%1

Twenty-two states and the District of Columbia sued the Education Department yesterday claiming that it broke federal law in adopting new rules for a program meant to wipe out the student loan debt of borrowers whose schools defrauded them, the New York Times reported. The new rule also “unreasonably favors the interests of predatory schools over students and would deny relief to borrowers who have been indisputably harmed by their schools,” according to the complaint filed in San Francisco federal court. The suit was the latest legal battle over the decades-old program, known as Borrower Defense to Repayment, which allows students to ask that their federal loans be eliminated if their schools seriously misled them or violated state laws. Education Secretary Betsy DeVos has called Borrower Defense a “free money” giveaway and repeatedly tried to slash the relief available through the program. Last year, her agency finalized a policy revision that significantly raised the bar for new claims. Among other changes, the new rule eliminated a group-discharge process, forcing each borrower to pursue relief individually, and required applicants to prove both that their school had knowingly lied to them and that the deception caused them financial harm. Those requirements “are so onerous that they make this defense impossible for a student loan borrower to assert successfully,” the state attorneys general wrote.

A Justice Department official said Neiman Marcus Group Chief Executive Geoffroy van Raemdonck and other top executives don’t deserve up to $10 million in bonuses unless the bankrupt company can prove the recipients boosted earnings, WSJ Pro Bankruptcy reported. Under U.S. bankruptcy law, Neiman isn’t allowed to give “pay-to-stay” bonuses simply to incentivize executives to remain with the company through its bankruptcy, Henry Hobbs, the Justice Department lawyer monitoring Neiman’s bankruptcy, wrote in court papers filed on Tuesday. The luxury retailer filed for bankruptcy in May, proposing to slash billions of dollars in debt and come out of bankruptcy with a clean balance sheet by September. Mr. van Raemdonck stands to collect anywhere between $1.5 million and $6 million in bonuses depending on the company’s performance under Neiman’s bonus plan, which requires court approval. Neiman already paid more than $3 million in bonuses this year to Mr. van Raemdonck and seven other top executives before the company filed for bankruptcy. The company’s bonus proposal includes a sliding scale tied to certain measures of the company’s performance, such as the level of sales receipts and timely progress on its restructuring process, according to court papers.

A $19 million settlement between Harvey Weinstein and some of his accusers was rejected yesterday by a judge, the Associated Press reported. U.S. District Judge Alvin K. Heellerstein in Manhattan said Weinstein’s accusers in the proposed class-action settlement were too varied to be grouped together. Lawyers for several women who had opposed the deal praised what they described as Hellerstein’s swift rejection of a one-sided proposal. A spokesperson for New York Attorney General Letitia James, who announced the tentative agreement on June 30, said her office is reviewing the decision and determining its next steps. “Our office has been fighting tirelessly to provide these brave women with the justice they are owed and will continue to do so,” Morgan Rubin said in a written statement. The deal to settle lawsuits brought by James and a Chicago lawyer on behalf of multiple women would have provided between $7,500 and $750,000 to some women who accused Weinstein of sexually abusing them. The 68-year-old former Hollywood producer was convicted earlier this year of rape and sexual assault against two women. Accusations by dozens of women in 2017 led to the downfall of his career and gave rise to #MeToo, the global movement to hold powerful men accountable for their sexual misconduct.

Travelport Worldwide Ltd. is asking a court to block lenders from seizing cash or taking control of the business over a dispute with Elliott Management Corp., warning of a possible bankruptcy if they aren’t restrained by an injunction, WSJ Pro Bankruptcy reported. The Elliott-backed booking platform filed papers in New York state court yesterday seeking to prohibit lenders from declaring more than $3 billion in debt immediately due and payable or exercising other rights stemming from an alleged debt default. Without such an order, Travelport said the lenders could cut off access to cash, push aside board members and force the company into a defensive bankruptcy. Generally, lenders rarely invoke their collateral rights against companies as large and indebted as Travelport. A bankruptcy filing by the company isn’t likely, in part because of the costs and risks of a chapter 11. The lenders have been locked in a standoff with Travelport for months after the company shifted valuable property out of their reach to secure a $1 billion rescue loan. Travelport said that the lifeline, which came from shareholders Elliott and Siris Capital Group LLC, provided much-needed cash to weather the drop-off in passenger flight bookings due to the coronavirus pandemic. But the maneuver touched off an unusually tense confrontation with some of the biggest investors on Wall Street, including the debt-investing divisions of Blackstone Group Inc. and Bain Capital LP. To secure the financing package, Travelport shifted intellectual-property assets out of the lenders’ grasp to serve as collateral for Elliott and Siris, which took the company private in 2018. Lenders said that the debt transaction isn’t allowed under their debt terms and that it siphoned off assets that should be available to satisfy their claims.

People claiming they were sexually abused as children involved in Boy Scouts activities say they have turned up evidence that assets have been deliberately moved out of their reach as the youth organization tries to deal with its legal problems in bankruptcy, WSJ Pro Bankruptcy reported. Suspicions about potentially improper activity are feeding a growing mistrust in the chapter 11 proceeding of the Boy Scouts of America, which filed for bankruptcy protection to deal with litigation accusing it of failing to safeguard boys from predators in its ranks. Facing more than 10,000 claims of sexual abuse, the Boy Scouts say they want to negotiate rather than litigate and are seeking to set up a fund to pay victims. But with talks just getting started, victims say that the Boy Scouts aren’t watching over the assets needed to pay their claims. Days ago, the Middle Tennessee Council of the Boy Scouts transferred a property to an asset protection trust, a legal entity that shields the property from the claims of sexual-abuse victims, said James Stang, a lawyer for the official committee representing sexual-abuse victims, at a hearing yesterday in U.S. Bankruptcy Court in Wilmington, Del. Jessica Boelter, a lawyer for the Boy Scouts, said progress is being made in the bankruptcy proceeding, which has as its goal an agreed resolution of the child sexual-abuse claims that have shadowed the historic brand. Boy Scout local councils own most of the youth organization’s wealth, with more than $3 billion in land, facilities, artwork, investments and other assets, compared with the $1.4 billion that is on the books of the national group.

Abuse victims say that the Roman Catholic Archdiocese of New Orleans is seeking bankruptcy protection to gain a “tactical advantage” in pending litigation. That’s according to a petition submitted on Friday in federal court asking a judge to dismiss the church’s chapter 11 filing, WDSU.com reported. The victims are represented in the bankruptcy as a group called the Unsecured Creditors Committee. Its request for a ”bad faith” dismissal asks Bankruptcy Judge Meredith Grabill to consider whether the archdiocese legitimately needed to reorganize its finances or was trying to gain an advantage in the lawsuits it faces from abuse victims. The archdiocese has asked the court to set a Sept. 29 for any additional abuse victims to come forward. Attorneys for victims say they intend to oppose that move in court. In Friday’s dismissal request, the unsecured creditors' committee points out the archdiocese has repeatedly said it’s solvent. It claimed $200 million in personal property assets when it filed for bankruptcy earlier this year, according to the filing. The archdiocese issued a statement that “the Archdiocese of New Orleans has publicly stated the underlying concerns which led to the decision to file chapter 11 reorganization. The archdiocese will address the factual and legal inaccuracies in the UCC’s Motion to Dismiss at the appropriate time with the Bankruptcy Court.”