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The Diocese of Gallup’s assets are “virtually non-existent” and insurance coverage is “extremely limited” for settling the diocese’s chapter 11 bankruptcy case, an attorney for an insurance company said in court records, the Albuquerque (N.M.) Journal reported today. At least 17 of the 57 sexual abuse claims filed in the case predate 1965, when the Diocese of Gallup had no insurance coverage, attorneys said in motions. The company that insured the diocese from 1965 to 1977, Home Insurance Co., is insolvent and went into liquidation proceedings in 2003. The 25 sexual abuse claims that date to that period are now covered by New Mexico Property and Casualty Guaranty Association, which was created by New Mexico state law in 1978 to cover insurance policies issued by defunct companies. But by state law, claims against the Guaranty Association are capped at $100,000 each, said John Franchini, the state’s insurance superintendent. Meanwhile, legal and professional costs in the bankruptcy case have mounted to more than $2.6 million through June 30, court records show. Read more.

“Diocese and Religious Order Bankruptcies” will be a featured session at this year’s Winter Leadership Conference, happening December 3-5 at the Arizona Biltmore in Phoenix, Arizona. For more information and to register, click here. 

Optim Energy LLC will pay Blackstone Group LP $5 million to settle their fight in the Texas power-plant operator’s bankruptcy case in exchange for Blackstone dropping its appeal of Optim’s court-approved plan to exit bankruptcy, the Wall Street Journal reported today. Optim said in a Wednesday court filing that the deal will stop all litigation between the sides and will serve as the backbone to a liquidation plan for the six bankrupt Optim entities that weren’t included in a broader reorganization plan approved by a judge late last month. That proposal kept Optim in the hands of Bill Gates’s private investment firm, Cascade Investment. Crucially, Blackstone will drop a $190 million claim it had made for so-called rejection damages. A hearing on the settlement had been scheduled for Aug. 19. Blackstone won’t officially drop its appeal to the broader restructuring until the approval of the liquidation plan for the six entities.

A lawsuit seeking to reclaim $825 million from two major funds that invested with Bernard Madoff may move forward largely intact, a bankruptcy judge ruled on Tuesday, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Stuart M. Bernstein largely rejected a bid by the funds, Kingate Global Fund Ltd. and Kingate Euro Fund Ltd., to dismiss litigation brought by the Irving Picard, the trustee winding down Madoff's investment firm. The lawsuit seeks to recover the $825 million that the two funds, so-called feeder funds that pooled investors' cash and sent the funds on to Madoff, received in the six years before the 2008 collapse of what was ultimately to be revealed as the largest Ponzi scheme of all time. Read more. (Subscription required.)

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A bankruptcy trustee is suing U.S. Secretary of Transportation Anthony Foxx to claw back more than $420,000 a defunct bus maker paid Foxx for work he allegedly never performed, the Wall Street Journal reported today. Trustee Elaine Rudisill, who is overseeing efforts to recover money and assets for creditors of defunct North Carolina bus manufacturer DesignLine Corp., on Friday sued Foxx in U.S. Bankruptcy Court in Charlotte. DesignLine filed for bankruptcy in August of 2013. According to the suit, DesignLine paid millions of dollars to two outside law firms for general legal counsel and other services at the time Foxx was employed as deputy general counsel. Foxx was also serving as the mayor of Charlotte at the time in question. DesignLine’s “books and records do not reflect any communications between [Mr. Foxx] and the outside firms, nor do they reflect any activities or actions of defendant in his role as deputy general counsel,” lawyers for Rudisill said in court papers.

Dewey & LeBoeuf’s former billing chief testified Monday that one of the firm’s top executives, ex-CFO Joel Sanders, had instructed her to prepare client invoices aimed at artificially inflating the firm’s revenues, the American Lawyer reported yesterday. After a juror’s illness led to a nearly weeklong break in the Dewey & LeBoeuf criminal trial, billing director Lourdes Rodriguez returned to court to testify on Monday in the Manhattan district attorney’s case against Sanders, ex-Dewey chairman Steven Davis and former executive director Stephen DiCarmine. The three are accused of deceiving bank lenders and investors about the firm’s deteriorating finances before Dewey collapsed in 2012.

The FBI will pay for and take over more than 100 boxes of documents that Tampa-based Creative Recycling Systems abandoned in a storage facility as part of the e-waste recycler's chapter 7 bankruptcy case, the Tampa Bay Business Journal reported yesterday. In a bankruptcy court hearing yesterday, attorney Terri Thomas from Fisher & Sauls, representing storage company Stevens & Stevens Inc., said that the FBI subpoenaed the documents on Friday. Bankruptcy Judge K. Rodney May authorized Thomas, on behalf of the storage company, to release the documents to the FBI. An earlier filing by Michael Markham, the attorney representing Creative Recycling's bankruptcy trustee, indicated sensitive documents abandoned by the company at the storage facility could be of use to "governmental agencies with open investigations of the debtors."

Creditors of Caesars Entertainment Operating Co. sued the bankrupt casino company, accusing it of trying to buy votes for its reorganization plan, Bloomberg News reported yesterday. A group of mid-level bondholders said in a complaint filed in bankruptcy court that Caesars promised $200 million in improper payments to other creditors to secure their support. The second-lien noteholders, who have been the company’s most vocal opponents, claimed that Caesars “has pledged to continue its illegal vote-buying campaign” to persuade more creditors to back the proposal. Caesars has said that it’s making progress in getting some of the second-lien noteholders to switch sides, while a lawsuit in Manhattan federal court by the trustee for those creditors could force Caesars Entertainment Corp. to join its main operating unit in bankruptcy.

West Virginia environmental regulators say that Patriot Coal's bankruptcy plan would leave the company with no assets to cover hundreds of millions of dollars in mine pollution cleanup, the Associated Press reported yesterday. In a bankruptcy court filing on Monday, attorneys for the Department of Environmental Protection (DEP)wrote that Patriot's plan would expose people to public health and safety risks. Patriot wants to close a proposed partial sale to Lexington, Kentucky-based Blackhawk Mining LLC. DEP attorneys said the plan appears to favor New York hedge funds and leave little to no ability for Patriot to pay to reclaim land and treat acid mine drainage and other water pollution. The plan also is opposed by the United Mine Workers of America because Patriot wants a judge to reject its collective bargaining agreement.

Energy Future Holdings Corp.'s deal to get out of bankruptcy fast was met with a barrage of criticism Tuesday from creditors who say they'll be left holding the bag if the deal at the heart of the turnaround falls through, Dow Jones Daily Bankruptcy Review reported today. Unveiled on Monday, the Dallas energy company's new bankruptcy plan is built around the $12.1 billion sale of its stake in Oncor, a cash-generating, regulated transmission business, to investors including Hunt Consolidated Inc. and investors including junior creditors from one of its two main divisions, the so-called "T-side" of the company. Unsecured creditors from Energy Future's other main division, the "E-side," attacked the deal at a court hearing Tuesday, saying it's no more than a "free option" to buy Oncor that leaves E-side creditors with the risk the deal will fail. Energy Future filed for chapter 11 bankruptcy protection in April 2014 with $42 billion in debt to resolve. The proposed takeover of Oncor is billed as a peaceful and speedy outcome to a bankruptcy that has been marked by contention.