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After more than a dozen years of motions, objections, petitions and appeals, the multibillion-dollar civil fraud case against five banks that provided financial services to Ponzi scheme perpetrator R. Allen Stanford and his investment firm will finally go to trial later this year and the trial will take place in Houston, the Houston Chronicle reported. A federal judge, who has overseen the massive litigation brought by thousands of investors who claim they were defrauded more than $5 billion in hard money by Stanford and the Stanford Financial Group between 1999 and 2008, said the biggest and final of all the lawsuits is ready to be sent back to Houston to be decided by a judge and jury in the town were the scheme took place. U.S. District Judge David Godbey of Dallas, who was appointed in 2009 to handle all civil litigation stemming from the Stanford fraud, ruled on Thursday that “the proper time to remand the case to the Southern District of Texas has arrived.” Lawyers involved in the litigation said the case could go to trial as early as this summer or fall and would be the largest in terms of civil damages to go to trial since a Houston jury awarded more than $10 billion to Pennzoil in its tortious interference case against Texaco 37 years ago. Judge Godbey, at the request of the U.S. Securities and Exchange Commission, which brought fraud charges against Stanford and his Stanford Financial Group in 2009, appointed Dallas lawyer Ralph Janvey to recover as much money as possible to return to the victims. To date, the receiver has collected $1.1 billion.

A federal appeals court revived a McKinsey & Co. critic’s lawsuit alleging the consulting giant concealed conflicts of interest to obtain lucrative appointments advising bankrupt companies at the expense of rival firms, WSJ Pro Bankruptcy reported. Yesterday’s ruling by the Second Circuit Court of Appeals in New York revived a racketeering lawsuit accusing McKinsey of submitting false and misleading statements in 13 bankruptcy cases to hide financial conflicts that could have disqualified the firm from being retained. Jay Alix, the retired founder of rival consultant AlixPartners LLP, should also be allowed to pursue allegations that McKinsey ran a pay-to-play scheme to rig the marketplace for bankruptcy assignments in its favor, according to the appeals court. The ruling reinstated Mr. Alix’s lawsuit after it was dismissed by a federal judge in 2019. A McKinsey representative said Wednesday that the decision “solely addresses technical pleading standards and not whether Mr. Alix’s claims are true.” He has waged a broader battle against McKinsey for years across multiple courts alleging the firm profited by misrepresenting conflicts of interest involving major clients. “To date, Mr. Alix has lost all six of his lawsuits against McKinsey, and we are confident the evidence will ultimately show that this lawsuit is similarly meritless,” McKinsey said Wednesday. Had McKinsey truthfully and timely disclosed its conflicts, the firm would have been disqualified from obtaining at least some of the assignments it received, according to Mr. Alix.

Johnson & Johnson won’t have to fight against two separate committees of victims who say they were harmed by the company’s baby-powder after a bankruptcy judge threw out one of the panels, Bloomberg News reported. Bankruptcy Judge Michael B. Kaplan ruled that the federal bankruptcy watchdog must abide by a court order issued last year that set up a single official committee to represent more than 38,000 people who claim J&J’s baby powder gave them cancer. Kaplan then threw out a December decision by the watchdog, known as the U.S. Trustee, to reorganize that committee and add a second panel. J&J has long denied that the talc in its baby powder and other products cause cancer. The ruling is a victory for J&J and the unit it created to resolve billions of dollars worth of baby-powder lawsuits the consumer products giant faces. J&J put that unit, LTL Management, into bankruptcy to seek court permission to establish a $2 billion trust fund to address all current and future suits. Lawyers for the U.S. Trustee argued that under bankruptcy code, no court has the power to second guess its decision to set up a committee to represent creditors like the people suing J&J. The two panels represented people who have the two main types of cancer allegedly caused by talc in baby powder.

Toys “R” Us board members and owners face new allegations of fraud and breach of duty over the company’s 2017 bankruptcy, Bloomberg News reported. Creditors claim in ongoing litigation that seven company directors have now said they knew they shouldn’t have approved executive bonuses and onerous bankruptcy loans at the outset of the case that put the retailer on the fast track to a sudden liquidation six months later. The additional debt served to keep Toys “R” Us in business during its restructuring, but cost it more than $500 million in fees and interest and came with strict terms, or covenants, court documents show. The costs were borne by trade creditors and employees who continued to work with the company on the promise of a successful turnaround, but went unpaid when it couldn’t comply with the debt terms and shut down. Meanwhile, the owners and directors who signed off on the ill-fated financing received immediate bonuses of as much as $2.8 million as part of the plan, according to the filings. The creditors allege the authorization of those bonuses violated federal criminal law.

The Boy Scouts of America remains slightly short of the votes it sought from sex abuse victims for a $2.7 billion settlement that aims to resolve accusations spanning decades, but says that it is still working to obtain more support for the deal that would allow it to emerge from bankruptcy, Reuters reported. BSA, which filed for chapter 11 protection in February 2020 facing widespread accusations that troop leaders sexually abused Scouts, said 73.57% of victims' votes were in favor of the plan, according to court papers filed on Tuesday. The count failed to meet the 75% threshold BSA had set as a target but exceeded the minimum required under bankruptcy law, meaning the organization could potentially still persuade a judge to approve the settlement. That figure represents less than a 0.5% increase from a preliminary count released earlier this month. But, thousands of ballots were not counted due to various defects, according to Tuesday's filing. Meanwhile, mediation between BSA and opponents of the plan is ongoing. Survivors can change their votes until a Feb. 22 hearing on the deal before U.S. Bankruptcy Judge Laurie Selber Silverstein in Delaware, who must sign off on the deal. The settlement, which is central to BSA's proposed reorganization plan, has divided survivors. Those that remain opposed argue that the offer is far too low. Local councils, insurers, and organizations that chartered Scouting units and activities agreed to pay a combined $2.7 billion to resolve more than 82,000 abuse claims.

A federal judge in Virginia rejected a debt-repayment plan for the former owner of Ann Taylor, Lane Bryant and other retail brands, voiding the broad legal protections bestowed on its former top executives and adding to the growing backlash against such liability releases, WSJ Pro Bankruptcy reported. Judge David Novak of the U.S. District Court in Richmond, Va., ruled on an appeal Thursday that a bankruptcy court lacked constitutional authority to approve legal releases in the chapter 11 plan of Ascena Retail Group Inc. that would have extinguished shareholders’ legal claims over actions management took before the company went bankrupt in 2020. The breadth of legal protection for the former Ascena executives “can only be described as shocking,” Judge Novak said. The proposed liability release, he said, would have extinguished not just a pending shareholder lawsuit but “every conceivable claim — both federal and state claims for an unspecified time period stretching back to time immemorial.” The ruling marks the second time in two months that a federal judge has rejected the use of legal releases that shut down creditors’ claims against third parties to a bankruptcy case. Third-party releases have become increasingly common in chapter 11 but are facing greater scrutiny beyond the nation’s bankruptcy courts. In December, a federal judge in Manhattan voided similar releases covering the wealthy owners of OxyContin maker Purdue Pharma LP, using reasoning similar to Judge Novak’s. Purdue has filed an appeal seeking to reinstate its owners’ releases, an integral part of its planned emergence from chapter 11.