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Republicans Decide to Move Bankruptcy Bill Ahead with Altered
Abortion Language
Preparing themselves for the possibility of a presidential veto,
Republican leaders decided yesterday to move ahead with language in the
bankruptcy bill (H.R. 833) that does not specifically address violence
at abortion clinics, the CQ Daily Monitor reported. The decision
came after House Majority Leader Dick Armey (Texas) and Senate Majority
Leader Trent Lott (Miss.) were unable to convince Henry Hyde (Ill.) to
compromise on a more general provision in the bill that would prohibit
the discharge of debts by those who make 'willful and malicious threat
of serious bodily injury.' 'Basically it is a leadership decision that
we have to go with abortion language that can go through the House,'
said Charles E. Grassley (R-Iowa), the bill's sponsor. Democrats had
requested that the bill include language preventing those prosecuted for
abortion-clinic violence to use bankruptcy to escape their related
debts, arguing that without the language, most abortion-clinic violence
would not be covered under the current bill. However, Republicans have
resisted including language specific to abortion clinics. 'This is the
bankruptcy bill,' said Hyde. 'It shouldn't be an abortion bill.'
President Clinton has reportedly said he would veto the bankruptcy bill
if the abortion-language issue remains.
However, Grassley reported that two issues that have stalled the bill
have been resolved: debt collection practices for bounced checks and
retirement savings protection. Grassley conceded to a demand by Edward
M. Kennedy (D-Mass.) to protect some retirement accounts by
self-employed individuals, capping at $1 million the amount of
Individual Retirement Account or Roth IRA savings that a debtor could
keep from creditors. But while Lott said that most of the compromises
had been worked out on most of the outstanding issues in the bill,
Minority Leader Tom Daschle (S.D.) said that no agreement had been
reached on key provisions. 'I'd say it's premature to say it's a deal,'
he said. 'We're getting closer to resolution, but we're still not
there.' Lott said he is still looking for a conference report on which
to attach the bankruptcy bill and is eyeing the crop insurance bill
(H.R. 2559), which passed on May 25, a rural television measure (H.R.
1554) or the military construction appropriations bill (H.R. 4425).
SIPC Provides Financial Aid Investors of Bankrupt Brokerage
Firms
Officials at the Securities Investor Protection Corp. (SIPC) announced
yesterday that a record payment of $31 million from a special reserve
fund authorized by Congress to help investors at bankrupt brokerage
firms is being used to restore stocks and cash that 9,738 investors lost
due to theft at Sunpoint Securities, a Longview, Texas-based firm,
according to a newswire report. 'This case, which is the most expensive
in our history, illustrates in vivid terms why it is that SIPC is the
investor's first line of defense in the event of brokerage bankruptcy,'
said SIPC President Michael Don. 'The cost of $31 million to SIPC
reserves meant that nearly 10,000 individuals had their accounts
restored nearly immediately without regard to whether the authorities
will ever recover the stolen funds.' In the Sunpoint case, SIPC worked
with trustee Robert G. Richardson, a partner in the Dallas office
of Jackson Walker L.L.P. law firm, to use $31 million of its reserves in
order to facilitate the transfer of 9,738 Sunpoint investor accounts to
other investment firms. Final individual claims are being closed out as
of this month. Investors in all of the 50 states received SIPC reserve
funds in the Sunpoint case. The Sunpoint Securities theft came to light
in November 1999, when two individuals at the brokerage firm are
believed by authorities to have been responsible for the theft estimated
at more than $26 million in securities. To date, almost none of the
stolen funds have been recovered. 'I am very pleased that within a week
of the commencement of the liquidation we made arrangements for the
transfer of nearly all of the almost 10,000 active accounts to new
brokerage firms,' said Richardson. However, investors still need to be
wary of their investments, Don said. ''Insurance' for investment fraud
does not exist in the U.S.,' he said. 'It is important to understand
that SIPC is not the securities world equivalent of FDICthe
Federal Deposit Insurance Corporation. The Federal Trade Commission,
Federal Bureau of Investigation, state securities regulators and other
experts have estimated that investment fraud in the U.S. ranges from
$10-$40 billion a year. With a reserve of slightly more than $1 billion,
SIPC could not keep its doors open for long if its purpose was to
compensate all victims in the event of loss due to investment fraud.'
SIPC's web site address is
TARGET='window2'>www.sipc.org.
Class Action Filed Against Flooring America
On Feb. 8, the U.S. District Court for the Northern District of Georgia
appointed the New York firm of Kirby McInerney & Squire LLP as lead
counsel in the consolidated securities fraud class action filed on
behalf of purchasers of shares of the now-bankrupt Flooring America
Inc., formerly called the Maxim Group Inc., according to a newswire
report. The consolidated class action complaint, which was filed on
April 10, alleges that the company and certain of its officers and
directors had committed securities fraud inter alia by improperly
reporting artificially inflated revenues and income. The company, which
filed chapter 11 last Thursday, admitted it had reported false and
misleading financial results for the fiscal year ended Jan. 31, 1999,
and the complaint alleges that these results, admittedly inflated by the
company's improper recognition of revenues from vendor rebate programs,
misled investors who purchased stock in a company whose losses were six
times larger than it originally reported for fiscal 1999. The
class-action was brought on behalf of all investors who purchased the
company's common stock between June 2, 1998 and July 13, 1999. The new
complaint will extend the class period to assert claims on behalf all
investors who purchased Flooring America (or Maxim) common stock between
June 2, 1998 and May 22, 2000. Those interested in finding out more
about the suit are to contact Ira M. Press or Orie Braun, Kirby
McInerney & Squire, 830 Third Avenue, 10th Floor, New York, NY
10022, Telephone: (212) 371-6600 or (888) 529-4787, Fax: (212) 751-2540,
E-mail: obraun@kmslaw.com
Cerplex Bondholders Seek Involuntary Bankruptcy for
Company
Reuters reported yesterday that seven bondholders of Cerplex Group Inc.
filed a petition with a federal court yesterday to place the company, a
provider of computer spare parts and depot repair services, in
involuntary chapter 11. According to papers filed in the U.S. Bankruptcy
Court in the District of Delaware, the holders of Cerplex's 7-3/4
percent convertible subordinated debentures, issued April 1986 and due
2001, have claims totaling $13.5 million plus unspecified interest.
Cerplex said it was unable to make a sinking fund payment of $404,008 in
interest and $1.8 million in principal that was due April 17. The
primary petitioners include Chase Manhattan Trust Co. with a $10.4
million claim and EZ Investment Partnership with a $1.1 million claim.
Furniture.com Receives $27 Million in Financing
Furniture.com, which had been on the verge of shutting down, received a
$27 million cash infusion from a CMGI-led investor group, according to a
newswire report. Chief Executive Andrew Brooks said he met with
bankruptcy lawyers on June 12 to explore the company's options.
Furniture.com, a 2-year-old company based in Framingham, Mass., was
among several Internet firms that went public just before the stock
market's downturn. The company recently withdrew its initial public
offering, which was filed in January, and cut 12 percent of its
workforce in April. Although it said it received 19.6 million customer
orders during the first quarter (which was a 46 percent jump from the
prior quarter), the Boston Globe reported that the company had
trouble raising money from its previous backers. In its January filing
with the Securities and Exchange Commission, the company said that it
lost $46.5 million in 1999 and that its cash reserves totaled $31
million.
Laidlaw to Meet with Creditors Today
After it meets with its creditors in New York today, analysts said
yesterday that Laidlaw Inc., the biggest operator of school buses in
North America and owner of Greyhound Lines Inc., will most likely be
forced to restructure its operations by swapping debt for equity,
according to Reuters. 'Whether they go chapter 11
or not, they are
still going to have to restructure the balance sheet,' one analyst said.
Another analyst said that liquidation of the company is not in anyone's
interest. 'It's a company that has good core assets,' he said. 'Like the
school bus assets are good assets, they're making money. The debt load
is just too big for the company to sustain.' Toronto-based Laidlaw's
recent financial problems began on March 6, when Safety-Kleen Corp., a
Columbia, S.C.-based hazardous waste firm, in which Laidlaw bought a
controlling stake in 1998, suspended three top executives for alleged
accounting irregularities. Laidlaw then got into trouble after missing
interest payments that were due May 15 on its $3.5-billion debt.
Safety-Kleen filed for chapter 11 on June 9 in the U.S. Bankruptcy Court
in the District of Delaware. Laidlaw, which reported a $1.46 billion
loss last quarter, said cash had been restricted since it was advanced
$30 million by lenders in mid-April.
Mariner Post-Acute
Proposes Employee Severance and Incentive Plans
Mariner Post-Acute Network Inc. (MPANQ) is asking for bankruptcy court
authorization to implement an employee severance policy and key employee
retention plan. In a recent court filing, Mariner argues that it's
crucial to retain and provide necessary incentives to its employees, who
provide essential management and operational services vital to Mariner's
bankruptcy reorganization.
Courtesy
of
href='http://www.fedfil.com/bankruptcy/developments.htm'>The Daily
Bankruptcy
Review Copyright © June 21,
2000.
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