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February 24, 2006
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BDO
Seidman Faces $170 Million Suit over Bankest Bust
International accounting
firm BDO Seidman and two of its CPA partners have been sued for
malpractice by a federal court-appointed officer, who is seeking $170
million in damages on charges of unfair business practices and
securities fraud,
size='3'>Portfolio Media reported yesterday.
The suit, filed in the U.S. Bankruptcy Court for the Southern District
of Florida, is the second to be filed against BDO in the wake of the
high-profile E.S. Bankest debacle, one of the largest bank and corporate
fraud cases ever prosecuted in
face='Times New Roman' size='3'>South Florida
size='3'>. Lewis B. Freeman, the federal court-appointed officer of
Bankest, alleges
size='3'>in the 40-page complaint that BDO’s conflicts of interest
followed in the footsteps of Arthur Anderson by maintaining a consulting
and joint marketing arrangement with Stratasys Group LLC, a Bankest
factoring client and the same company whose accounts receivable it was
supposed to verify as Bankest's auditor, according to the lawsuit. The
case is Lewis B. Freeman
v. BDO Seidman LLP, case no. 04-17602, U.S.
Bankruptcy Court in the Southern District of Florida.
name='2'>Adelphia Creditors Lose
w:st='on'>
size='3'>Battle
Million SEC Deal
A federal judge in
York
of bankrupt cable company Adelphia Communications Corp. to tear up a
$715 million settlement with the
w:st='on'>
size='3'>U.S.
face='Times New Roman'> Securities and Exchange
Commission penned after the company’s accounting scandal,
Portfolio Media
reported yesterday. U.S. District Court Judge Lewis
Kaplan upheld an earlier ruling by Bankruptcy Judge Robert
Gerber, rejecting an assertion by creditors
that
size='3'>the government had forced Adelphia into settling. “What
the appellants characterize as coercion was no different in principle
than the pressure that leads the overwhelming majority of defendants in
criminal cases to plead guilty -- the risk that a convictionafter trial
will result in a harsher sentence than is likely to be imposed following
a guilty plea,” Kaplan wrote in his ruling. Under Adelphia’s
deal with the SEC, the $715 million payment will be used to fund a
restitution reserve for investors. The deal allows Adelphia to avoid
payment of civil fines to settle the SEC’s fraud charges. The
second-largest payment ever made to settle an accounting fraud suit, the
deal was exceeded only by WorldCom Inc.'s $750-million settlement in
2003.
name='3'>HealthSouth Settles Investor Lawsuits
Investors who sued over a huge
fraud at HealthSouth Corp. would get $445 million in stock and cash
under a proposed settlement that the rehabilitation chain said resolves
its thorniest legal problems stemming from the scheme, the Associated
Press reported yesterday. The Birmingham-based company will pay $215
million in common stock and warrants under the global settlement
proposal announced Thursday, and insurance companies will pay another
$230 million in cash. Stockholders and bondholders involved in
class-action suits filed in federal court also will receive 25 percent
of anything the company eventually gets in its lawsuit against fired
chief executive Richard Scrushy, former auditor Ernst & Young ,and
UBS, HealthSouth's former investment bank. The company said attorneys
were still working on a final version of the agreement, which must be
approved by a judge. In all, the company has announced $895 million in
settlements related to the fraud.
href='http://biz.yahoo.com/ap/060223/healthsouth.html?.v=5'>Read
more.
Tower
Automotive Makes Offer to Unions to Fend Off Strike
Tower Automotive Inc.,
a
size='3'>Novi
supplier under bankruptcy protection, made a last-minute cost-cutting
proposal to its three unions to prevent them from striking, the
Detroit Free Press
reported today. Tower's proposal improves on an earlier
demand to freeze pensions, make workers pay more for health insurance
and cut hourly wages $2 to $3 an hour, Tower spokesman Joel Weiden said.
Wages currently range from $13 to $15 an hour. Tower's three unions --
the United Auto Workers, steelworkers and the International Union of
Electrical Workers -- said Wednesday they were moving closer to a strike
because the supplier of assemblies and suspension modules had rejected a
union proposal to help save jobs and return the company to
profitability. Unless a deal is reached soon, Tower would make an
argument to get rid of its union contracts at a hearing Monday in the
U.S. Bankruptcy Court for the Southern District of New York. The judge
is to rule on the motion March 13.
href='http://www.freep.com/apps/pbcs.dll/article?AID=/20060224/BUSINESS01/602…'>Read
more.
name='5'>Delphi
size='3'>Union
Vote
Members of Delphi Corp.'s
second-largest union began voting on whether to strike if a bankruptcy
judge decides to cancel the auto supplier's labor contracts, the
Associated Press reported today. The
IUE-CWA, which represents 25 percent of
w:st='on'>
size='3'>Delphi
workers, told local unions two weeks ago that they could begin holding
votes to authorize a strike, spokeswoman Lauren Asplen said. The union
hasn't set a deadline when voting must be completed. A prolonged strike
against Delphi, the nation's largest auto supplier, could devastate the
company and its largest customer, General Motors Corp., which already is
reeling from falling
w:st='on'>
size='3'>U.S.
size='3'>sales and its own high labor costs.
href='http://www.cleveland.com/printer/printer.ssf?/base/business/11407842678…'>Read
more.
size='3'>Dana Corp
size='3'>. Begins
Working with a Restructuring Adviser
Dana Corp., a supplier to
several big auto and heavy-truck makers, has begun working with
restructuring firm Miller Buckfire & Co., which typically works with
firms facing financial straits, the
size='3'>Wall Street Journal reported today.
Dana, which employs more than 45,000 people worldwide and has annual
revenue of $9 billion, is grappling with a number of financial and
operational issues. Dana announced in October that it would restate its
2004 and first-half 2005 results after an internal investigation showed
it didn't properly account for certain items, primarily in its
commercial-truck operations. The restatements cut $44 million from net
income for the 18-month period from Jan. 1, 2004, to June 30, 2005. A
week later, the company slashed the dividend to a penny a share from 12
cents. Like many auto suppliers, Dana has been hurt by high material and
labor costs, and pressure from auto makers to cut prices.
href='http://online.wsj.com/article/SB114075414999882282.html'>Read
more.
w:st='on'>
name='7'>Oregon
face='Times









New



Roman'
size='3'> Remodeler Files for Chapter 7
w:st='on'>
size='3'>Former
face='Times New Roman' size='3'>Oregon
size='3'>City
size='3'>remodeler Wade McGilvra filed for chapter 7 bankruptcy
protection as he listed debts of $1.5 million, the
face='Times New Roman' size='3'>Oregonian
size='3'>reported today. More than a third of the debt is owed to former
customers who have sued McGilvra, claiming he had botched their projects
or pocketed their money. The move could enable McGilvra to regain his
contractor's license and get back in business, even though the Oregon
Construction Contractors Board suspended his license last summer after
determining he had engaged in 'dishonest and fraudulent
conduct.' In addition to discharging debts,
a bankruptcy filing also severely restricts any kind of disciplinary
action taken by governmental agencies such as the contractors board.
McGilvra might be able to obtain a new contractor’s license if he
pays off $3,000 in fines levied by the board.
href='http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1…'>Read
more.
name='8'>Bloated Pay for Executives Draws Ire in Chapter 11
Cases
Bloated compensation packages
for executives at the helm of bankrupt companies are increasingly
drawing fire from creditors and workers, who question why
executivesshould earn
huge bonuses while employees are asked to sacrifice pay and
benefits, Portfolio
Media reported yesterday. As the past year was
dominated by a string of huge bankruptcies, executive pay appeared to be
climbing even as companies impose austere conditions on other employees
while struggling to claw their way out of chapter 11. While the idea of
a bankrupt company offering a generous pay package to executives as it
lays off others might not seem to make much sense, experts argue there
is sound reasoning behind the move. “Without a retention plan,
these people could be spooked into leaving,” said Baker
Smith, a principal with Morris-Anderson & Associates,
Ltd.
name='9'>Fannie Mae Accounting Is Faulted
An internal investigation
has uncovered new evidence that senior executives of Fannie Mae, the
largest buyer of American home mortgages, manipulated its accounting in
the 1990s to meet earnings projections so that top executives could
receive more than $27 million in bonuses, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. In a 616-page report that was released
yesterday, former Senator Warren Rudman and a team of lawyers and
investigators concluded after an 18-month review that Fannie Mae's
accounting practices 'in virtually all of the areas that we reviewed
were not consistent with' generally accepted accounting principles.
Administration officials, some members of Congress and rival businesses
said the report showed the need to strengthen oversight of Fannie Mae
and limit its size. But the company's supporters in the housing industry
and elsewhere said that the report only highlighted the changes that
have taken place under its new management. The report, which was
commissioned by Fannie Mae's directors in 2004 after the company was
accused by its main regulator of violating accounting rules, laid the
responsibility for many of the violations on two former top executives:
the chief financial officer, J. Timothy Howard, and the controller,
Leanne Spencer.
href='http://www.nytimes.com/2006/02/24/business/24fannie.html?_r=1&oref=slog…'>Read
more.
Airlines
name='10'>Northwest Unions Report Progress in Labor
Talks
Unions representing pilots and
flight attendants at bankrupt Northwest Airlines said on Thursday that
they had made progress on some issues in labor talks but others remained
as Friday's court-imposed deadline nears, Reuters reported yesterday. A
federal judge is expected to decide on Friday whether to allow the
airline to void contracts with employee groups that are resisting
concessions that Northwest says it needs to survive. The pilots' union
said it had reached a possible agreement on the structure of a regional
carrier the company wants to start. Northwest had wanted the planned
subsidiary fly planes with up to 100 seats, encroaching on the territory
of its existing pilots, who now have the right to fly any plane with
more than 70 seats. The flight attendants' union said Northwest had
struck a deal on the issue of $195 million in salary and benefit cuts.
But a union spokesman said some crucial issues remained and talks were
'excruciatingly slow.'
href='http://asia.news.yahoo.com/060223/3/2gcq9.html'>Read
more.
name='11'>Aloha Airlines under Federal
Investigation
Federal labor officials are
investigating whether Aloha Airlines illegally used employee pension
funds to pay bank loans, the Associated Press reported yesterday. The
Labor Department has subpoenaed four banks for information on the
carrier's 2,400-member machinists union's defined-benefit plan. Aloha
emerged from bankruptcy last week, but the investigation covers events
before the bankruptcy when the airline was headed by former CEO Glenn
Zander. Aloha's management of its employees' pensions was a source of
controversy for the local carrier during its 13-month bankruptcy, which
began in December 2004.
href='http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2006/02/23/financia…'>Read
more.
International
w:st='on'>
name='12'>U.K.
face='Times New Roman' size='3'> to Adopt Cross-Border Insolvency
Law
The United Kingdom is gearing
up to adopt a new cross-border bankruptcy law that will likely ease
international disputes over which nation’s solvency laws will
applyto bankrupt
companies that have a global footprint,
size='3'>Portfolio Media reported
yesterday.
size='3'>The law, expected to go into effect April 1, will be drawn up
using the same model provided by the United Nations nearly a decade ago
that inspired the
w:st='on'>
size='3'>U.S.
size='3'>adoption of chapter 15 in October 2005. Adoption of the law in
the
size='3'>United Kingdom
not likely change the way British and
w:st='on'>
size='3'>U.S.
size='3'>attorneys cooperate because cooperation is already
extensive,
size='3'>according to Evan C. Hollander, partner in the
financial restructuring & insolvency group at White &
Case’s
face='Times New Roman' size='3'>New York
office. The proposed U.K law will only be applied where
the other country has adopted a similar law, while chapter 15 does not
require that a representative in a foreign proceeding be from a
jurisdiction that has adopted a similar law.
name='13'>Canadian Pension Bill Passes
The controversial pension
changes that nearly triggered a disruptive strike by municipal workers
across
face='Times New Roman' size='3'>Ontario
became law amid warnings that higher costs could force
cities and towns to hike taxes or cut services, the Canadian Press
reported Thursday. Bill 206 passed just one day after the government
narrowly averted a province-wide strike by members of the Canadian Union
of Public Employees,
w:st='on'>
size='3'>Ontario
largest public-sector union, with a promise to conduct an independent
review of the pension plan in 2012. The bill, which devolves
responsibility for the $40-billion Ontario Municipal Employees
Retirement System to municipalities and their workers, passed final
reading by a vote of 51 to 23, with both the Conservatives and New
Democrats voting against it. The new law
allows emergency workers, including police and firefighters, to
negotiate supplementary benefits, including earlier retirement.
href='http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/…'>Read
more.