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The U.S. Supreme Court yesterday turned away a novel case by Arizona seeking to recover billions of dollars that the state has said that members of the Sackler family — owners of Purdue Pharma LP — funneled out of the OxyContin maker before the company filed for bankruptcy in September, Reuters reported. The justices declined to take the rare step of allowing Arizona Attorney General Mark Brnovich to pursue a case directly with the Supreme Court on the role the drugmaker played in the U.S. opioid epidemic that has killed tens of thousands of Americans annually in recent years. The lawsuit accused eight Sackler family members of funneling $4 billion out of Purdue from 2008 to 2016 despite being aware that the company faced massive potential liabilities over its marketing of opioid medications. Brnovich argued that the national importance of holding those responsible for the opioid crisis accountable justified taking the case directly to the justices. The case is among the thousands filed by states, counties and cities seeking to hold Stamford, Connecticut-based Purdue, and in many cases the Sacklers, responsible for a U.S. opioid addiction crisis that since 1999 has resulted in more than 400,000 overdose deaths. The lawsuits accuse the company of deceptively marketing opioids by overstating their benefits and playing down the risks. Purdue filed for chapter 11 protection in September after reaching a tentative deal it values at $10 billion to resolve those cases.

The U.S. Supreme Court asked for the Trump administration’s views on a $3 billion appeal from foreign financial institutions that took stolen money from Bernard Madoff’s Ponzi scheme, WSJ Pro Bankruptcy reported. The justices yesterday asked the U.S. solicitor general to weigh in on whether the trustee cleaning up after Madoff’s Ponzi scheme can pursue tainted cash that was sent to offshore investment funds, then passed on to European banks and other foreign recipients. Irving Picard, the trustee cleaning up after the Ponzi scheme, has long maintained that under U.S. bankruptcy law, he can recoup stolen money that passed between foreign institutions before the $20 billion fraud was discovered. Banks including HSBC Holdings PLC and several Caribbean governments have fought Picard’s efforts, saying that transfers occurring entirely outside U.S. borders are beyond his grasp. Picard has recouped more than $13 billion in Ponzi scheme proceeds over the past decade, arguing that money withdrawn from Madoff’s phantom investment firm should help repay average investors who came out as net losers when the fraud collapsed in 2009. Madoff pleaded guilty to running the largest Ponzi scheme in history and is serving a 150-year prison sentence in North Carolina. Read more. 

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

PG&E Corp. disclosed in a securities filing yesterday that it expects to take a fourth-quarter charge of $4.9 billion in connection with a new $13.5 billion deal to settle claims from wildfire victims, the Wall Street Journal reported. The new charge, which PG&E expects to take by year’s end, would raise the company’s total recorded fire-related charges to over $25 billion. The higher amount reflects the increase over the $8.4 billion PG&E initially offered to resolve wildfire victim claims, which stem from more than a dozen fires linked to the company’s equipment in recent years. The victims settlement agreement unveiled Friday would remove a substantial roadblock to PG&E’s emergence from bankruptcy, even as it puts additional strain on its balance sheet. PG&E shares were up more than 18 percent yesterday following news of the deal.

California’s bankrupt power producer PG&E Corp. said on Friday that it had reached a $13.5 billion settlement with victims of some of the most devastating wildfires in the state’s modern history, Reuters reported. The agreement helps smooth the way for the beleaguered company to emerge from bankruptcy. It filed for chapter 11 protection in January, citing potential liabilities in excess of $30 billion from wildfires in 2017 and 2018 linked to its equipment. State fire investigators in May determined that PG&E transmission lines caused the deadliest and most destructive wildfire on record in California, the wind-driven Camp Fire that killed 85 people in and around the town of Paradise last year. They likewise concluded that PG&E power lines had sparked a separate flurry of wildfires that swept California’s wine country north of San Francisco Bay in 2017. The agreed settlement is subject to a number of conditions and requires confirmation by the United States Bankruptcy Court, the company said. It faces a tight deadline as it needs to exit bankruptcy by June 30, 2020 to participate in a state-backed wildfire fund that would help reduce the threat to utilities from wildfires.

A Delaware bankruptcy judge rejected fracking-sand supplier Emerge Energy Services LP’s attempt to bind equity holders and junior creditors to legal releases in its chapter 11 exit-plan if they didn’t return opt-out forms, <em>WSJ Pro Bankruptcy</em> reported. Bankruptcy Judge <b>Karen Owens</em> ruled on Thursday that Emerge Energy can’t assume shareholders and unsecured creditors that didn’t return opt-out forms consented to releases covering groups that include the company and its lenders. The opt-out forms explained what would happen if creditors didn’t return them but Emerge Energy couldn’t prove that failing to return the forms “manifested their intent to provide a release,” Judge Owens said. “Carelessness, inattentiveness, or mistake are three reasonable alternative explanations,” the judge said in a written ruling. Despite the setback, Thursday’s ruling was mostly favorable to Emerge Energy’s bankruptcy plan. Judge Owens called on the company to revise the plan’s so-called third-party releases before she considers confirming the plan, which proposes swapping bond debt for equity in the reorganized business.

Expenses from Weil, Gotshal & Manges are among the issues raised by the U.S. Trustee overseeing the case of bankrupt mortgage servicer Ditech Holding Corp., Bloomberg News reported. Lawyers and professionals from other firms have applied to collect more than $50 million in fees and expenses. Some of those applications show “questionable billing judgment” and lawyers appear to have “simply disregarded” established guidelines, a U.S. Trustee lawyer said. The U.S. Trustee said that Weil billed the estate about $18 million for work done from the bankruptcy filing in February to Sept. 30. Weil’s senior lawyers billed the estate at an hourly rate of $1,327, which is $116 higher than it charges non-bankruptcy clients, according to an objection filed on Thursday by the U.S. Trustee. A firm’s rates should not increase because the client files for bankruptcy, said the U.S. Trustee, a division of the U.S. Justice Department which oversees bankruptcy cases.

More than 110 Northern California city and county officials representing the majority of bankrupt PG&E Corp.’s customers are proposing to turn the utility giant into a customer-owned cooperative, Bloomberg News reported. The coalition led by the city of San Jose includes officials from 58 cities and 10 counties who altogether represent more than 8 million residents, according to a statement from San Jose Mayor Sam Liccardo. The group is proposing, among other things, to continue managing PG&E’s expansive territory as a single system, honor existing power and labor contracts and have a board overseeing the co-op set customer rates. “With these principles, we’ve presented a framework for a viable customer-owned PG&E that will be transparent, accountable, and equitable,” said Liccardo, who has spent weeks getting local officials behind the idea of a cooperative. He didn’t detail how the governments would finance a takeover, but a consultant for the group said bonds would be issued to cover much of the cost. Calls for a takeover of San Francisco-based PG&E have intensified since the company filed for bankruptcy in January amid billions of dollars in liabilities tied to wildfires that its equipment ignited. The latest proposal comes as PG&E’s shareholders and creditors are jostling over control of the state’s largest utility in bankruptcy court.

More time is needed to sort out whether the CEO of OxyContin maker Purdue Pharma should receive a $1.3 million bonus next year, but the company should be allowed to pay about $35 million in bonuses to 682 other employees, the judge overseeing the company’s bankruptcy case said on Wednesday, the Associated Press reported. There were objections at the hearing only to payments to CEO Craig Landau and a group of nine other upper-level “insider” employees. State governments and a watchdog committee didn’t dispute the company’s contention that bonuses would be needed to keep employees working and the company running — especially after the company agreed to trim many of the bonuses. Bankruptcy Judge <b>Robert Drain</b> said that he would sign an order for all the employees except Landau to get bonuses next year. He said that it would contain a provision that it could be withheld from anyone found liable in lawsuits over the toll of the opioid crisis linked to more than 400,000 deaths in the U.S. since 2000. Purdue, based in Stamford, Conn., is in bankruptcy court as part of an effort to settle more than 2,700 lawsuits it’s facing over the toll of opioids.

Defunct opioid maker Insys Therapeutics Inc. faced tough questioning from a bankruptcy judge Wednesday over its plan to bar shareholders from suing anyone involved in the company’s demise, WSJ Pro Bankruptcy reported. “These are parties that are getting no compensation and are being asked to take positive action to not give a release,” Judge Kevin Gross said at a hearing in the U.S. Bankruptcy Court in Wilmington, Del., where he was considering Insys’s chapter 11 liquidation plan. The company filed for chapter 11 bankruptcy in June, after pleading guilty to mail fraud in connection with the sales of the powerful painkiller Subsys. It wants to end its bankruptcy by handing out its remaining cash and shutting down litigation, including lawsuits by shareholders, who are getting nothing. Yesterday, Judge Gross cleared Insys to begin polling creditors on its chapter 11 liquidation plan, which includes a forced ban on lawsuits applied to shareholders, unless they speak up quickly. After the voting, Insys must return to court to seek confirmation of its chapter 11 plan, and Judge Gross will take another look at the shareholder litigation ban, he said.

PG&E Corp. is nearing a settlement with victims of the wildfires that pushed the utility into bankruptcy, while clashing with California Gov. Gavin Newsom (D) about the best path out of chapter 11, the Wall Street Journal reported. Nancy Mitchell, the lawyer representing the governor, said Gov. Newsom wants assurances that PG&E will come out of bankruptcy financially stable, with cash to invest in new technology and improved safety practices. Tensions between PG&E and Gov. Newsom surfaced at a hearing yesterday in the U.S. Bankruptcy Court in San Francisco, as Mitchell spoke out against an $11 billion pact that would bind one of PG&E’s most powerful groups of creditors to supporting the company’s chapter 11 exit plan. The group, which includes insurance companies and big investors, would be pledged to oppose a rival restructuring strategy backed by bondholders and wildfire victims. In the coming weeks, Gov. Newsom is likely to make clear which plan he favors, according to Michael Stamer, lawyer for the bondholders. He spoke in court yesterday, after Mitchell said that California’s top executive has concerns about whether the company’s version of the plan will pass muster. PG&E, fire victims and major investors have been engaged in talks about a revamped chapter 11 plan. PG&E and fire victims are working to settle their differences, with an improved $13.5 billion payout for victims.