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Two former partners who testified yesterday at the Dewey & LeBoeuf criminal trial in New York state court in Manhattan said that they were shocked to learn that almost none of the income they took home in 2009 was reported as such on their firm-prepared tax forms the following year, American Lawyer reported today. Instead, Dewey & LeBoeuf reported to the Internal Revenue Service that it had distributed to the two partners the capital it owed them, when in fact the capital had not been repaid. As the case concludes its second week — the court will adjourn today for an educational development day in New York schools — prosecutors appear to be building their case that the three Dewey & LeBoeuf executives on trial knowingly stiffed departing partners of hundreds of thousands of dollars in capital to boost earnings in 2009, and submitted false information to the IRS.

The chief executive officer of Nextel's bankrupt Latin American arm denied giving bondholders a sweetheart deal as he testified yesterday on the company's $4.35 billion restructuring plan, Reuters reported yesterday. NII Holdings Inc, which operates the Nextel brand in Brazil, is trying to emerge from chapter 11 protection under a plan to hand control to Aurelius Capital Management and other holders of $4.35 billion in bonds. The plan is scheduled for four days of trial in bankruptcy court, where one creditor faction alleges NII was a doormat for creditors who designed the plan themselves. Steven Shindler, NII's chief executive officer, testified yesterday that he rejected multiple restructuring proposals he deemed unfair, and initiated a meeting at NII's Reston, Va.-based headquarters with Aurelius boss Mark Brodsky. "I wouldn't call it friendly, but it was a healthy dialogue," Shindler said.

A federal judge on Tuesday ruled largely in favor of the trustee seeking potentially hundreds of millions of dollars for Bernard Madoff's victims in 233 lawsuits that sought to recoup alleged fictitious profits generated by the Ponzi schemer's firm, Reuters reported yesterday. Bankruptcy Judge Stuart Bernstein said that trustee Irving Picard could try to claw back money that former customers who he calls "net winners" withdrew from Bernard L. Madoff Investment Securities LLC in the two years prior to that firm's December 2008 bankruptcy. Judge Bernstein rejected the argument that clawbacks should be limited because only a few Madoff employees knew of the fraud. "Once it is determined that a Ponzi scheme exists, all transfers made in furtherance of that Ponzi scheme are presumed to have been made with fraudulent intent," he wrote in his opinion. But the judge said Picard did not show he was presently entitled to recoup money from various "subsequent transferee" defendants who received sums originally withdrawn from Madoff's firm.

JPMorgan Chase & Co. won a legal battle in its effort to avoid billions of dollars in potential liabilities from its purchase of Washington Mutual Inc.’s banking operations during the financial crisis, the Wall Street Journal reported today. A U.S. District Court judge in Washington, D.C., ruled yesterday that the Federal Deposit Insurance Corp. must shoulder certain legal claims stemming from decisions that Washington Mutual made before JPMorgan bought the business in 2008 at the behest of regulators. JPMorgan and the FDIC have fought for years over who is ultimately liable for claims that arose from the failed Seattle thrift. The bank has said the FDIC receivership that liquidated Washington Mutual in 2008 should pay any claims. The FDIC has countered that JPMorgan is responsible. JPMorgan bought the business for $1.88 billion during some of the most tumultuous hours of the financial crisis.

Caesars Entertainment Corp began a trial yesterday, hoping to convince a judge to put on hold lawsuits against the casino company that it said threatened plans to overhaul $18 billion in debt owed by its operating affiliate, Reuters reported. Groups of creditors have sued Caesars alleging that it must honor a guarantee of billions of dollars in the debt of its operating affiliate, Caesars Entertainment Operating Co. Inc., which filed for bankruptcy protection in January. The lawsuits also alleged the parent company transferred billions of dollars of choice properties and casinos from the operating unit in the years leading up the bankruptcy, which benefited the parent and its private equity backers. Caesars has said that its guarantees of the operating unit's debts were properly voided, and that the asset transfers were done for fair value. Read more.

For more on the issue of valuation, be sure to pick up a copy of ABI’s A Practical Guide to Bankruptcy Valuation. 

The collapse of Life Partners, which sold shares in life insurance policies on the elderly and the ill, doesn’t fit neatly under bankruptcy law, which requires a judge distribute assets equally among creditor classes, Bloomberg News reported yesterday. “How can someone wrap things up and bring it to a conclusion if there are still scores of policies outstanding because insureds have not passed away?” said Christopher Bebel, a former Securities and Exchange Commission attorney.  The investment vehicles, blandly labeled life settlements but known more bluntly as death bonds, first appeared in the late 1980s, when they were called viaticals. They became popular among AIDS patients who needed cash for medical expenses and elderly clients seeking money for end-of-life care. Life Partners, founded in 1991, sold stakes in policies with a face value of $2.4 billion. Its clients were individuals, but the $35 billion market has also attracted asset managers like Fortress Investment Group LLC and insurers such as American International Group Inc. Life Partners relied on an expert to estimate life expectancies, a key factor in the price investors would pay. The identity of the insured, or any other fractional investors in the policy, would usually remain secret. A Texas jury found that the company had low-balled mortality estimates in a lawsuit filed by the Securities and Exchange Commission. Unwilling to pay a $46 million judgment, the Waco-based company filed for bankruptcy Jan. 20.

Kitchenware manufacturer EveryWare Global said yesterday that it has emerged from bankruptcy under new ownership and with $250 million in debt erased from its balance sheet, Dow Jones Daily Bankruptcy Review reported today. Sam Solomon, EveryWare Global's chief executive, said the company is leaving chapter 11 with a strengthened balance sheet and $110 million in exit financing. The maker of Anchor Hocking and Oneida kitchen products arrived in bankruptcy in April with a prearranged deal with senior lenders. They have agreed to swap the approximately $250 million they're owed for 96 percent of EveryWare Global's new common stock, under the chapter 11 plan.

LightSquared Inc. won a judge’s approval for $1.75 billion in exit financing as it gets set to conclude a contentious three-year trip through bankruptcy, Bloomberg News reported yesterday. The wireless broadband venture, which has been locked in a battle with Dish Network Corp. Chairman Charles Ergen, also got permission to keep secret key data on fees to investment bankers and lenders led by Credit Suisse Group AG, Jefferies Group LLC and Morgan Stanley. Bankruptcy Judge Shelley Chapman approved the bankruptcy plan in a March 26 ruling that resolved most disputes between LightSquared and Ergen, and she approved the exit financing yesterday.

U.S. regulators asked for public input yesterday on whether to assign licenses for airwaves held by LightSquared Inc. to the reorganized wireless company now emerging from bankruptcy, Bloomberg News reported yesterday. The Federal Communications Commission asked for comments beginning July 1 and concluding July 20 on LightSquared’s request to assign the licenses to the reorganized entity under a plan approved by a bankruptcy court. The plan would shift control from Harbinger Capital Partners Funds, controlled by Philip Falcone, to JPMorgan Chase & Co., Fortress Investment Group LLC and Jeffrey Aronson and Mark Gallogly, through Centerbridge Partners LP, the FCC said.

As the second week of testimony in the criminal fraud trial of three former Dewey & LeBoeuf executives got under way yesterday, defense lawyers attempted to put the most damaging evidence introduced by prosecutors into a context more favorable to their clients, the American Lawyer reported today. In several hours of cross-examination yesterday, former Dewey & LeBoeuf executive committee member Jane Boisseau admitted that the firm’s partnership agreement didn’t require former chair Steven Davis to seek the executive committee’s approval — or even to inform that committee — about employment terms he set with senior staffers, including executive director Stephen DiCarmine and CFO Joel Sanders, the two nonpartner defendants in the case along with Davis. Jurors learned last week that DiCarmine's and Sanders’ compensation doubled to more than $2 million a year after LeBoeuf, Lamb, Greene & MacRae merged with Dewey Ballantine in October 2007. Prompted by Peirce Moser, an assistant district attorney with the New York County District Attorney's Office, Boisseau testified last week that the firm’s top governance committee never authorized the firm’s long-term incentive agreements with DiCarmine and Sanders, including multimillion-dollar guarantees if their employment was terminated before Dec. 31, 2013. But under questioning by DiCarmine’s lawyer, Bryan Cave partner Austin Campriello, Boisseau admitted in her third day of questioning that such "golden handcuffs" contracts aren’t unusual in corporate America.