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April 20, 2010

Former Lehman Boss to Defend Accounting
Moves

The former chief executive of Lehman Brothers will tell House
lawmakers at a hearing today that he has 'absolutely no recollection
whatsoever' about an accounting maneuver that a bankruptcy examiner says
the company used to mask its perilous financial condition, the
Associated Press reported today. Richard Fuld, Lehman's former CEO, said
in prepared witness testimony that he does not recall seeing any
documents related to the so-called Repo 105 accounting gimmick. Last
month, an examiner appointed by the bankruptcy court to investigate
Lehman's downfall issued a 2,200-page report. It found that the firm
masked $50 billion in debt by using the so-called Repo 105 accounting
maneuver. 
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_04202010.shtml'>Click
here to access the prepared witness testimony and a link to the
live webcast of the House Financial Services Committee hearing scheduled
for 11 a.m. ET today titled 'Public Policy Issues Raised by the Report
of the Lehman Bankruptcy Examiner.'

Dodd Predicts No GOP Filibuster on
Financial Regulatory Reform Package

Obama Administration officials spent yesterday wooing Sens. Susan
Collins and Olympia Snowe, both Republicans from Maine, in order to
build a filibuster-proof bloc of votes for a showdown on financial
reform legislation this week, the Deal Pipeline reported
yesterday. Even if both senators ultimately refuse to support the bill,
Democratic leaders predict that GOP lawmakers won't have the nerve to
filibuster an expected vote later this week on the sweeping reform plan
that would empower financial regulators to break up failing financial
firms, impose new capital and liquidity requirements on risky financial
transactions and impose new restrictions on derivatives trading. Senate
Banking Committee Chairman Christopher Dodd (D-Conn.), the chief author
of the bill, said that charges filed against Goldman Sach & Co.
on April 16 have further emboldened supporters of reform to push ahead
with a vote this week, mostly likely on Wednesday or Thursday. Dodd
noted that the GOP letter expressing opposition to the current
version of the reform bill did not threaten a filibuster to block a vote
on the bill. Consequently, Dodd predicted that at worst the bill will
pass the Senate on a strict party-line vote.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005416780'>Read
more. (Subscription required.)

Analysis: A Difficult Path in Goldman
Case

In accusing Goldman Sachs of defrauding investors, legal experts said
that regulators are not only taking aim at a company with deep pockets
and a will to fight, they are also pursuing an unusual claim that could
be difficult to prove in court, the New York Times reported
today. Rather than asserting that Goldman misrepresented a product it
was selling, the most commonly used grounds for securities fraud, the
Securities and Exchange Commission said in a civil suit filed on Friday
that the investment bank misled customers about how that product was
created. After all, investors did not know some information about the
product that they might have considered vital, and they lost $1 billion
in the end. However, the rules that govern these kinds of transactions
are not so plain. Several experts on securities law said fraud cases
like this one, which focus on context rather than content, are generally
more difficult to win, because it can be hard to persuade a jury that
the missing information might have led buyers to walk away. They added,
however, that the strength of the SEC?s case is impossible to gauge
until the agency discloses more of the evidence it has assembled. So far
it has provided only a sketch.
href='http://www.nytimes.com/2010/04/20/business/20sec.html?ref=business&pagewanted=print'>Read
more.

In related news, earnings for Goldman Sachs rose 91 percent in the
first quarter of 2010, to $3.46 billion up from $1.81 billion in the
same period last year, the New York Times reported today.
Revenues increased 36 percent to $12.78 billion, up from $9.42 billion
in the quarter a year ago. The bank's bond, commodities and currency
trading bolstered the results. Goldman also said that it had set aside
43 percent of revenue in the first quarter for employee salaries and
bonuses, down from 50 percent for the period a year ago.
title='Read more.'
href='http://www.nytimes.com/2010/04/21/business/21goldman.html?ref=business&pagewanted=print'>Read
more.

Visteon Shareholders Seek Committee
Status

Shareholders of bankrupt Visteon Corp. asked a court for permission
to form an official committee to represent them in talks to reorganize
the auto parts marker, Reuters reported yesterday. Holders of 2.2
percent of the company's common stock requested the official committee
as a way for them to join the talks on a $950 million rights offering
aimed at recapitalizing the company, according to the request filed on
Friday. The shareholders, Cypress Management Master LP, Lenado Capital
Advisors LLC and Goshawk Capital Corp, said an official committee would
also help them develop an alternative rights offering to bring the
company out bankruptcy. This is the second group of shareholders to take
an active role in the case. Funds associated with Davidson Kempner
Partners, Plainfield Asset Management and Brigade Capital Management
recently hired noted bankruptcy attorney Martin Bienenstock of
Dewey & LeBoeuf to press their demands for an alternative plan of
reorganization.
href='http://www.reuters.com/article/idUSN1919950220100419'>Read
more.

Pacific Ethanol Files Amended Bankruptcy
Exit Plan

Pacific Ethanol Inc. and its four wholly-owned ethanol plants have
jointly filed an amended plan of reorganization in U.S. Bankruptcy Court
in Delaware, the Sacramento Business Journal reported yesterday.
The amended plan would reduce debt and provide an opportunity for the
company to continue as an owner of the production facilities, the
company said. The ethanol-maker and marketer filed a bankruptcy
reorganization plan March 26 that would give ownership of its four
plants to lenders. Under the plan, Pacific Ethanol would continue
operating the plants, but ownership of the plant subsidiaries was to be
transferred to a newly formed holding company, Pacific Ethanol Holding
Co. LLC. Under the amended plan, lenders may grant the company an option
to purchase up to 25 percent of the total ownership interests in Pacific
Ethanol Holding for up to $30 million in cash. The option would be
exercisable until 90 days following the court?s confirmation of the
amended pan.
href='http://sacramento.bizjournals.com/sacramento/stories/2010/04/19/daily6.html?t=printable'>Read
more.

Station Casinos Strikes Bankruptcy Deal
with Lender Group

Station Casinos Inc. said yesterday that it has reached a deal with a
group of lenders that calls for the company's founding Fertitta family
to lead a $772 million stalking-horse bid for the casino operator's
assets, Dow Jones Daily Bankruptcy Review reported today. The
Fertittas will lead a group that includes investment firm Colony Capital
and Station's mortgage lenders that will purchase the company's more
than a dozen casino properties - among them Santa Fe Station, Texas
Station and two Fiesta brand casinos - pending higher bids at a
bankruptcy court supervised auction. Station rival Boyd Gaming Corp.,
which offered $2.45 billion for Station's assets last year, said earlier
this year that it was still interested in the company.

Chemtura Seeks Court Approval to Settle
2004 Class Action Suit

Bankrupt U.S. chemicals maker Chemtura Corp. sought court approval to
settle a 2004 securities class action lawsuit for about $11.4 million,
Reuters reported yesterday. The lawsuit, filed in a Connecticut court,
was led by Pierre Brull and William Ashe, who represented former
shareholders of Witco Corp. In 1999 Witco merged with Crompton &
Knowles Corp, which is now called Chemtura. The lawsuit alleged that
Witco shareholders entered into a deal with Chemtura based on false and
misleading financial statements and that Chemtura had breached its
fiduciary duty to Witco's shareholders. The suit alleged that during the
period between Oct. 26, 1998, and Oct. 8, 2002, Chemtura issued
materially false and misleading statements concerning its reported
financial results, competition, pricing, sales and margins. In court
papers filed on Friday, Chemtura said the settlement amount will be paid
solely from insurance and will not prejudice any of the company's
stakeholders.
href='http://www.reuters.com/article/idUSSGE63I0K020100419'>Read
more.

W.R. Grace Asks for Ruling on Chapter 11
Plan

W.R. Grace & Co. yesterday told Bankruptcy Judge Judith
Fitzgerald that it is ready for her verdict on its chapter 11 exit
proposal, Dow Jones Daily Bankruptcy Review. Judge Fitzgerald has
been working on a decision for months on whether to confirm Grace's
bankruptcy emergence plan. She has been waiting for Grace to try to
reach deals that would clear up objections to the plan. W.R. Grace
attorney Theodore L. Freedman yesterday told Judge Fitzgerald that the
chemical company has likely reached the end of the line when it comes to
clearing away chapter 11 plan objections by way of settlement. Judge
Fitzgerald said that she would review the final papers in Grace's bid
for confirmation, but she did not indicate how she would rule.

Tribune Reaches Agreement on Bankruptcy
Examiner

Attorneys in the chapter 11 case of the Tribune Co. presented a judge
yesterday with a draft agreement for the appointment of an independent
examiner to look at issues surrounding the 2007 leveraged buyout of the
media conglomerate, the Associated Press reported yesterday. The
agreement was reached less than a week after Bankruptcy Judge Kevin
Carey indicated that he believed an examiner was needed to conduct
at least a narrow investigation of issues surrounding the buyout
engineered by real estate mogul Sam Zell. Under the proposal presented
yesterday, the examiner would rely on information already submitted in
the case because of questions raised by Tribune's unsecured creditors'
committee and a group of junior bondholders who would be left with
nothing under a reorganization plan that Tribune submitted last week.
The examiner also would review the settlement that Tribune announced
with certain creditors and which paved the way for the filing of its
reorganization plan.
href='http://www.google.com/hostednews/ap/article/ALeqM5iTgAbPRmpl0cNwR11q1q2797SdWgD9F6DC882'>Read
more.

Adviser, Bank Sued in Madoff Case

Connecticut Attorney General Richard Blumenthal sued Westport
National Bank and a Wilton, Conn., money manager yesterday for
'effectively aiding and abetting' a fraud by convicted Ponzi scheme
operator Bernard Madoff, the Wall Street Journal reported today.
Blumenthal said his office, in cooperation with the Connecticut
Department of Banking, is seeking to recover for investors $16.2 million
in fees paid to Westport National and Robert L. Silverman, a Connecticut
actuary and investment adviser. Blumenthal also is seeking a $100,000
fine for each violation of state banking laws and legal costs.
id='uein' title='Read more.'
href='http://online.wsj.com/article/SB100014240527487046719045751940214668140…'>Read
more. (Subscription required.)

Ex-Collins & Aikman CEO to Pay $7.2
Million to Settle SEC Lawsuit

Former Collins & Aikman Corp. CEO David Stockman has agreed to
pay $7.2 million in a proposed settlement of a civil lawsuit by the U.S.
Securities & Exchange Commission, Dow Jones Daily Bankruptcy
Review reported today. In a court filing yesterday, Stockman, the
former White House budget director under U.S. President Ronald Reagan,
agreed to pay a disgorgement of $4.42 million, plus $2.38 million in
prejudgment interest. He also agreed to pay a $400,000 civil penalty.
Stockman, who was Collins & Aikman's CEO from August 2003 to May
2005 and served on its board from 2000 to May 2005, would receive a
credit of up to $4.4 million under the SEC settlement for any amounts
paid in two separate shareholder lawsuits in U.S. District Court in
Detroit, according to the filing. He has agreed to pay $4.4 million to
settle those lawsuits earlier this year.

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