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The company behind the Local.com website — a place for Internet users to search for local businesses — filed for bankruptcy on Tuesday, saying it stumbled after a sudden drop in traffic last year, the Wall Street Journal reported today. Company officials who put Local.com Corp. into chapter 11 protection plan to sell the 48-worker company, which has patents for the way it generates search results for consumers who are looking for businesses, products and services by geographic area. The Irvine, Calif.-based company said that Local.com draws about 14 million monthly visitors, and took in $83 million in revenue last year from advertising such as pay-per-click, pay-per-call and banner ads. But it struggled after a drop in visitors in the first quarter of last year, which meant that it collected less than the $1.6 million it expected to receive from Google Inc. and Yahoo Inc. for generating traffic for the search engines. Company officials weren’t specific about the severity of the drop.

Spurred by its creditors' complaints, Patriot Coal Corp. overhauled its sale process as it works to secure a bankruptcy court's blessing, Dow Jones Daily Bankruptcy Review reported today. The new auction plan, which Patriot outlined yesterday before the U.S. Bankruptcy Court in Richmond, Va., gives would-be buyers more time to formulate their challenges to proposed lead bidder Blackhawk Mining LLC and reduces the amount of bidder protections available to Blackhawk. The U.S. Trustee’s office, large banks, the union representing Patriot's miners and the company's unsecured creditors were among those who raised objections to Patriot's auction plans, warning that a speedy sale timeline and substantial bidder protections for Blackhawk would freeze out rival bidders. In response to objections, a Patriot lawyer said that the company extended its auction timeline by about a month, giving rival bidders until early September to submit their offers instead of Aug. 7. An auction would be held Sept. 9, and Patriot would aim to close a sale by Oct. 9.

Colt Defense LLC bondholders have acquired $37 million worth of the gun maker’s senior debt, giving them more ammunition to fight for a better deal in the company’s bankruptcy, the Wall Street Journal reported today. Colt, whose more than 175-year history includes the development of a revolver it calls “the gun that won the West,” is seeking to slash its roughly $358 million debt load in chapter 11 bankruptcy. Bondholders that had been poised to receive little in Colt’s restructuring have opposed the process, in part by challenging the company’s plan for an early August auction led by its private-equity backer, Sciens Capital Management LLC. After hashing out a deal over the weekend, bondholders purchased a $2 million position in debtor-in-possession financing — meant to fund Colt’s operations while it is in bankruptcy — and a $35 million prebankruptcy loan from hedge fund firm Marblegate Asset Management LLC.

Only a fraction of former students are likely to file a claim in Corinthian Colleges Inc.’s bankruptcy case, according to a law firm representing them, as students armed with little information face numerous administrative tasks to recoup losses, the Wall Street Journal reported today. “If the process goes as it is, maybe 6 percent of students will file the appropriate papers,” said Mark Rosenbaum of Public Counsel, which is one of the law firms representing students in Corinthian’s bankruptcy case. Any of the 81,000 former Corinthian students who believe they were defrauded by the schools, which include Everest, Heald and WyoTech campuses, are eligible to submit claims to the bankruptcy court. Students have until July 20 to complete the forms, or they could forfeit their right to any recovery in Corinthian’s bankruptcy case.

Salus Capital Partners LLC is pressing ahead with a bid to convert RadioShack Corp.'s chapter 11 case into a shoestring chapter 7 that would oust teams of lawyers and advisers and replace them with a trustee, Dow Jones Newswires reported yesterday. Salus, a hedge-fund owed $150 million, said in court papers on Monday that the liquidation of the ailing electronics retailer brought in far less than it should have and that legal and other professional fees are running higher than expected: $45 million by the end of June, according to court papers. The mounting legal fees "threaten to rapidly erode creditor recoveries in these cases," lawyers for the hedge fund said in court papers. "Salus stands to lose the most in these chapter 11 cases, which at this stage are essentially being funded directly from Salus's pockets." RadioShack's lawyers are trying to fend off Salus's efforts to convert the case. If Salus's motion wins a judge's signature at a hearing currently scheduled for Thursday, RadioShack's lawyers and other advisers would be displaced by a chapter 7 trustee. RadioShack says that Salus benefited from the higher prices professionals were able to get for the company's assets and, in court papers, called the motion to convert the case a "drastic remedy."

Nearly two years after the Lac-Mégantic oil train explosion killed 47 people and levelled the small Quebec town, the Canadian government has laid new criminal charges, the Toronto Globe and Mail reported today. Six former employees of the Montreal, Maine and Atlantic Railway, including the train engineer and the top executive, face charges under the Railway Safety Act and Fisheries Act for their alleged roles in the worst Canadian rail disaster in modern times. The bankrupt company itself has also been charged. The Canadian government said that the accused failed to ensure that the brakes were properly set on the unattended train of 63 oil tank cars that rolled down a hill in the early morning of July 6, 2013, before crashing in a series of explosions that destroyed 40 buildings and killed people in their sleep or as they enjoyed a night out in the village.

Peter Rogan last week pleaded not guilty to criminal charges accusing him of trying to evade creditors from collecting nearly $200 million in legal judgments against him in connection with the fraud that brought down Edgewater Hospital and Medical Center, the Wall Street Journal reported today. According to the Chicago Tribune, Rogan faced a $64 million civil judgment in a lawsuit accusing him of submitting false Medicare and Medicaid claims on the hospital’s behalf and another $124 million judgment from a hospital creditor. Prosecutors now say that Rogan worked with his lawyer to avoid paying up, taking such steps as hiding a trust account. Court records show that after entering his not guilty plea in Chicago, Rogan was taken into custody. He will return to federal court on Wednesday for a detention hearing. Read more. (Subscription required.) 

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

Just over three months before Dewey & LeBoeuf LLP fell into bankruptcy, a meeting of the law firm's key business generators devolved into finger pointing that presaged the death of the firm, an influential former Dewey partner told a jury yesterday, the Wall Street Journal reported today. The testimony by Washington, D.C., securities lawyer Ralph Ferrara came during the fifth week of a trial over whether Dewey's three former leaders conspired to commit financial fraud by lying to lenders and creditors in the runup to its May 2012 collapse. The defendants, former Chairman Steven Davis, ex-Chief Financial Officer Joel Sanders, and former Executive Director Stephen DiCarmine, have denied any guilt.

Gun maker Colt Defense LLC has pushed back until Wednesday a planned showdown with bondholders that are offering what they say is a superior financing package to get the company through bankruptcy, the Wall Street Journal reported today. Colt’s lawyers say that it wants to take more time to review the loan offer from bondholders, which is an alternative to a deal the company brought with it to bankruptcy court last week. Colt asked for the adjournment in an emergency hearing on Friday before Bankruptcy Judge Laurie Silverstein, seeking “additional time for a consensual resolution of the otherwise costly litigation,” in the words of company lawyer John Rapisardi. An open-court fight threatens to be a “very, very expensive and damaging process,” the company’s lawyer warned.

The federal government may try to assess damages against Altegrity Inc., the bankrupt parent of a government security investigations contracting business that is been accused of fraud in a whistleblower lawsuit, the Wall Street Journal reported today. The business — US Investigations Services (USIS) — is being liquidated, but Altegrity plans to emerge from bankruptcy with its other businesses intact. Federal lawyers moved on Friday to block Altegrity’s bid to shield itself and its leaders from liability in the lawsuit, which alleges USIS raked in tens of millions of taxpayer dollars for work that was never performed. Whistleblower Blake Percival, a former USIS employee who exposed the alleged “flushing” or “dumping” of unfinished security investigations, has already asked a bankruptcy judge to find that the wrongs alleged in the lawsuit he filed can’t be erased in chapter 11. Besides the whistleblower damages, the government said it may seek damages for possible violations of federal retirement pay protection laws if any turn up in a continuing investigation.