January 19, 2006
Calif. High Court Tackles Question of Landowner Liability in Asbestos Case
If a landowner hires an independent contractor to do some work on his property, and an employee of the contractor is injured while doing that work, is the landowner liable? The California Supreme Court recently tackled that question in its review of a lawsuit filed by Ray Kinsman, a carpenter who contends he developed mesothelioma from exposure to airborne asbestos while doing contract work during the 1950s at a Unocal refinery in Wilmington, Calif., OccupationalHazards.com reported yesterday. A jury attributed 15 percent of the responsibility for Kinsman's illness to Unocal – it assigned 85 percent of the blame to "all others," the definition of which is unclear to the high court – and ordered Unocal to pay Kinsman more than $3 million in compensatory damages. The First District Court of Appeal in San Francisco reversed the jury verdict and ordered a new trial, pointing out that the jury likely would have ruled in favor of Unocal if it had known of the appeals court's interpretation of a landowner's legal liability. Read more.
Federal Judge OKs McDermott's Asbestos Settlement
A judge has approved McDermott International Inc.'s plan to settle as many as 300,000 asbestos injury claims with a price tag that will range from $375 million to $955 million for the company, depending on whether Congress creates a national trust fund to handle all such cases, the Associated Press reported yesterday. U.S. District Judge Sarah Vance signed off on the agreement Tuesday, contained in a bankruptcy reorganization plan for the Babcock & Wilcox Co., a wholly owned McDermott unit that has been the target of asbestos claims. McDermott spokesman Jay Roueche said yesterday that the Babcock & Wilcox settlement calls for $1.1 billion in insurance payments and a $350 million payment from McDermott to a separate trust fund handling the B&W case, regardless of the federal bill's fate. Read more.
Debate Over N.Y. Town’s Looming Bankruptcy Sparks Up
Olean, N.Y., Mayor David Carucci says that the city of Olean is facing bankruptcy if it doesn’t get the money it needs to cover a cash shortage until revenues increase in March, the Olean Times Herald reported yesterday. According to City Auditor Steve Pachla, the city budget will have a $558,888 deficit by the end of January. That number balloons to a deficit of $1.5 million in February. Mayor Carucci applied Monday for early payment of an annual $1.2 million state aid check that normally comes in March. The mayor said if the city doesn’t get $600,000 by Jan. 26, he won’t be able to pay city employees. So is it time for Olean to throw in the financial towel and seek protection from its creditors by declaring bankruptcy? A long-time city alderman and the county treasurer say no. Olean has run out of money at the beginning of the year since 2003. The revenues side of the budget is always a little low between January and March. The city earns most of its money between March and May as people pay taxes. In the past, the city could rely on its surplus account to cover revenue shortages. Read more.
Large Scale Biology Corp. (LSBC), along with its subsidiaries Bioprocessing and Predictive Diagnostics, has filed for chapter 11 bankruptcy protection, in-pharmatechnologist.com reported yesterday. However, with assets of approximately $9.8 million and debts in the region of $7.8 million, the company said it expects to be able to pay off all the creditors and have additional funds left over for shareholders, according to Robert Erwin, chairman of the company's board of directors. The creditors include Agility Capital, Kentucky Technology, Woodlawn Foundation, Seneca Meadows Corporate Center III Limited Partnership, LSBC's CEO Kevin Ryan and Robert Erwin. Read more.
Commentary: The Emotional Toll of a Bankruptcy
Many people fall on hard times at some point in their lives, Bankrate.com reported today. Events lead to an exhaustive struggle to stay afloat with finances intact. Some consumers become submerged, drowning in debts that leave them filing for bankruptcy. "The main three reasons for filing are job loss, medical and family breakup," says Elizabeth Warren, Harvard Law School professor. "These three reasons account for about 90 percent of all filings, with many debtors hit by two or even all three events." Edward Charlesworth, psychologist and author of "Stress Management: A Comprehensive Guide to Wellness," says health-care costs cause people to get buried in medical expenses. He says those who become bankrupt are usually not to blame. "They've been hit by a bankruptcy that was out of their control." Attorney Gary McKenzie of Steffes, Vingiello & McKenzie LLC in Baton Rouge, La., says debtors are almost always in a very low emotional state when they decide to file. Read more.
Airlines
Judge Approves UAL's Managers Incentive Plan
A federal bankruptcy judge overseeing the 37-month reorganization of United
Airlines parent UAL Corp. overruled union and retiree objections to an
equity incentive plan that will award 8 percent of the 125 million new UAL
shares to 400 top managers of the airline, the Wall Street Journal reported
today. During the first day of a hearing in Chicago to confirm UAL's
reorganization plan, U.S. Bankruptcy Court Judge Eugene Wedoff listened to union complaints that the proposal is "excessive" at a time when
other employees have made concessions to help the airline rebound
financially. But he said the Bankruptcy Code doesn't expressly call for a
review of management compensation, so the only reasonable basis for a
decision is if the plan is "what's done in the marketplace." "It may be we
have a culture in this country that overcompensates management," the judge
said. "But United is just one enterprise that operates in that general
environment," and therefore it can't be expected to stand against the tide
and be uncompetitive. The plan approved yesterday calls for 9.8 million
shares in the form of restricted shares or stock options to be made
available to management, with the rights vesting over four years with the
first 20 percent after six months. Read more.
Delta Could Emerge from Bankruptcy in Over a Year
Delta Air Lines has completed 70 percent of the goals in its recovery plan
and could emerge from bankruptcy court in little over a year, CEO Gerald Grinstein said, the Associated Press reported yesterday.
Grinstein, who spoke to The Atlanta Journal-Constitution yesterday, also
said Delta is not in merger talks with Northwest Airlines, as some have
speculated. Atlanta-based Delta, the nation's third-largest carrier, filed
for chapter 11 protection last September. "My aspiration would be to come
out in the spring or summer of '07," Grinstein said. But he also said the
airline still wants a permanent cost-cutting deal with pilots worth $325
million a year—substantially higher than the value of a tentative deal
reached last month. Grinstein said he expects consolidation in the airline
industry after 2007, but discounted rumors that Delta might merge with
Northwest, which is also in bankruptcy court.
Refco Creditors Seek Postponement of Foreign-Exchange Asset Auction
Refco Inc.'s lenders and unsecured creditors asked a judge to postpone an
auction of the company's foreign-exchange assets, saying potential bidders
didn't get the financial information they need to formulate a bid until last
weekend, according to a Dow Jones Newswire report yesterday. Those assets --
including more than 15,000 retail client accounts at Refco F/X Associates
LLC, and Refco's minority stake in a foreign-exchange trading firm -- are
scheduled to go on the auction block Jan. 26. The lead bidder has offered to
buy them for $110 million. But Refco's unsecured creditors committee and
Bank of America N.A., which represents a group of lenders, asked a judge for
a postponement of at least two weeks. In documents filed late Tuesday in
U.S. Bankruptcy Court in Manhattan, they complained the lead bidder was
tardy in providing financial information to other potential bidders. They
also sought a court order that would temporarily bar Refco from making a
$7.6 million payment to the lead bidder, Forex Capital Markets LLC. Refco,
once the country's largest independent commodities broker, filed for
bankruptcy protection Oct. 17 amid allegations that a top executive had
hidden $430 million in bad debt. Read more.
Impath Ex-CEO Is Jailed Three Months
The former chief executive of Impath Inc. was sentenced Tuesday to three
months in prison in connection with improperly charging personal expenses to
the company, including purchases of furniture, artwork and beauty products,
the Associated Press reported yesterday. At a hearing in Manhattan on
Tuesday, U.S. District Judge Jed S. Rakoff also sentenced Anuradha D. Saad
to two years supervised release and ordered her to pay a $6,900 fine and a
special assessment of $300. In September, Saad, of Beverly Hills, Calif.,
pleaded guilty to two counts of soliciting proxies containing false proxy
statements and one count of knowingly failing to implement a system of
internal accounting controls. Prosecutors say she improperly charged about
$120,000 in personal expenses to her corporate credit card as business
expenses and that those personal expenditures weren't disclosed as
compensation in Impath's proxy statements. Richard P. Adelson, Impath's
former chief financial officer, is scheduled to go to trial later this month
on charges of conspiracy, securities fraud and making false filings with the
Securities and Exchange Commission. The company announced an internal
investigation into possible accounting irregularities in July 2003. It filed
for bankruptcy protection in September 2003.
Lawyers Oppose Moving Lay, Skilling Trial
Federal prosecutors said Wednesday the upcoming fraud and conspiracy trial
of Enron Corp. founder Kenneth Lay and former CEO Jeffrey Skilling should
stay in Houston despite defense concerns about the ability to choose a fair
jury, the Associated Press reported yesterday. In court papers, prosecutors
urged U.S. District Judge Sim Lake to deny a renewed request to move the
trial from Enron's hometown as he did a year ago when the defense teams
first pushed to move the trial out of Texas. Last week Lake indicated the
renewed request to move the trial had little chance of approval when he
asked attorneys and prosecutors if any more hearings were needed before jury
selection begins Jan. 30. The judge then scheduled a Jan. 26 hearing to
address any outstanding issues. Read more.
Bankruptcy Court Confirms Aura's Reorganization Plan
Aura Systems, Inc. announced today that its reorganization plan was confirmed by the court, with an effective date to be on or before Jan. 31, a press release on BusinessWire.com said yesterday. The reorganized company, based in El Segundo, Calif., will have approximately 23 million issued and outstanding common shares and the total debt will be approximately $2.5 million dollars payable over five years, including 7 percent simple interest with no payments scheduled for the first year. The reorganized company's bylaws prohibit the company from issuing any preferred stock or any convertible instruments without the prior approval of the shareholders. The company shall have an initial five-member board consisting of Melvin Gagerman as Chairman of the Board, Marc Hoffman as President and Chief Operating Officer, Richard Armbrust, Dr. Arthur Schwartz and Sheldon Appel. Read more. (Free login required).
International
Australia's Hardie Director Resigns Due to Health
James Hardie Industries NV non-executive director Peter Cameron has resigned citing ill health, the Australian Age reported today. Mr Cameron, who joined the board in August 2003, has been described as the architect of the group's restructure as it shifted its headquarters to The Netherlands in 2001. He was a partner in Allens Arthur Robinson, which advised the building products company when it set up the Medical Research and Compensation Foundation to handle its asbestos liabilities and its move to The Netherlands. The foundation came under the microscope of the NSW Special Commission of Inquiry investigating concerns that the MRCF faced a shortfall of as much as $1.5 billion to meet future asbestos compensation claims. Read more.
Japan's 2005 Bankruptcy Cases Below 13,000 for First Time in 14+ Years
Japan's corporate bankruptcies totaled 12,998 cases in 2005, falling below 13,000 for the first time in 14 years helped partly by a recovery in business sentiment among major companies, a credit research agency said today, according to a report by Japan Economic Newswire. The number of corporate bankruptcies was down 4.9 percent from 2004 for the fourth straight yearly decline, according to Tokyo Shoko Research, whose data cover the failures of firms with debts of 10 million yen or more. Besides the improvement of major companies' business, the agency attributed the fall to expansion of public financial support to small and midsize companies. The amount of debt left by failed firms was 6.70 trillion yen, down 14.2 percent from the preceding year and falling below 7 trillion yen for the first time in 11 years. The size of the debt left by bankrupt firms has shrunk every year since hitting a record high of 23.89 trillion yen in 2000. Read more.