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February 9, 2006
Large and Small
on Asbestos Bill
As the Senate opened
debate on legislation that would create a $140 billion fund for victims
of asbestos, some of the fiercest fighting will be between large and
small companies, the New
York Times reported today. Several large
companies back the bill, arguing they want to put their asbestos
litigation and liabilities behind them. Smaller businesses say the
bill's complicated formula for determining how much each company will
have to put into the fund will drive them into chapter 11 bankruptcy.
The Fairness in Asbestos Injury Resolution Act of 2005 would restrict
asbestos victims from bringing claims to court. Companies with claims
against them and insurers would contribute to the fund. 'To American
business, I think this bill is extremely important,' said John E.
Roueche III, director for investor relations at McDermott International.
'We have seen 70-plus companies that have gone into bankruptcy because
of asbestos litigation, and there are household-name companies that
still have serious asbestos issues.' Some small companies say they are
probably better off fighting in the courts than paying their share under
this bill as they argue that cases against them have fallen
sharply.
href='http://www.nytimes.com/2006/02/09/business/09asbestos.html?pagewanted=p…'>Read
more.
In related news, Senators
raised objections Wednesday to legislation that would take
asbestos-exposure cases out of the courts and pay victims from a trust
fund created by industry and insurance contributions, according
to Congress
Daily today. With debate on amendments set to
begin today, budget points of order and possible 'poison-pill' changes
threatened to doom the long-stalled measure. Budget ranking member Sen.
Kent Conrad, (D-N.D.), said Wednesday he believed Republicans would
raise budget points of order, which need 60 votes to waive. Budget
Chairman Gregg has the authority to raise a point of order contending
the bill exceeds his committee's budget allocation. Any senator can
raise another point of order contending that the bill would increase the
deficit by more than $5 billion after the 10-year budget window. The
administration issued a Statement of Administrative Policy expressing
'serious concerns about certain provisions,' but saying that the White
House was eager to work with lawmakers 'to strengthen and improve this
important legislation.'
name='2'>Supreme Court Justice Says Consequences Key to
Constitutionality
Supreme Court Justice Stephen
Breyer says he frequently makes decisions about a law's
constitutionality by considering its purposes and consequences, which
puts him at odds with fellow justices who try to adhere strictly to the
language of the Constitution, the Associated Press reported today.
Breyer talked about other differences in how the justices make
decisions, saying they can consult six basic criteria in assessing a
law: the language of the law, the history of the text, tradition behind
the text, precedents, the purpose of the law and the consequences of
letting the law stand or striking it down. 'I tend to emphasize purpose
and consequences,' said Breyer, who was nominated for the high court by
President Clinton. 'Others emphasize language, a more literal reading of
the text, history and tradition -- believing that those help you reach a
more objective answer.'
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1139393109736'>Read
more.
GM,
Ford Craft Plea for Limited Federal Assistance
As their woes mount,
General Motors Corp., and Ford Motor Co, have crafted a call for help
that focuses on restraining health care costs, promoting new fuel
technologies and keeping exchange rates in line, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The political climate ihas greatly altered
since 1980, when Chrysler Corp. was bailed out with $1.5 billion in
federal loan guarantees. GM and Ford are scrupulously avoiding talk of a
bailout, and the current climate in
w:st='on'>
size='3'>Washington
size='3'>doesn't allow much room for federal intervention to support
industry. Rep. John Dingell, a Michigan Democrat who has long championed
the car makers' cause, agrees that nothing is on the immediate horizon,
noting that President Bush in recent comments has ruled out any form of
bailout. 'I see no sign of the administration changing its position
until the situation gets worse or Congress runs away from them, and then
they'll rush to get ahead of the parade,' he said.
face='Times New Roman' size='3'>Both the White House and Congress are in
the control of a party ideologically opposed to bailouts. White House
officials, including the president himself, have made clear that while
they are concerned about the auto makers, they think their most
important task is to cushion the blow for workers who lose their jobs.
Democrats, for their part, say they will use the auto makers' plight as
political ammunition in congressional elections this year in Midwestern
swing states.
href='http://online.wsj.com/article/SB113945176949069105-email.html'>Read
more.
In other news,
negotiations among GM, Delphi Corp. and the United Auto Workers union to
restructure Delphi's work force outside of bankruptcy court have stalled
in the past few days, raising doubts about whether GM and the UAW can
engineer a solution for thousands of
face='Times New Roman' size='3'>Delphi
size='3'>workers whose jobs and pay are at risk, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. One setback came within the past week when UAW
negotiators didn't make an expected presentation about helping GM to
reduce its hourly work force through retirements or buyouts, people
familiar with the talks said. The discussions also have stalled over
concerns that Delphi workers won't agree to transfer back to GM, which
spun off its Delphi parts unit in 1999 but kept responsibility for many
of
size='3'>Delphi
officials also are concerned about how much or how long GM is willing to
subsidize compensation for
could see their pay and benefits slashed by 60% or more.
size='3'>Delphi
chapter 11 bankruptcy protection, is scheduled to ask the U.S.
Bankruptcy Court on Feb. 17 to void its union contracts.
href='http://online.wsj.com/article/SB113945465293869190-email.html'>Read
more.
name='4'>Bankruptcy Trustee Works Through Home Broker Title
Mess
Wesley Husinga, the
bankruptcy trustee enlisted to make sense of the collapse of one of
central
face='Times New Roman' size='3'>Iowa
size='3'>'s largest home-sale brokers, is expected to testify today in
the criminal trial of Rod Wolford Sr., according to the
face='Times New Roman' size='3'>Des Moines Register
size='3'>yesterday. The
w:st='on'>Des
Moines
swindling scores of investors and would-be home buyers and sellers
before his family business went under. More than 200 people lost
thousands of dollars, saw their credit ruined, got sued by banks or were
kicked out of their homes when the Wolford Group Inc. went bankrupt in
2003. Husinga said that after two years he continues to work to clear up
the titles to about two dozen former Wolford Group properties. 'It's a
mess,' he said. 'Many of them have multiple liens because the Wolfords
sold them several times over on contract.' Wolford Sr. and his son, Rod
Wolford II, bought hundreds of properties from people in distressed
situations and then sold them to people with poor credit.
href='http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20060208/NE…'>Read
more.
w:st='on'>
name='5'>Colorado
face='Times New Roman' size='3'> Senate
Panel Tackles Insurance for Working Poor
A state Senate panel
Thursday will take the latest crack at finding a way to offer affordable
health insurance to working-class Coloradans, especially those who work
for small companies, the
size='3'>Rocky Mountain News reported
yesterday. Senate Bill 36, sponsored by Sen. Bob Hagedorn, D-Aurora,
would extend the requirement that health insurance companies working the
small-group market offer a basic health plan. It would add an option to
offer to the working poor the same benefits as those going to someone
who qualifies for Medicaid and gets coverage through a Health
Maintenance Organization.Some 650,000 Coloradans are uninsured, and
among the adults 81 percent of them work part or full time, according to
statistics from the Colorado Coalition for the Medically Underserved.
Most simply can’
face='Times New Roman' size='3'>t afford to spend a big chunk of their
take-home income for health insurance, says Molly Markert, executive
director of CCMU.A basic health plan 'is just protection from
bankruptcy,' she said, and should be available to all. 'If we can make
it affordable enough, people can get into the habit of managing to
afford, say, $150 a month, and avoid all these bankruptcies,' Markert
added.
href='http://www.rockymountainnews.com/drmn/government/article/0,2777,DRMN_23…'>
face='Times New Roman'>Read more.
Airlines
name='6'>Delta Considers Severance Plan for Some
Officials
Delta Air Lines plans to
set up a severance plan that would benefit about 150 top executives as a
means to keep its managerial ranks from thinning further while it
pursues cost-cutting efforts, the according to the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>today. Under the plan, qualifying executives would receive
severance packages ranging from six months to 12 months of salary should
their jobs be eliminated under Delta's restructuring, or should there be
a 'change of control' at the company, such as in a merger. The request
to establish the severance program for executives is expected to come in
a filing with the U.S. Bankruptcy Court in
w:st='on'>New
York
overseeing the
face='Times New Roman' size='3'>Atlanta
carrier's reorganization and must approve such plans.
Other carriers that have filed for bankruptcy, notably United Airlines
parent UAL Corp. and Northwest Airlines, have established programs that
go further in trying to retain executives, including by offering cash
bonuses. John Kennedy, a Delta spokesman, confirmed the contents of the
memo and added that 'any payments under this plan would come from
Delta's general assets' and not from a trust fund for disabled workers
and survivors of former Delta workers. A court-appointed committee
representing Delta retirees has challenged the company's use of the
trust fund, though a judge ruled this week that Delta could make use of
the fund as long as it continues to make promised benefits
payments.
href='http://online.wsj.com/article/SB113945645230169245-email.html'>Read
more.
In related news, a
bankruptcy judge on Wednesday tentatively ordered Delta Air Lines to pay
a bondholders' trustee $2 million a month as a cushion against any drop
in the value of jets the carrier pledged as collateral, according to
the Associated
Press today. Bankruptcy Judge Adlai
Hardin also provided guidelines to how the carrier should
maintain and adequately protect the value of 32 planes Delta pledged in
the 2004 bond deal. He is expected to formally rule on the guidelines in
coming days. The trustee, Wells Fargo Bank N.A., had asked the airline
to ensure proper maintenance of the jets. Wednesday was the second day
of hearings on this issue. That money is not expected to be paid back
until the Atlanta-based company emerges from chapter 11 bankruptcy
protection.
href='http://www.usatoday.com/travel/flights/2006-02-09-delta-bankruptcy_x.htm'>Read
more.
name='7'>Judge Says Parent Company's Holding Won't Apply to
Mesaba
A judge ruled that the
resources of Mesaba Airlines' parent company shouldn't affect a court
decision on whether to toss out its labor contracts, KARE11 Minneapolis
reported yesterday. Eagan, Minn.-based Mesaba wants its employees to
agree to 19.4 percent labor cost cuts. Both sides were in U.S.
Bankruptcy Court Tuesday arguing whether the cash reserves held by the
airline's parent company, MAIR Holdings, should be part of the unions'
case that the contracts shouldn't be nullified. Union lawyers said the
$120 million in cash and equivalents that MAIR Holdings had when Mesaba
filed for chapter 11 in October is key in determining fair and equitable
contracts for union employees. U.S. Bankruptcy Judge Gregory
Kishel sided with management, ruling that the MAIR money is
'not material' to deliberations over the Mesaba employee
contracts.
href='http://www.kare11.com/money/business_article.aspx?storyid=118178#'>Read
more.
AIG
Agrees to $1.6 Billion Settlement
State and federal
authorities are expected to announce today a more than $1.6 billion pact
with American International Group Inc. over alleged accounting
improprieties, according to people familiar with the matter, the
Wall Street Journal reported today. The settlement, split about
evenly between the Securities and Exchange Commission and
York
largest finance-industry regulatory settlements with a single company
in
face='Times New Roman'
size='3'>U.S.
size='3'>history. The pact settles civil fraud charges filed by New York
Attorney General Eliot Spitzer and the New York State Insurance
Department. The SEC hasn't filed charges against AIG; it is expected to
file and settle allegations of accounting fraud with the company
simultaneously. An AIG spokesman declined to comment. The huge payout is
expected to include fines, restitution and business-practice changes.
AIG will pay $700 million in disgorgement and $100 in penalties to the
SEC, according to a person familiar with the matter. That money is
expected to go to a fund designed to compensate investors who may have
been misled or injured.
href='http://online.wsj.com/article/SB113942904195568630-email.html'>Read
more.
International
name='9'>Czech Republic Passes Bankruptcy Bill
The Chamber of Deputies today
passed the bankruptcy bill which should significantly accelerate
bankruptcy proceedings, improve the position of creditors, and enable
the rescue of companies in trouble, the Prague Daily Monitor
reported yesterday. The law would take effect on July 1, 2007, also
introduces the possibility of personal bankruptcies. The government and
the deputies hope that it could help change the image of the Czech
Republic as a country whose bankruptcy law is among the worst in Europe,
if not the world. President of the Economic Chamber Jaromir Drabek said
that the new law will bring more possibilities of recovery for companies
which have gone bankrupt.
href='http://www.praguemonitor.com/ctk/?id=20060208F01329'>Read
more.