%1

The city of Harrisburg, Pa., can continue pressing legal claims that lawyers and bankers misled city officials into backing a $360 million incinerator project that wrecked the state capital’s finances, a Pennsylvania court said, WSJ Pro Bankruptcy reported. The Commonwealth Court of Pennsylvania on Thursday declined to dismiss the city’s lawsuit alleging that a working group of legal and financial advisers provided false information to get Harrisburg’s financial support for the ill-fated waste-to-energy project. Starting in 2003, Harrisburg pledged its taxing power to guarantee municipal debt sold to retrofit the incinerator, the revenue from which was supposed to repay bondholders. When revenue from the incinerator fell short, responsibility for the debt payments fell to Harrisburg, plunging the city of nearly 50,000 into insolvency. Harrisburg avoided defaulting on its general obligation bonds in 2010 only because the state stepped in with aid. State and city officials in 2018 sued underwriter RBC Capital Markets, financial adviser Public Financial Management Inc. and three law firms, alleging they made misrepresentations to get Harrisburg’s signoff. The professionals’ compensation was largely contingent on securing the city’s debt guarantee, which drove them to provide false information and conceal material facts about the project, according to the complaint.

A nearly 3-year-old bankruptcy case filed amid hundreds of child sexual abuse allegations has cost the Archdiocese of Santa Fe, N.M., more than $2.3 million in legal fees alone, the Santa Fe New Mexican reported. Federal court records show the Roman Catholic institution has used the services of at least four law firms with expertise in cases involving clergy sexual abuse and bankruptcy. The archdiocese seeks to reach a settlement with 385 claimants in its December 2018 chapter 11 filing with the U.S. Bankruptcy Court in Albuquerque. This archdiocese and many dioceses across the nation, including the one in Gallup, have claimed bankruptcy in the Catholic Church scandal that began to receive attention in the early 1990s. U.S. Bankruptcy Court records show the Albuquerque firm Walker & Associates this week billed the Archdiocese of Santa Fe $374,999 for work done over 13 months ending in July. Including bills for two previous periods, Walker's billings have totaled about $907,200. Walker & Associates meticulously detailed its phone calls, meetings, projects, time spent and amount billed in a 165-page court document. Depending on which attorney or staffer worked on a matter, the firm's fees ranged from $75 to $295 an hour. The court reviews the charges and has final say on whether they are reasonable.

A Cayman Island mutual fund whose manager was charged in a $100 million bait-and-switch scheme filed for chapter 15 bankruptcy protection in the U.S. to protect its assets from lawsuits by disgruntled investors, Bloomberg News reported. Representatives of the so-called Income Collecting 1-3 Months T-Bills Mutual Fund asked a federal bankruptcy judge in New York on Friday to recognize their efforts to liquidate the company, which they said would include an attempt to pay back investors. Recognition of the foreign liquidation would put a hold on any lawsuits against the fund. The fund’s manager, Ofer Abarbanel, was arrested June 24 in Los Angeles and charged with securities and wire fraud. U.S. prosecutors said the California man told an investor group that its money would be primarily placed in short-term U.S. Treasury securities but instead put it in funds he controlled or was closely associated with. Two days before Abarbanel’s arrest, the fund was placed in liquidation in the Cayman Islands on the vote of its sole shareholder, NY Alaska ETF Management LP, according to court records. The fund’s representatives said in court papers that the fund has “a particular need” for recognition of its liquidation efforts, given the Securities and Exchange Commission’s findings of “potential significant fraud against the fund and its creditors.” According to the SEC, the fund “had $106 million in liabilities against possibly only approximately $88 million in assets,” the lawyers said. “Based upon these serious allegations of fraud, it is likely that other parties may assert litigation against the fund. A stay of any pending and potential future proceedings will be important to the (representatives’) investigation and efforts to collect assets and wind down the fund.”

The federal judge handling the bankruptcy filing by the Diocese of Norwich, Conn., raised concerns yesterday about the number, cost and role of the lawyers and financial experts in the case and their possible effect on the compensation available to those who say they were sexually assaulted by diocesan priests and other employees, The Day reported. At one point Judge James Tancredi called the $490-an-hour paralegal rate charged by Ice Miller, the New York City firm hired by the diocese, as "shocking" for someone who doesn't have a license to practice law. Judge Tancredi also warned that if the case gets "get out of control with professional fees," he would not hesitate to look at implementing measures such as budget caps. He also urged lead diocesan attorney Louis DeLucia to "efficiently deploy his staff" to "avoid rate shock" at the end of the case. U.S. trustee attorney Steven MacKey added the diocese's decision to hire two legal firms is increasing the legal costs. He said that his office will continue to monitor how the diocese is spending money on its legal and financial experts to avoid unnecessary costs.

Lynn Tavenner, the trustee overseeing the estate of the collapsed Richmond law firm LeClairRyan, last week filed a wave of lawsuits against dozens of former LeClairRyan partners in a bid to recoup potentially tens of millions of dollars for creditors, RichmondBizSense.com reported. The complaints, which total nearly four dozen, make similar claims against the various defendants depending on their prior stature at the firm. From each of the shareholding partners, Tavenner seeks to claw back certain compensation they were paid in the years leading up to LeClairRyan’s demise. For the defendants who were partners and had served on the firm’s board of directors, Tavenner alleges they breached their fiduciary duty to the firm as directors and their decisions helped contribute to its financial losses. From most of the shareholder defendants Tavenner wants five to six figures worth of compensation to be returned. For many of the former directors the suits seek tens of millions in damages. Among the higher ranking defendants on Tavenner’s hit list is Erik Gustafson, who served as CEO of LeClairRyan from 2016 until its dissolution in 2019. Tavenner’s 69-page complaint against Gustafson seeks to recoup $786,000 in allegedly improper compensation and $41 million in damages. Also being sued is Lori Thompson, who was the firm’s general counsel in its final days and served on its dissolution committee. Tavenner wants $386,000 in claw backs and $34 million in damages from Thompson. Thompson took over the role of general counsel from Bruce Matson, who is facing his own separate legal troubles dating back to his days at LeClairRyan.

Griddy Energy customers got another scare this week when they received a notice from a U.S. bankruptcy court that their class-action lawsuit had been dismissed. But the order signed Tuesday by U.S. Bankruptcy Court Judge Marvin Isgur isn’t the end of efforts to refund former customers at least some of the exorbitant electric bills they paid Griddy during Texas’ epic February freeze, the Dallas Morning News reported. “The class-action case wasn’t going to go anywhere,” said Derek Potts, the lawyer who filed the lawsuit against Griddy. Griddy, which filed for bankruptcy in March, didn’t have the assets to pay creditors and the administrative costs of the bankruptcy. Lawyer fees in the case have topped $3.5 million. But Griddy’s former customers and other creditors can still seek damages from companies that do have assets, such as natural gas and energy providers that collected windfalls during that week in February when electricity prices shot up. Potts’ Houston-based law firm has been hired by the bankruptcy court to move ahead with other lawsuits that could lead to paybacks to former customers.