Lawyers for prisoners suing Corizon Health over allegedly substandard medical care in U.S. prisons have asked a bankruptcy judge to toss the chapter 11 case of a Corizon subsidiary, saying the prison healthcare provider's bankruptcy was a fraud from the start, Reuters reported. The Corizon subsidiary, Tehum Care, was created solely to get rid of medical malpractice and wrongful death lawsuits for "pennies on the dollar" through the chapter 11 process, while allowing Corizon to rebrand itself as YesCare, according to a Tuesday filing in Houston bankruptcy court by the official tort committee that represents about 200 prisoners, former prisoners, and family members suing Corizon. Tehum does not intend to reorganize its business, and is instead using its bankruptcy to stop lawsuits against Corizon, its owners and key employees, according to the committee. "There is no possible rehabilitation here," the committee said in the filing. "This case was a fraud from its inception." Tehum Care, which filed for bankruptcy in February, has been pursuing a mediated bankruptcy settlement which would allocate roughly $8.5 million to settle prisoners' and former prisoners' claims.
The world’s largest sovereign-wealth fund is going after the now-defunct Silicon Valley Bank, its management and the Wall Street advisers that aided its rise, the Wall Street Journal reported. Norges Bank Investment Management, which manages Norway’s $1.5 trillion wealth fund, and other former SVB shareholders attacked the failed bank in a legal filing late Tuesday. The filing accused SVB and its executives of concealing the lender’s ailing health from public view, while also ignoring warnings about risks from rising interest rates. The suit said the bank’s board, its auditor KPMG, and four investment banks that helped it raise money — Goldman Sachs, Bank of America BAC, Keefe, Bruyette & Woods and Morgan Stanley — all “ utterly failed in their role as gatekeepers” and “must be held to account for the harm they caused to investors.” The suit said investors lost more than $24 billion in market value. The filing is the main complaint in a large class-action lawsuit from SVB shareholders, who were wiped out in March 2023, when a rapid bank run led to one of the biggest bank failures in U.S. history. In December Norges was made lead plaintiff in the class action, along with a Swedish pension fund. The suit names three executives, including former SVB Chief Executive Greg Becker, and 12 former board members as individual defendants. Read more.
In related news, New York City is trying to collect more than $2.1 million it says Silicon Valley Bank owes in back taxes from before the California-based regional lender collapsed last year, Bloomberg News reported. In a complaint filed yesterday against the Federal Deposit Insurance Corporation, the receiver for the failed bank, the city cites corporation business tax “deficiencies” for 2017 through 2021 and is also seeking interest and penalties. The city said the FDIC in November denied its request to be paid out of remaining bank assets. “The city has a legitimate tax claim against the SVB and is entitled to collect taxes due,” New York’s lawyers said in the complaint, filed in federal court in Washington. “The FDIC, in its capacity as receiver for SVB, is liable for the claim amount.” The March collapse of Silicon Valley Bank, following a wave of withdrawals by the tech startups and venture capital firms that formed its client base, was the biggest U.S. bank failure in more than a decade and presaged a banking crisis that engulfed several other financial institutions. This month, the parent company of Silicon Valley Bank announced it had struck a deal with key creditors in a step toward resolving its bankruptcy case. The arrangement, which requires court approval, involves forming a new company that would hold valuable assets like the firm’s venture capital arm — SVB Capital — and tax attributes potentially worth billions of dollars, according to court papers. Read more.
Former New York mayor Rudolph Giuliani may soon find out how far chapter 11 bankruptcy can go in sheltering him from overwhelming legal bills, Bloomberg News reported. Giuliani is scheduled to make his first appearance Friday in New York bankruptcy court, where he has asked a judge’s permission to challenge the $148 million judgment that drove him to seek protection from creditors. The hearing is slated for 11 a.m. The onetime prosecutor went bankrupt last month after losing a defamation lawsuit to two 2020 Georgia election workers he falsely accused of trying to rig the election for Joe Biden. Giuliani must ask Judge Sean Lane permission to appeal their $148 million award because filing bankruptcy pauses all litigation against him and prevents the election workers from immediately collecting the judgment. The election workers and others who have sued Giuliani, including Dominion Voting Systems, are challenging his request.
Diamond Sports Group, the largest regional sports broadcaster, has reached a restructuring agreement with creditors in bankruptcy, with Amazon agreeing to invest in its streaming business, WSJ Pro Bankruptcy reported. Under the agreement, Amazon would provide Diamond’s local channels through Prime Video, which will become Diamond’s primary partner where viewers can purchase direct-to-consumer access to stream games of more than 40 major sports teams across the U.S., Diamond said Wednesday. Viewers will be able to stream Major League Baseball, National Basketball Association and National Hockey League games through Prime Video. Diamond also reached a restructuring agreement supported by most of its largest creditor groups. A group of creditors have agreed to provide Diamond with a $450 million loan to finance the remaining bankruptcy proceedings and pay down debt, according to the company. Hein Park Capital Management and PGIM are among Diamond bondholders who agreed to backstop the new loan. All Diamond bondholders will have the opportunity to invest in the new loan. The agreement represents a sharp reversal of the fortunes of both Diamond and its debt investors. Diamond Sports was close to liquidating its business earlier as talks with the sports leagues hit a snag. Its creditors were divided on whether to try to revive the company. And it was mired in a legal dispute with parent company Sinclair Broadcast Group. Under the restructuring plan, the investors have also agreed to swap their debt into equity. They, along with other bondholders and Amazon, will become owners of the reorganized company.
Representatives for the owner and operator of the Tattered Cover bookstore chain have filed part of a reorganization plan for the business under the chapter 11 bankruptcy reorganization process that began in October, though they asked for more time to offer more details on the plan, 9news.com reported. According to its Jan. 16 filing in the U.S. Bankruptcy Court for the District of Colorado, Bended Page, LLC revealed it owes more than $3.1 million to creditors in unsecured claims — among them is almost $500,000 that former CEO Kwame Spearman says is owed to him. It also lists $820,000 in secured claims owed to five lenders, including $300,000 for its board of directors, per the filings. Interim CEO Brad Dempsey, who has a promissory note of $25,000, has opted to waive his claim.
Crypto mining firm Core Scientific Inc. won court approval to exit bankruptcy and implement a restructuring plan that trims about $400 million in debt from its balance sheet and fully repays company creditors thanks largely to a turnaround in Bitcoin prices over the last year, Bloomberg News reported. Bankruptcy Judge Christopher Lopez said yesterday that he would confirm Core Scientific’s chapter 11 exit plan, a decision that clears the firm to emerge from bankruptcy later this month. Core Scientific said during a court hearing that the company anticipates its shares will be re-listed on the Nasdaq on Jan. 24. Core Scientific filed for chapter 11 in December 2022 amid falling crypto prices and a string of major industry failures including the bankruptcies of Sam Bankman-Fried’s FTX, crypto lender Celsius Network LLC and crypto hedge fund Three Arrows Capital. But Core Scientific and its creditors fared far better in chapter 11 than its bankrupt peers and saw its fortunes turn thanks to higher Bitcoin prices and lower energy costs. Bitcoin was trading on Tuesday at more than $43,000 — up from about $16,800 when Core Scientific filed chapter 11 in late 2022. Core Scientific was also able to strike a series of settlements with different creditor groups, including lender B. Riley.
The owners of Nashville hot chicken restaurant chain Party Fowl have filed a petition seeking bankruptcy protection — noting the timing of their expansion and other factors have “started a snowball of debt,” the Nashville Post reported. Via six LLCs, Austin Smith and Nick Jacobson own Party Fowl, having begun operations in 2014 with their Gulch location at the intersection of Eighth Avenue South and Division Street. Other outposts are found in Murfreesboro, Donelson, Franklin (Cool Springs), Chattanooga and Destin, Fla. The concept has licensed presences at both Nashville International Airport and Nissan Stadium. According to a document filed with the U.S. Bankruptcy Court for the Middle District of Tennessee, Smith and Jacobson, after opening in Cool Springs in 2020, decided to open sister businesses in Chattanooga and Destin. However, the document notes, those two locations have not generated sufficient revenue, thus creating financial stress on the owners and their other locations. COVID-19 is cited as a contributing factor. Via the LLCs, Smith and Jacobson own the six Party Fowl restaurant businesses, with chef Bart Pickens overseeing the menu of each. Smith and Jacobson intend for the six businesses to file a joint plan of reorganization prior to the chapter 11, subchapter V, filing deadline of 90 days after the petition date (Jan. 9), the court document notes.
A U.S. bankruptcy judge on Friday approved Yellow Corp's $82.9 million sale of 23 leased shipping centers to six other trucking companies, one month after the majority of the company's real estate assets sold for $1.88 billion, Reuters reported. U.S. Bankruptcy Judge Craig Goldblatt in Wilmington, Del., approved the sale in a written order on Friday, after Yellow filed court papers indicating that no one had raised any objections to the sale. Rival trucking company Estes Express Lines was the largest buyer in Yellow's latest asset sale, picking up five leased properties for a price of $35.3 million, according to court documents. Estes previously purchased 24 properties from Yellow for $248 million, and it had offered $1.525 billion in an unsuccessful effort to buy all of Yellow's real estate. Yellow chose to break up its business rather than keeping the company intact for potential buyers. With most of its real estate assets already sold, the company is focused on a separate sale of its vehicle fleet.
The New York Department of Financial Services said Digital Currency Group subsidiary Genesis Global trading will pay an $8 million penalty and surrender its license from the regulator after an investigation found significant failings in the company's anti-money laundering and cybersecurity programs, Reuters reported. Genesis — a cryptocurrency market-maker and brokerage firm — failed to maintain an effective compliance program for anti-money laundering and Bank Secrecy Act requirements and did not file sufficient Suspicious Activity Reports, which requires financial institutions to flag certain transactions to law enforcement. “Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for the Department’s regulatory requirements and exposed the company and its customers to potential threats," said NYDFS Superintendent Adrienne Harris in a statement. As part of the penalty, Genesis will give up its "BitLicense," which New York requires that cryptocurrency companies obtain to be able to offer certain services within the state. The BitLicense requires that companies comply with know-your-customer, anti-money laundering and capital requirements. Genesis has held a BitLicense since 2018.
Kirkland & Ellis has been sued for allegedly profiting from an undisclosed romantic relationship between a Houston bankruptcy judge and a local bankruptcy lawyer, a relationship that ultimately caused the judge to resign, Reuters reported. Plaintiff Michael Van Deelen, whose October lawsuit led former U.S. Bankruptcy Judge David Jones to publicly acknowledge a romantic relationship with bankruptcy attorney Elizabeth Freeman, expanded his lawsuit Thursday to add Freeman, her former law firm Jackson Walker, and Kirkland & Ellis as defendants. Van Deelen alleged that Kirkland profited from Jones and Freeman's relationship by frequently teaming up with Jackson Walker, which served as local counsel, to represent debtors in Jones' court, knowing that Jones would give favorable treatment to the law firm that employed his girlfriend. Van Deelen said that Kirkland and the other defendants "deliberately concealed" the relationship in order to continue placing their cases in front of a friendly bankruptcy judge. Kirkland said Friday that Van Deelen's allegations against the firm were "baseless and false."
