August 52009

 

Senators Hint at More
Regulatory Consolidation

Against a backdrop of agency heads fighting to protect

their turf, some key Senate Banking Committee members raised the specter

of even greater consolidation among federal banking regulators than has
been proposed by the Obama administration,

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size='3'>CongressDaily reported yesterday.
Senate Banking Chairman Christopher Dodd (D-Conn.) at a committee
hearing yesterday wondered if the country really needs three federal
agencies to regulate banks as called for under the Obama plan, which
would consolidate the Office of Thrift Supervision and the Office of the

Comptroller of the Currency into a new National Bank Supervisor but does

not go as far as a single national regulator as some critics wanted. The

plan also would continue to leave supervision of state banks to the FDIC

and the Federal Reserve, whose role would be strengthened to supervise
bank holding companies. 'There are reasons for one strong, powerful and
efficient regulator,' said Sen. Charles Schumer (D-N.Y.). 'I think more
people who are objective, who don't have any turf considerations ...
tend to think that should happen in the banking area.' FDIC Chairwoman
Sheila Bair testified against a single regulator, noting that community
banks would suffer because such a system would focus on larger banks.
She added that it could place at risk the deposit insurance
system. 

href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=f52f78d8-b048-4e33-8b50-8ae5c7c4f73c'>Click

here  to read the prepared testimony from the
hearing.

New York Seeks Millions in
Tax from Lehman

New York City Mayor Michael Bloomberg has accused
Lehman Brothers of shortchanging the city of $627 million in corporate
and other taxes since 1996, the

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size='3'>New York Times reported today. The
Bloomberg administration is now trying to convince a federal bankruptcy
court in Manhattan that the city should jump closer to the front of
Lehman’s long line of creditors. Though financial experts say the
city stands a good chance of recouping at least some of the money, how
much and when is anyone’s guess, given the size and complexity of
the bankruptcy proceedings. The city asserts that since 1996, Lehman had

underpaid its general corporation tax by $615 million, roughly a third
of which represents interest. The city also claims that the firm failed
to pay $12 million in commercial rent taxes since 2001. Though the city
has discussed the tax shortfall with Lehman since the 1990s, officials
dispute the suggestion that they have taken too long to try to collect
the money. In fact, the city has stepped up its efforts in the last year

to recoup back taxes from large taxpayers and to speed up the audits,
said Sam Miller, an assistant commissioner at the Department of
Finance. 

href='http://www.nytimes.com/2009/08/05/nyregion/05taxes.html?_r=1&hp=&pagewanted=print'>Read

more.

Fourth Circuit Revives
BearingPoint Shareholder Action

A securities class action against bankrupt technology
consulting firm BearingPoint Inc.has been given a second life by a
federal appeals court, more than a year and a half after the case was
tossed for failing to reach the pleading bar established by the U.S.
Supreme Court's

size='3'>Tellabs ruling,
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size='3'>Bankruptcy Law360 reported yesterday.

The U.S. Court of Appeals for the Fourth Circuit on Friday agreed that
the shareholders' case had inadequately pled
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size='3'>scienter under the heightened
standard, but ruled that the U.S. District Court for the Eastern
District of Virginia had erred in November 2007 when it refused the
plaintiffs' motion to correct the deficiencies in a second amended
complaint. BearingPoint, formerly known as KPMG Consulting LLC, filed
for bankruptcy March 6, after oral arguments were heard in the
shareholders' appeal. The case was originally filed against BearingPoint

and its top executives by Matrix Capital Management Fund LP more than
four years ago, alleging that the “defendants defrauded the market

by knowingly or recklessly publishing false financial information
despite awareness of BearingPoint's 'lax internal controls' and
dysfunctional accounting systems.” The complaint came in the wake
of an April 2005 announcement that BearingPoint would take an impairment

charge of between $250 million and $400 million due to accounting errors

and that its financial statements for 2003 and 2004 would be affected by

the errors. 
href='http://bankruptcy.law360.com/articles/114781'>Read more .
(Subscription required.)

Lawmakers Reach Deal on
Alabama County Crisis

The sheriff in Jefferson County, Ala., may call for
the National Guard to help maintain order, a spokesman said yesterday,
as a judge cleared the way for cuts in the sheriff's budget and
lawmakers reached a compromise they hope will end the budget crisis, the

Associated Press reported yesterday. Jefferson County's state
legislators asked for a hasty special session to enact the tax
compromise. Lawmakers reached the deal after Circuit Judge Joseph L.
Boohaker ruled that Jefferson commissioners - now trying to head off a
municipal bankruptcy filing of historic proportions - could go ahead
with plans to slash $4.1 million from the budget of Sheriff Mike Hale,
who had filed a lawsuit that temporarily blocked spending cuts for his
office. State lawmakers said that the compromise was flawed but vital to

ending a crisis that already has resulted in layoffs for more than
one-fourth of the county work force. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/04/AR2009080401971_pf.html'>Read

more.

Eddie Bauer Completes $286
Million Sale to Golden Gate Capital

Bankrupt retailer Eddie Bauer Holdings Inc.announced
yesterday that it had closed the $286 million sale of its business to
Golden Gate Capital following court approval of the sale in late
July,

size='3'>Bankruptcy Law360 reported yesterday.

Eddie Bauer will keep the majority of its stores and employees under the

agreement, and executives from the company expect that the sale will
give the company a stronger balance sheet and help eliminate its
long-term debt. The U.S. Bankruptcy Court for the District of Delaware
approved the sale on July 22. 
href='http://bankruptcy.law360.com/print_article/114863'>Read more.
 (Subscription required.)

Energy Partners’
Chapter 11 Plan Receives Court Approval

Bankrupt oil and gas producer Energy Partners Ltd.
received court approval for a prenegotiated restructuring plan but is
still working with lenders to obtain the financing it needs for the plan

to take effect,

size='3'>Bankruptcy Law360 reported yesterday.

Bankruptcy Judge

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size='3'>Jeff Bohm issued an order Monday
confirming the plan and setting a Sept. 10 deadline for the debtor to
come up with financing and meet other conditions. The plan gives holders

of the company's senior notes 95 percent of the outstanding common stock

in the reorganized company, leaving the remaining 5 percent to current
Energy Partners shareholders, the company said in a statement. A lack of

financing for a proposed $125 million exit facility was one of the
reasons secured lenders Fortis Capital Corp. and BNP Paribas objected to

the plan late last month. Judge Bohm on Monday overruled all objections
not consensually resolved in approving the plan. 
href='http://bankruptcy.law360.com/articles/114941'>Read more.
(Subscription required.)

Autos

Chrysler Creditors Seek
'Billions' from Daimler

Creditors of Chrysler LLC have asked a bankruptcy
court for permission to sue the recently reorganized car company's
former parent, Daimler AG, to recover billions of dollars Daimler
allegedly stripped from Chrysler when it sold the company to Cerberus
Capital Partners LP in 2007,

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size='3'>Bankruptcy Law360 reported yesterday.

The motion said that the complaint would include counts of intentional
and constructive fraudulent transfer and unjust enrichment against
Daimler, and breach of fiduciary duty against the directors, who were
not named. The details of the creditors' allegations were redacted from
the motion, and the proposed complaint was filed under seal. 
href='http://bankruptcy.law360.com/print_article/114910'>Read more .

(Subscription required.)

Lean Inventories Imperil
Car Sales

With the U.S. Senate considering a vote on putting
more money into the government's 'Cash for Clunkers' program, some auto
dealers are raising concerns about tight inventories as a new threat to
the incentive program, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The clunker program, which offers subsidies of
as much as $4,500 to consumers who trade in older vehicles and buy new,
more fuel-efficient models, sparked a surge in sales in late July,
leaving many dealers with lean stocks of cars and trucks on their lots.
If Congress moves ahead and allocates more money for the trade-in plan,
light inventories could hinder sales and damp the program's impact until

automakers are able to rush vehicles to dealerships. 
href='http://online.wsj.com/article/SB124943011168206233.html'>Read
more.  (Subscription required.)

Board Chief Says GM Must
Retain Top Ranking in U.S. Sales

New General Motors Co. chairman Edward E. Whitacre Jr.

said that the carmaker must not lose the No. 1 spot in U.S. sales and
has charged his management team with regaining market share after years
of decline, the

size='3'>Wall Street Journal reported today.
Among areas Whitacre cited as needing rapid improvement are advertising,

revenue and net income. GM—which decades ago controlled half of
the U.S. car market—has seen its share steadily decline as it lost

out to import brands. In July, its share was 18.9 percent— just
1.4 percentage points ahead of the No. 2 car seller, Toyota Motor Corp.
Also creeping closer to GM is Ford Motor Co., which didn't need a
government bailout or bankruptcy reorganization. Ford's market share in
July rose to 16.5 percent. 
href='http://online.wsj.com/article/SB124942848029206121.html'>Read
more.  (Subscription required.)

Bankrupt Aleris to Pay
$8.8 Million to Settle Clean Air Act Suit

Aleris International Inc. has settled a Clean Air Act
suit with the U.S., 10 states and an Arizona county, agreeing to pay
$4.2 million to improve its facilities and a civil penalty of $4.6
million that will be an unsecured claim in its pending
bankruptcy,

size='3'>Bankruptcy Law360 reported yesterday.

The settlement requires Aleris to make improvements and install
pollution controls at 15 plants in 11 states, according to a joint
announcement from the U.S. Department of Justice and the U.S.
Environmental Protection Agency released yesterday. Aleris must improve
its furnaces so they can capture emissions more efficiently, test every
furnace with approved protocols, revamp its record-keeping and
reporting, and install pollution control and monitoring equipment at
certain facilities, the DOJ and EPA said. 
href='http://bankruptcy.law360.com/print_article/114939'>Read more.
 (Subscription required.)

Condo-Hotel Buyers Head to

the Courts

Desperate to recoup money paid to acquire condominiums

in hotels, buyers from California to Florida are trying to use the
courts to get their money back, arguing that condo-hotel developers
violated securities laws when selling the units, the
face='Times New Roman'>Wall
Street Journal reported today. A few years
ago, condo-hotels were a popular idea as hotel developers could offset
construction costs by selling rooms to individual buyers, then share the

rental income with the owners every time a room was booked. However,
instead of the lucrative venture some buyers claim they were promised by

developers, condo-hotels have turned out to be one of the worst
investments in decades. The industry is getting hit on two fronts: The
condo crash has wiped out the value of many units, and the hotel bust
means the rooms are being rented only infrequently and at much lower
rates than anticipated. Now, some buyers are arguing in court that
purchasing a unit in a condo-hotel is similar to buying a stock, where
the buyer is entirely reliant on the operational skills of management
for any return. Therefore, they contend, the purchases should have been
regulated by the Securities and Exchange Commission, which would force
companies to issue a detailed prospectus and have agents licensed to
sell both real estate and securities, a rare combination. 
href='http://online.wsj.com/article/SB124943301400306393.html'>Read
more.  (Subscription required.)

Judge Issues Show-cause
Order in Coyotes Case

Bankruptcy Judge

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size='3'>Redfield T. Baum is ordering the
owner of the Phoenix Coyotes to show why he should not be held in
contempt of court, the Associated Press reported yesterday. Judge Baum
ordered Jerry Moyes, his wife Vickie and their attorneys yesterday to
appear at a show-cause hearing today. The Moyes' and their attorneys
must show why they should not be held in contempt for 'willfully
violating' the confidentiality order issued by the judge on July 18 in
the exchange of information between parties in the team's bankruptcy
case. Moyes' filing last Friday included details of negotiations between

potential buyer Jerry Reinsdorf and the city of Glendale. Glendale
sought the contempt order on Monday, saying the city was 'absolutely
outraged' by the release of the information. According to the city, the
Reinsdorf group 'expressed its complete disbelief that such confidential

material was released by Moyes and threatened to walk away from the
bidding process.' 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/04/AR2009080403336_pf.html'>Read

more.

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