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The former chairman of Dewey & LeBoeuf has reached an agreement with New York prosecutors to avert a retrial on fraud charges stemming from the law firm's collapse, Reuters reported on Friday. The agreement with Steven Davis was discussed at a hearing on Friday in Manhattan Supreme Court. Two former Dewey colleagues, executive director Stephen DiCarmine and chief financial officer Joel Sanders, failed to reach similar agreements and face a possible second trial, their respective lawyers said at the hearing. Dewey, which once counted over 1,400 lawyers and ranked as one of the largest U.S. law firms, filed for bankruptcy in 2012.

A federal appeals court on Friday set back Bank of New York Mellon Corp's effort to recoup $312 million it lent to Sentinel Management Group Inc, a money manager that collapsed in 2007 and whose former chief is now in prison for fraud, Reuters reported. The U.S. Court of Appeals for the Seventh Circuit said that a lower court judge reviewing bankruptcy trustee Frederick Grede's lawsuit erred in clearing the bank of wrongdoing in its dealings with Sentinel and its chief executive officer, Eric Bloom. Writing for the appeals court, Circuit Judge Richard Posner said the bank should be treated as an unsecured Sentinel creditor, not a secured creditor, because it was aware of suspicious facts that should have led it to investigate whether Northbrook, Ill.-based Sentinel was up to no good. Judge Posner also rejected Grede's argument that the bank's claim should be pushed further behind other claims, saying the trustee did not show that the bank acted deliberately to avoid confirming its belief there was a high probability of fraud.

PricewaterhouseCoopers agreed to pay $55 million to settle a class-action lawsuit accusing it of misleading investors in feeder funds that funneled their cash to Bernard Madoff, Dow Jones Daily Bankruptcy Review reported today. The cash deal, filed in court on Wednesday, heads off a trial that would have begun this week in which investors in Fairfield Greenwich Ltd. were set to accuse PwC affiliates of negligence in connection with their work auditing Fairfield's funds, which invested with Madoff. Investors have asked a federal judge to schedule a hearing in the spring to consider the deal, reached with PwC's Canadian and Dutch units as well as with PricewaterhouseCoopers International Ltd. Read more. (Subscription required.) 

For more on fraud and Ponzi scheme cases, including analysis of the Madoff case, be sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

The Internal Revenue Service said that Texas tycoon Sam Wyly engaged in "lies, deception and fraud" in a years-long scheme to dodge taxes on $1.1 billion held in offshore trusts, Reuters reported yesterday. The IRS made those claims at the start of a trial in federal bankruptcy court in Dallas in which the agency is seeking $3.22 billion in back taxes, penalties and interest from Wyly and the widow of his late brother Charles, Caroline Wyly. Cynthia Messersmith, a U.S. Justice Department lawyer representing the IRS, said the Wylys had since 1992 used offshore trusts to avoid paying taxes on $1.1 billion in proceeds while exercising stock options and warrants of four companies on whose boards the brothers sat.

A former manager for a nonprofit that oversaw Newark, New Jersey’s water supply pleaded guilty to corruption charges as U.S. prosecutors investigate the bankrupt entity’s activities while Cory Booker was mayor, Bloomberg News reported yesterday. Donald Bernard Sr., a consultant and manager of special projects at the Newark Watershed Conservation and Development Corp. admitted in federal court that he took $956,948 in kickbacks for himself and his boss in exchange for helping award work to contractors. Giacomo “Jack” DeRosa, also pleaded guilty in Newark to laundering part of $85,000 he gave to Bernard from funds he received for roofing work at NWCDC.

Timothy Blixseth, former owner of the bankrupt Yellowstone Mountain Club LLC, has been jailed for almost nine months — not for a crime, but for contempt from violating a bankruptcy court injunction and subsequent district court orders, according to a report today from ABI Editor at Large Bill Rochelle. Unless the Ninth Circuit intervenes, Blixseth’s incarceration could last a year or more; District Judge Sam E. Haddon of Butte, Mont., handed down a 40-page opinion on Dec. 30 explaining why Blixseth is still in civil contempt of an order directing him to account for how he spent $13.8 million obtained from the sale of a Mexican resort in violation of a bankruptcy court order.

A new settlement with one of Bernard Madoff’s investors will add another $25 million to the billions of dollars that have been recovered following the collapse of his Ponzi scheme, the Wall Street Journal reported yesterday. Irving Picard, the trustee overseeing the liquidation of the Bernard L. Madoff Investment Securities LLC investment firm, reached the deal with investor Vizcaya Partners Ltd. as well as with Vizcaya’s investors and their bank. Picard had sued Vizcaya in bankruptcy court in 2009 to recover the false profits it received during the course of Madoff’s Ponzi scheme. The lawsuit also targeted two of Vizcaya’s investors and its bank, to which Vizcaya subsequently transferred the funds that originated with Madoff’s firm. Read more. (Subscription required.) 

For more information on fraud cases, including the Madoff case, be sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case.