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If American Apparel gets the bankruptcy turnaround it envisions, the fashion chain will soon have its most profitable years ever, according to court documents filed on Thursday, Reuters reported. The company projected in a court filing that it would return to profit in 2018, its first money-making year since 2009. By 2020, the company projected a net profit of $23.7 million, well above its previous peak in 2007. The company warned in the court filing that ongoing legal battles with Dov Charney, the founder who was fired as chief executive last year, remained one of the risks to its future. The company accused Charney of orchestrating protests at its headquarters and said that he could undermine the company’s ability to hire staff and executives. Separately on Thursday, American Apparel sought to reassure suppliers and other creditors that they were key to its future, even though they were going to get next to nothing on what the company owes them.

The attorney representing Joel Sanders, the former chief financial officer of bankrupt law firm Dewey & LeBoeuf, renewed his call for a mistrial yesterday, saying that he was worried the jury was feeling pressure to convict after 20 days of deliberations, Reuters reported yesterday. Judge Robert Stolz, who is presiding over the case in Manhattan criminal court, declined to order a mistrial. Prosecutors and attorneys for the other two defendants, former Dewey Chairman Steven Davis and Executive Director Stephen DiCarmine, did not join in the call for a mistrial. Sanders' lawyer, Andrew Frisch, said he was worried "the jury feels they have to convict someone of something to get out of here."

A bankruptcy judge agreed to undo the sale of a $230 million claim against Bernard Madoff’s liquidating investment firm, offering hopes of a higher recovery to certain Madoff investors, the Wall Street Journal reported today. Bankruptcy Judge Stuart Bernstein this week said that he would break off the sale of the claim, currently held by major Madoff feeder fund Fairfield Sentry Ltd. Fairfield, a British Virgin Islands fund that funneled nearly all of its investors’ cash to Madoff, had sought to undo a pending sale of the claim after a massive settlement with another of Mr. Madoff’s investors dramatically changed the playing field and drove up the price such claims were fetching on the secondary market.

Jurors in the Dewey & LeBoeuf criminal trial stuck it out for one more day of deliberations on Wednesday, laboring uneventfully even as the months-long trial threatened to end in a mistrial, the American Lawyer reported today. Yesterday was the 18th full day of deliberations in the trial of Dewey & LeBoeuf chairman Steven Davis, former executive director Stephen DiCarmine and former chief financial officer Joel Sanders. Over nearly four weeks of deliberations, the Manhattan jury has twice complained of deadlock—and twice delivered partial verdicts that cleared Dewey’s former leaders of relatively minor charges. Prosecutors accuse the trio of overseeing a scheme to conceal the firm’s true financial condition from lenders and investors before Dewey & LeBoeuf finally collapsed in 2012. Each defendant faces years in prison if convicted.

Molycorp Inc.’s unsecured creditors want to investigate lender Oaktree Capital Management LP, which they ‎say loaded the rare-earths miner with debt in transactions the creditors may sue to challenge in court, the Wall Street Journal reported today. Molycorp’s unsecured creditors’ committee is asking the bankruptcy court to let it question Oaktree employees and review various documents about transactions between the Los Angeles-based private-equity firm and Molycorp that took place in the months before Molycorp’s chapter 11 filing. Oaktree provided funding to Molycorp before the chapter 11 filing and has since provided the company with a $130 million bankruptcy-financing package. The committee said that it is investigating potential claims and litigation against Oaktree related to these transactions, including possibly seeking to unwind them. Other possible claims include aiding and abetting breaches of fiduciary duty, the committee said, as well as reviewing whether Oaktree may have violated securities laws with respect to its trading of Molycorp securities.

The lawyers who raked in more than $200 million for MF Global’s investors are now seeking their own payday, the Wall Street Journal Bankruptcy Blog reported yesterday. Bernstein Litowitz Berger & Grossmann LLP and Bleichmar Fonti Tountas & Auld LLP are seeking a total of $42.1 million — $38.8 million in fees and $3.3 million in expenses — for their work leading the charge in shareholder litigation against the failed brokerage, its former officials, its auditor and others. The lawsuit claimed that MF Global misled investors about its business and financial results leading up to the its 2011 collapse. Officials have disputed wrongdoing in connection with the brokerage firm’s demise.

Victims of a convicted Ponzi schemer will benefit from an arbitration award stemming from that criminal’s own poor investments, the Wall Street Journal reported today. A trio of brokers has agreed to pay $2.75 million to settle arbitration claims about their role in various unsuccessful investments purchased by Gregory McKnight, who is currently in jail after having been found guilty of a roughly $72 million Ponzi scheme. That settlement money will go to help compensate victims of McKnight’s fraud, which, according to the Securities and Exchange Commission, involved more than 3,000 investors from across the country, as well as several foreign countries. So far, just $1.5 million has been distributed by the receiver to those investors, according to court documents. Read more. (Subscription required.) 

For further analysis of financial fraud and ponzi schemes, be sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

A bankruptcy judge on Wednesday declined to order a new sale of properties belonging to the Diocese of Gallup, N.M., even though auctioneers made an “error in judgment” by turning away a newspaper reporter and a graduate student from what had been billed as a public auction last month in Albuquerque, the Albuquerque Journal reported on Thursday. Bankruptcy Judge David T. Thuma said that ordering a new auction could harm victims of sexual abuse by priests by reducing the money available to settle the diocese’s chapter 11 case. Auctions held last month in Albuquerque and Phoenix netted the diocese about $160,000 after fees were paid to real estate brokers handling the sales. As of June 30, legal and professional costs in the case had mounted to more than $2.6 million. Ordering a new auction “would cost money,” Judge Thuma said at the end of a hearing in Albuquerque. “There is a risk that ordering a new auction would harm the creditors, who are abuse victims.” Read more.

For more on diocesan bankruptcies, be sure to attend ABI's Winter Leadership Conference that will feature a panel of experts looking at issues surrounding a bankrupt diocese.

More than two years after a train laden with crude oil derailed in Canada, killing 47 people and destroying part of a small town in Quebec, a U.S. judge approved the railway’s multimillion-dollar bankruptcy-exit plan and cleared the way for victims to begin receiving payment from a $343 million fund, the Wall Street Journal reported on Saturday. Bankruptcy Judge Peter G. Cary on Friday approved Montreal, Maine & Atlantic Railway’s bankruptcy-exit plan, a day after a Canadian judge gave it conditional approval. The plan earmarks about $86 million for the families of those who died in the explosive crash in the town of Lac-Mégantic. The railway is now defunct, its assets sold off as part of the bankruptcy case, but the remnants of the company under the control of Robert Keach, the bankruptcy trustee in the U.S. case, have been working with parties on both sides of the border on a compensation plan for victims and creditors.

Creditors objected to elements of the city of San Bernardino's initial debt payment plan at a bankruptcy court hearing on Thursday, saying that the city was not being forthcoming about what assets it had and complaining about the lengthy process, Reuters reported on Friday. San Bernardino has proposed paying a penny on the dollar on nearly $50 million in pension obligation bonds held by EEPK, the Luxembourg-based bank and the city's second largest creditor behind the California Public Employee Retirement System. Representing EEPK at the hearing in Riverside, Calif., Vince Marriott said that the city had failed to reveal to creditors how much property it owned, its value, and whether it could be liquidated. Representing the city of San Bernardino, Paul Glassman said that the city would identify any excess properties but said the creditors were misguided if they thought there were great sums of money to be had through their sale.