Restructuring professionals say that companies in bankruptcy court are increasingly facing off with Justice Department watchdogs over important matters such as court venue and executive bonuses, the Wall Street Journal reported today. U.S. Trustee recently objected to the venue choice made by Houghton Mifflin Harcourt Publishing Co., the educational publisher that in May filed for chapter 11 in Manhattan. The company sought to cut more than $3 billion in debt off its balance sheet through a plan supported by more than 90 percent of its creditors. The trustee thought that Boston-based Houghton Mifflin made the wrong venue choice and urged the judge to move the case. Yet Philip Dublin of Akin Gump Strauss Hauer & Feld LLP, who represented a group of the publisher's creditors, said a change of venue would jeopardize a crucial $500 million financing deal, leaving the company "with potentially no way out of bankruptcy." Restructuring professionals say the trustees' increasingly fastidious approach comes from the director of the U.S. Trustee Program, Clifford J. White III, who is vehement that trustees uphold the letter of the law and the integrity of the bankruptcy system. "The U.S. trustees' objectives are to preserve the integrity of the bankruptcy system," said Kenneth Klee of boutique bankruptcy law firm Klee, Tuchin, Bogdanoff & Stern LLP. "Sometimes in doing so it will not be in the best interest of a particular company."
