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Bankruptcy Court Judge Stuart Bernstein yesterday authorized creditors of Gawker Media Group to begin voting on its debt-repayment plan, a day after the former publisher unveiled the settlement of a yearslong legal battle with former professional wrestler Hulk Hogan that put both the company and its founder in bankruptcy, the Wall Street Journal reported today. Following a hearing in Manhattan, Judge Bernstein said that Gawker could solicit votes on the plan, which describes both the company’s intent to pay out $31 million to the retired wrestler as well as provisions that would allot millions of dollars more to other creditors. Since filing for bankruptcy in June, Gawker sold off most of its assets to a unit of Univision Communications Inc., which renamed them Gizmodo Media Group. The $135 million sale put Gawker’s editorial operations out the reach of the crippling defamation lawsuits brought by Hulk Hogan, whose real name is Terry Bollea, and others and provided the funds needed to settle those lawsuits.

A fight is brewing in U.S. court that threatens to derail a settlement deal struck last month to conclude a seven-year battle over divvying up Nortel Networks Ltd.’s remaining $7.3-billion (U.S.) in assets, the Globe and Mail reported today. The Pension Benefit Guaranty Corp. (PBGC) has objected to the settlement plan, saying it may not receive enough to cover its $708-million claim, which represents the shortfall in Nortel’s U.S. pension plan after the company filed for chapter 11 bankruptcy protection in 2009. Nortel’s U.S. division has 22,000 pension plan members. PBGC said in a court filing it will “defend its claims aggressively” to ensure it receives the highest possible payout, and warns the settlement will not achieve the desired resolution of the case but will instead “needlessly instigate a lengthy and bitter dispute.”

After deliberating for two days, a jury in St. Paul, Minn., yesterday found former entrepreneur Bryan Reichel guilty on 11 counts of fraud, but not guilty of concealing bankruptcy estate property, the Minneapolis Star Tribune reported today. Reichel was indicted in 2014 on allegations that he lied to investors to get them to fund his start-up company, PureChoice. Last year, the grand jury added five charges alleging that after PureChoice closed its doors in 2011, Reichel tried to defraud the bankruptcy court. Jurors saw pages and pages of e-mails and heard hours of testimony from former PureChoice employees and investors during the nearly monthlong trial. They found Reichel guilty on seven wire fraud counts and four bankruptcy fraud counts. Read more.

Don’t miss next Tuesday’s free abiLIVE webinar “Administration of a Mega Ponzi Scheme Case: Receivership v. Bankruptcy.”

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. 

Caesars Entertainment Corp.’s main casino operating unit has begun a process to raise up to $3.8 billion of cash needed to exit a contentious two-year bankruptcy, Reuters reported yesterday. After more than a year of legal battles, the Caesars subsidiary last month secured support from the vast majority of its creditors for a wide-ranging plan to emerge from bankruptcy early next year. Now Caesars Entertainment Operating Co Inc. is seeking financing for its reorganization plan, which entails splitting Caesars' main bankrupt unit into a casino operator and real estate investment trust (REIT), both controlled by creditors. If the plan wins bankruptcy court approval at a trial set for January, CEOC must have at least $1.8 billion in new financing for the REIT and $1.2 billion for the operating company before the reorganization can become effective.

U.S. Bankruptcy Judge Robert A. Mark ordered 43 condos in the 1300 Ponce building in Coral Gables, Fla., out of chapter 11 reorganization and back into foreclosure in county court, the South Florida Business Journal reported yesterday. Ponce Trust LLC, Dayco Properties and Franco D’Agostino got hit with a foreclosure lawsuit in 2010 over 85 condos in the building at 1300 Ponce de Leon Blvd. In 2012, Ponce Trust filed chapter 11 reorganization to stay the foreclosure case. It reached a reorganization plan with a modified loan payment schedule the following year. The company resumed selling units and now has 43 left. However, it has sold only two condos so far this year after selling 13 in 2015. The mortgage was subsequently sold to CCP Ponce LLC, an affiliate of Tampa-based real estate private equity firm Convergent Capital Partners. On Sept. 12, CCP Ponce filed a motion to lift the stay on pursuing the foreclosure case in county court because Ponce Trust fell behind on loan payments. Ponce Trust was required to pay $3.83 million by Jan 1., 2016 but made partial payments and it still owed $1.65 million, according to the creditor’s motion. Judge Mark granted the motion on Oct. 26.

Shuttered irreverent news website Gawker Media LLC has reached a $31 million cash settlement with Hulk Hogan, the former professional wrestler who won a $140 million judgment against the site over a leaked sex tape, Reuters reported yesterday. Hogan's judgment forced Gawker into bankruptcy in June. Its sister websites, including sports site Deadspin and women's site Jezebel, were acquired for $135 million by media company Univision Holdings Inc in a bankruptcy auction last summer. The settlement is subject to approval by a bankruptcy judge. Silicon Valley billionaire Peter Thiel said in May that he helped fund the invasion of the privacy lawsuit filed by Hogan, whose real name is Terry Bollea. The site published an article in 2007 about Thiel's homosexuality.

For the second time in five years, San Antonio furniture maker KLN Steel Products Co. LLC has sought bankruptcy protection from creditors, the San Antonio Express-News reported today. KLN and its Dallas-based parent company, AGS Enterprises Inc., each filed emergency chapter 11 bankruptcy petitions on Wednesday in U.S. Bankruptcy Court in Dallas. AGS does business as Avteq Inc. KLN, which makes furniture for military barracks and universities, reported both assets and liabilities in the range of $1 million to $10 million. The filing comes as the company is defending itself against a whistleblower lawsuit alleging that it defrauded the federal government out of millions of dollars. The complaint was brought by a rival company, and KLN President Kelly O’Donnell previously has said that the allegations are untrue. Read more. 

A panel of experts at ABI’s Winter Leadership Conference will discuss the myriad reasons that chapter 22s and chapter 33s occur and the lessons learned from those cases. For more information and to register, please click here. 

A federal judge in Fort Worth, Texas, has approved a reorganization plan for Waco-based Life Partners Holdings Inc., which filed for bankruptcy protection in 2015 amid allegations that the company and founder Brian Pardo defrauded investors and put more than $1.4 billion in premiums at risk, the Waco Tribune reported today. The action means Pardo has no further involvement in the entity he created in 1991 to broker sales of life insurance policies from terminally ill patients to investors from around the world. Life Partners Holdings became a frequent target of the Securities and Exchange Commission, which most recently alleged the company purposefully underestimated the life expectancy of clients selling policies, making them more desirable to investors. The commission imposed an almost $47 million judgment. That case prompted the company’s bankruptcy filing and the involvement of trustee H. Thomas Moran II. Bankruptcy Judge Russell F. Nelms confirmed the reorganization plan on Tuesday after Moran spent months identifying 22,000 investors; holding town hall-style informational meeting in several cities, including Waco; and holding five weeks of hearings before Judge Nelms in a Fort Worth courtroom. The ruling preserves a portfolio of life insurance policies with a face value of $2.4 billion and provides a more certain future for $1.4 billion in premiums. Read more. 

Don’t miss next Tuesday’s free abiLIVE webinar “Administration of a Mega Ponzi Scheme Case: Receivership v. Bankruptcy.”

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. 

A bankruptcy judge yesterday temporarily barred regulators from continuing litigation against ITT Educational Services Inc., questioning whether there is any point in calling the defunct school operator to account for alleged fraud, the Wall Street Journal reported today. “If you want to punish and deter ITT, you ought to be bringing criminal actions,” Judge James Carr said during a hearing in U.S. Bankruptcy Court in Indianapolis. The operator of the ITT Technical Institute chain of schools closed in September after federal authorities yanked its authority to run on taxpayer-backed student loans. At the time, the Securities and Exchange Commission, the Consumer Financial Protection Bureau and the state of New Mexico accused ITT Tech of defrauding students and investors in connection with its private-loan programs. Massachusetts also sued, accusing ITT Tech of misleading students with false graduation and job-placement statistics. The bankruptcy filing that followed started a process in which a judge must balance competing demands to a finite pool of cash and manpower. The judge said yesterday that the regulatory crackdown has to take a back seat to other bankruptcy business, at least until Dec. 21, when he will take up the question again. The SEC and CFPB wanted to steam ahead with the litigation as a demonstration to others in the for-profit education industry that bankruptcy won’t immunize companies involved in the alleged mistreatment of investors and consumers.

An Orlando, Fla.-based motorcoach company that catered to Brazilian tourists is facing numerous claims of unpaid debts and has filed for chapter 11 protection, the Orlando Sentinel reported today. Its founder, Claudio Cipeda, has claimed 30 years of experience in the Brazilian travel business world. His companies have claimed to own 25 vehicles, including 15 luxury coaches, operating out of three cities in recent years. VHS Leasing Co. has filed a federal lawsuit against Alltour for more than $500,000. The company also battled an overtime lawsuit filed by three Miami drivers. U.S. District Judge Lawrence King ruled in favor of Alltour last year, but the drivers have appealed the case.