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August 14, 2008
U.S. Trustee Calls for Probe in
SemGroup's Chapter 11 Case
Acting U.S. Trustee Roberta A. DeAngelis called for a
probe of possible fraud in the trading strategy of SemGroup LP, the
bankrupt oil distributor whose liquidity problems have come under the
scrutiny of several regulatory agencies in recent weeks, Bankruptcy
Law360 reported yesterday. In a motion filed Tuesday in the U.S.
Bankruptcy Court for the District of Delaware, DeAngelis argued that it
was mandatory for the court to appoint an examiner to investigate the
energy company's trading activity that led to the severe liquidity
crisis that prompted its filing for chapter 11 protection in July. The
debtors' liquidity crisis resulted from the use of virtually all of the
debtors' available cash generated from its allegedly profitable business
operations and from various insider transactions to cover the losses
caused by the company's trading strategy, the motion said.
href='http://bankruptcy.law360.com/articles/65974'>Read more.
(Subscription required.)
In related news, SemGroup LP rushed to raise $718 million to fund
money-losing commodity trades prior to filing for bankruptcy last month,
Bloomberg News reported yesterday. The cash was obtained in five
transactions with affiliates, including the swap of an asphalt business
with the company's publicly traded subsidiary, SemGroup Energy Partners
LP, and loans from two hedge funds and General Electric Capital Corp.,
according to regulatory filings and shareholder and creditor lawsuits.
The hedge-fund borrowings were secured with the company's SemGroup
Energy stake, while GE Capital's loan to a pipeline project ended up
with the parent company.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aVa8bFAYtHhk&refer=home'>Read
more.
Auto Supplier Files for Chapter
11
Citing unprecedented low automotive sales volumes and high commodity
prices, Intermet Corp. filed for bankruptcy protection for the second
time in nearly five years, Bankruptcy Law360 reported yesterday. The
Texas-based automotive cast component supplier company and its domestic
subsidiaries filed for chapter 11 on Tuesday in the U.S. Bankruptcy
Court for the District of Delaware. The company listed assets between
$50 million and $100 million and liabilities between $100 million and
$500 million. In the 12-month period ended July 31, 2008, the company
said that it had sales of about $310 million. The case is Intermet
Corp., case number 08-11859 in the U.S. Bankruptcy Court for the
District of Delaware.
href='http://bankruptcy.law360.com/articles/65977'>Read more.
(Subscription required.)
Mortgage Insurers' Losses
Mount
Large mortgage insurers have reported $2.6 billion in losses so far this
year, sparking concerns that rising foreclosure rates could force the
industry into a money crunch and ultimately make the home-buying process
even more difficult, the Washington Post reported today. The
mortgage insurance industry has already paid more than $6 billion to
cover claims on foreclosed homes this year, including $3.8 billion
during the second quarter, according to Inside Mortgage Finance. This
year's $2.6 billion in losses includes $1.7 billion during the past
three months. Credit-rating agencies, including Moody's Investors
Service, have downgraded some of the largest players. One firm, Triad
Guaranty Insurance Corp., is going out of business. Shares of Radian
Guaranty, Triad and PMI Mortgage Insurance have lost 90 percent of their
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/08/13/AR2008081303539_pf.html'>Read
more.
UBS Executives Allegedly Warned of
Possible Offshore Violations in 2005
Senior executives at the Swiss bank UBS were allegedly alerted at least
three years ago to possible violations of U.S. securities laws in
dealings with American clients of its private bank, the New York
Times reported today. Internal letters as a result of a widening
investigation into whether UBS had violated securities and tax laws by
helping wealthy Americans hide money overseas point out that the bank
ignored the earliest warnings from a former top banker. Prosecutors
suspect that UBS, the world's largest private bank, helped American
clients place $20 billion in secret offshore accounts, evading $300
million or more in taxes.
href='http://www.nytimes.com/2008/08/14/business/worldbusiness/14ubs.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Oral Arguments Heard in JPMorgan-Bear
Stearns Merger Case
New York State Judge Herman Cahn held a summary judgment hearing on
Monday for a case brought by Bear Stearns' shareholders claiming that
the company and its directors breached their fiduciary duty when they
agreed to a buyout by JPMorgan and didn't find a better alternative,
according to the American Lawyer today. The shareholders also
are targeting JPMorgan, claiming the bank aided and abetted those
breaches. JPMorgan initially offered $2 per share, but then increased
the offer to $10 per share. The hearing was held on the defendants'
motion for summary judgment.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202423775227'>Read
more.
Republicans Seek Ethical Probe of
Potential Favorable Mortgages to Congressional Members
Reps. Darrell Issa (R-Calif.) and Mark Souder (R-Ind.) are calling on
the ethics committee to investigate whether House members and aides
received sweetheart deals on their home mortgages, The Hill
reported yesterday. Issa and Souder last month called on House Oversight
and Government Reform Committee Chairman Henry Waxman (D-Calif.) to
probe the matter. In a response letter to the two members, Waxman
deferred to the ethics committee “because the issues you raise
would require the [Oversight and Government Reform] Committee to
investigate the conduct of members.” Issa and Souder informed
Waxman in a letter on Tuesday that they are following up with the ethics
panel, even though they believe that the panel's precedent, set by the
Clinton campaign finance and Jack Abramoff controversies, would allow
the Oversight Committee to tackle the mortgage issues and conduct
oversight on individuals who are not members of Congress.
href='http://thehill.com/leading-the-news/republicans-seek-probe-of-sweetheart-mortgages-2008-08-12.html'>Read
more.
Ten Stock Exchanges Agree to Stronger
Oversight
Ten American exchanges have agreed to give two market watchdogs more
power to ferret out insider trading regardless of where it occurs in the
United States, Reuters reported today. Under the proposal, the exchanges
will give NYSE Regulation, which oversees the New York Stock Exchange,
and the Financial Industry Regulatory Authority, which is known as FINRA
and is responsible for Nasdaq, the responsibility for detecting illegal
trading. The move aims to improve the surveillance, investigation and
enforcement of fraudulent trading in equities securities. The exchanges
included in the agreement, besides the New York Stock Exchange and
Nasdaq, are the American Stock Exchange, Boston Stock Exchange, CBOE
Stock Exchange, Chicago Stock Exchange, Deutsche Börse's
International Securities Exchange, National Stock Exchange, NYSE Arca
and the Philadelphia Stock Exchange.
href='http://www.nytimes.com/2008/08/14/washington/14exchange.html?ref=business&pagewanted=print'>Read
more.
Commentary: Proposal on Judicial
Selections Contains Flaws
The proposal endorsed this week by the American Bar Association to a
version of 'merit selection' for federal judges contains a few flaws as
it looks to strip judicial selection from future Presidents, according
to an editorial in today's Wall Street Journal. According to
the proposal, future federal judges would be selected not by an elected
President, but with the aid of home-state Senators and a bipartisan
commission that would provide a list of recommended nominees for
judicial vacancies. The White House would then select a candidate from
the preapproved list. The commission would be created by the two
Senators from each state to offer up consensus choices for federal
nominees. While the proposal looks to avoid the heated debates in the
confirmation process and make sure vacancies aren't left to languish
indefinitely, it takes the partisan politics out of the public eye and
into backrooms stocked with political insiders. In states that have
adopted the ostensibly nonpartisan system, it has given disproportionate
influence to the state trial bars that control selection
commissions.
href='http://online.wsj.com/article/SB121867190633138889.html?mod=opinion_main_review_and_outlooks'>Read
the full editorial. (Subscription required.)
International
Japanese Real Estate Company Files
for Bankruptcy with $2.35 Billion in Debt
Urban Corp. filed for bankruptcy protection from creditors with debt of
255.8 billion yen ($2.35 billion), making it the largest corporate
bankruptcy filing in Japan this year, Bloomberg News reported yesterday.
The number of bankruptcies among property companies more than doubled to
60 in July from 27 a year earlier, researcher Tokyo Shoko Research Ltd.
said. The lending balance to Japan's real estate industry declined for a
fourth straight quarter in the three months ended June, according to the
Bank of Japan. Urban's filing prompted Hiroshima Bank Ltd., a lender
based in southwestern Japan, to reduce its net income forecast by 54
percent to 5 billion yen for the first half ending Sept. 30 because it
may not be able to collect loans from the company.
href='http://www.bloomberg.com/apps/news?pid=20601101&sid=acdWdqzPrRwQ'>Read
more.
Spain Looks to Shift Economy
Away from Sagging Home Building Industry
In less than a year, Spain has gone from brisk growth to acute distress
as a housing collapse, high energy prices and the world financial crisis
have drained its lifeblood - a building boom built on rising property
values, the New York Times reported today. Prime minister
José Luis Rodríguez Zapatero yesterday called an emergency
cabinet meeting to consider responses to the financially distressed
Spanish economy. New housing starts peaked at over 900,000 in 2006, but
home building in Spain is likely to fall to about half that level this
year, the country's minister of economy and housing, Pedro Solbes, said
recently. Home prices fell 4 percent in the second quarter, and most
economists say that they expect years of stagnation.
href='http://www.nytimes.com/2008/08/14/business/worldbusiness/14madrid.html?sq=bankruptcy&st=cse&scp=5&pagewanted=print'>Read
more.