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Victims of Bernard Madoff's Ponzi scheme can expect to soon receive about $1.42 billion to help cover their losses, after two U.S. judges yesterday authorized the payouts, Reuters reported. In the first payout, customers who invested directly with Madoff will receive about $1.18 billion from Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC. Separately, former customers of J. Ezra Merkin, a New York money manager who funneled their money to Madoff through his Ariel and Gabriel Capital "feeder funds," will receive nearly $236 million, court papers show. The payouts were approved less than a month before the seventh anniversary of Madoff's fraud being uncovered in December 2008. In a statement, Picard said U.S. Bankruptcy Judge Stuart Bernstein yesterday authorized him to release $1.5 billion from reserves. Read more. 

Register today for the Dec. 9 abiLIVE webinar titled “Fraud and Forensics: The Expert Witness in a Commercial Fraud Case.” Moderator Kathy Bazoian Phelps of Diamond McCarthy LLP (Los Angeles), and lead author of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case will be joined by speakers Melissa Kibler and Bankruptcy Judge (ret.) Steven Rhodes. Click here to pick up a copy of Fraud and Forensics.

A Washington state court jury on Friday found Ernst & Young liable for millions of dollars in losses a Washington investment firm took from the collapse of Bernard Madoff’s Ponzi scheme, the Wall Street Journal reported on Saturday. Steven W. Thomas, attorney for FutureSelect Portfolio Management Inc., said that the jury found the Big Four auditing firm was negligent in its work as auditor for a feeder fund that pooled investors’ cash and funneled it Madoff’s way. FutureSelect claimed that Ernst & Young, as auditor, supplied false information that FutureSelect Portfolio Management Inc. relied on to invest with the feeder fund. FutureSelect, of Redmond, Wash., invested approximately $200 million in a feeder fund that sent its money to Madoff, whose 2008 arrest exposed a massive Ponzi scheme in which investors lost more than $17 billion. In 2010, FutureSelect sued Ernst & Young, accusing it of negligence and seeking to recover its losses.

Glay H. Collier II faces up to 5 years in prison, a $250,000 fine and 3 years on supervised release for collecting filing fees from clients without informing the bankruptcy court, KSLA.com reported yesterday. Collier is scheduled to be sentenced March 1. The 53-year-old entered a conditional guilty plea to one count of bankruptcy fraud on Nov. 10 before U.S. Magistrate Judge Karen L. Hayes. His plea will become final when accepted by U.S. District Judge Robert G. James. Evidence presented during Collier's plea hearing shows he filed records with the bankruptcy court stating he would accept “no look” fees as payment for his services. Such fees cap attorney’s fees in bankruptcy proceedings to $2,800. In excess of that amount, records show, Collier charged some clients up to $281 in filing fees that he did not disclose to the court. Collier filed 2,160 Chapter 13 bankruptcy cases in Shreveport, La., and another 983 such cases in Monroe between March 2010 and November 2013. He fraudulently collected or attempted to collect filing fees in about 479, or 22 percent, of those cases, according to U.S. Attorney Stephanie A. Finley's office.

The Consumer Financial Protection Bureau (CFPB) has released its latest supervision report showing that CFPB supervisory actions resulted in $107 million in relief to more than 238,000 consumers, NationalMortgageProfessional.com reported yesterday. The report, the ninth edition of Supervisory Highlights, generally covers supervisory activities completed between May 2015 and August 2015. The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action. Recent non-public supervisory actions in areas such as mortgage servicing, mortgage origination, deposits, and credit cards have resulted in $107 million in restitution to more than 238,000 consumers. The CFPB found violations in the student loan servicing, mortgage origination and servicing, consumer reporting, and debt collection markets.

Federal consumer regulators yesterday won a major court battle against Corinthian Colleges Inc., the former national for-profit chain that entered bankruptcy this year amid claims of defrauding students, Dow Jones Newswires reported yesterday. A federal judge in Illinois ruled that Corinthian "engaged in deceptive practices" by misleading students about their career prospects. The Consumer Financial Protection Bureau had filed the lawsuit. Corinthian had declined to contest the charges, and the ruling yesterday was a default judgment. The judge ordered Corinthian to pay $531 million in damages to former students. Corinthian operated three Everest College campuses in Aurora, Thornton and Colorado Springs. It also operated Heald College and WyoTech. Judge Gary Feinerman of the U.S. District Court for the Northern District of Illinois, in his ruling, said: Corinthian violated a federal "prohibition on deceptive acts and practices by its misrepresentations and omissions regarding prospective students' career opportunities."

A Billings, Mont., neurosurgeon accused of malpractice who filed for bankruptcy last year is now battling allegations that he is trying to hide his money and property from creditors, the Billings Gazette reported today. Bankruptcy trustee Joe Womack, a Billings attorney, said in court records that Dr. John Henry Schneider was a successful neurosurgeon who claimed to have a personal net worth of $17 million as recently as 2011. After filing for bankruptcy in 2014, Schneider claims “virtually no assets,” Womack said. Schneider, the trustee said, carried out “this disappearing act,” through a complex scheme that used companies, trusts and transfers to “divest himself of technical ownership of virtually all assets and claims, leaving virtually nothing to satisfy his creditors.” Womack alleges Schneider worked with his wife and others to defraud creditors by transferring assets to his children’s trusts, to his wife and to various corporations and trusts he’s been involved with. Read more. 

For further analysis of challenges faced by bankruptcy professionals in the course of a commercial fraud matter, be sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

Scammers posing as attorneys representing debt collectors have been targeting those who have filed for bankruptcy, Alabama Attorney General Luther Strange warned yesterday, AL.com reported. The scammers are using Caller ID "spoofing" and the victims' personal information to demand  payments by wire on bogus debts, the attorney general stated in a press release. The scammers use publicly available documents about bankruptcy filers and "spoof" the Caller ID system to make it appear they are calling from a bankruptcy attorney's office. In most cases, the scammers inform their victims they must wire a debt payment immediately or face arrest. Strange warns that such calls are fraudulent and asks that anyone receiving them report it to law enforcement.

Tim Blixseth, the former billionaire and founder of the luxurious Yellowstone Club ski and golf resort in Montana, was sent back to jail Oct. 19 after a U.S. district judge said that he was unsatisfied that Blixseth hadn't come clean on the $13.8 million that he received from the sale of a Mexican resort, the Associated Press reported yesterday. Blixseth was tossed into a Great Falls, Mont., jail in April after a judge found the developer in contempt for failing to account for the millions he owes creditors. Prosecutors said that Blixseth owes more than $250 million to his lenders. Blixseth sat silently in court on Monday as his accountant took nearly six hours to explain Blixseth's sale of a Mexican resort, with funds funneling through more than 20 different businesses and/or bank accounts. The accountant insisted that all of the $13.8 million has been spent. U.S. District Judge Sam Haddon ordered Blixseth back to jail until at least Nov. 20, when he's expected to rule on whether Blixseth had provided sufficient detail on the Mexican funds.