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The “Furthering Asbestos Claim Transparency (FACT) Act of 2015,” a Republican-backed bill that aims to reduce fraud in asbestos lawsuits, was approved (19-9) by the House Judiciary Committee yesterday, The Hill reported today. Bankrupt manufacturers and their insurers under the Bankruptcy Code are able to create bankruptcy trusts to compensate workers and their family members who were injured by the company’s manufacturing of asbestos. With roughly 60 asbestos trust funds and nearly $40 billion in assets, lawmakers said opportunistic individuals are able to seek multiple payouts by filing conflicting claims with numerous trusts. To protect these finite trusts from paying out money for fraudulent or inflated claims, the bill would require trusts to file quarterly reports on their public bankruptcy dockets that include information on demands for payments and the basis for payments made.  Read more.

For more on litigation and litigation trusts in bankruptcy, be sure to pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts. 

A lawyer for New York financier Lynn Tilton urged a U.S. judge on Monday to block the U.S. Securities and Exchange Commission from trying her before an administrative judge for defrauding investors, Reuters reported yesterday. Tilton, the head of private equity firm Patriarch Partners, appeared in court as one of her lawyers asked U.S. District Judge Ronnie Abrams in Manhattan to declare the SEC's in-house court system unconstitutional. Lawyers for the U.S. Justice Department defending the SEC countered that the system was proper, and that any challenge Tilton wanted to make would need to wait until after her trial, which is set for Oct. 13.

A former top executive of the failed Connecticut hedge fund firm New Stream Capital LLC was sentenced on Tuesday to 2-3/4 years in prison, after pleading guilty to conspiring to defraud clients as the 2008 financial crisis approached, Reuters reported yesterday. Former managing partner David Bryson had pleaded guilty last May to a charge of conspiracy to commit wire fraud. Federal prosecutors had accused him and two co-defendants of helping conceal changes in the capital structure of one of New Stream's funds, to avoid losing the Ridgefield, Connecticut-based firm's largest investor. Authorities said New Stream was once a $750 million firm that specialized in investments such as loans backed by real estate and life insurance contracts. It filed for bankruptcy protection in March 2011.

The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) announced on Tuesday that the organizations are taking action against Green Tree Servicing, a subsidiary of Walter Investment Management Corp., for “mistreating borrowers” who were attempting to save their homes from foreclosure, HousingWire.com reported yesterday. According to the CFPB and the FTC, Green Tree failed to honor modifications for loans transferred from other servicers, demanded payments before providing loss mitigation options, delayed decisions on short sales, and harassed and threatened overdue borrowers. Recently, Green Tree received a superior five STAR designation as part of Fannie Mae’s Servicer Total Achievement and Rewards program for 2014. As part of the agreement, Green Tree agreed to pay $48 million in restitution to victims, and a $15 million civil money penalty to the CFPB’s Civil Penalty Fund for its illegal actions, the CFPB said.

The bankrupt founder of the private Yellowstone Club in Montana whose members have included Microsoft Corp.’s Bill Gates was jailed for a second time after failing to account for proceeds from a resort in Mexico that he sold in violation of a court order, Bloomberg News reported yesterday. Timothy Blixseth was ordered by U.S. District Judge Sam Haddon in Butte, Mont., to be taken into custody yesterday and held until he provides a full of accounting of the $13.8 million he received for the Tamarindo resort. Blixseth was briefly jailed by the judge in December after he was found in contempt in February 2014 for disobeying a bankruptcy court. Blixseth became a billionaire after founding the Yellowstone Club as a private ski and golf resort and signing up wealthy corporate leaders including Gates. 

A Florida telemarketing firm that the state’s consumer watchdog has called a scam filed for bankruptcy protection, the Wall Street Journal reported on Saturday. Facing a lawsuit over allegedly deceptive practices, Federal Verification Co., which promised to help small businesses win lucrative U.S. government contracts, filed for bankruptcy on Monday to try to stop an upcoming trial. In November, Florida Attorney General Pam Bondi sued Federal Verification for allegedly charging high upfront fees to customers who were “given false hope of a [General Services Administration] contract,” according to the 19-page lawsuit. Her office has received more than 200 complaints about Federal Verification and dozens of related businesses since 2012, the lawsuit said.

The court-appointed official tracking down money for Bernard Madoff's cheated investors wants to return $1.25 billion to customers who fell victim to the biggest Ponzi scheme ever, Dow Jones Daily Bankruptcy Review reported today. Irving Picard, the trustee in charge of returning cash to Madoff's victims, is seeking court approval to make his sixth distribution to customers more than six years after Madoff's multibillion-dollar Ponzi scheme collapsed. In a filing Wednesday with the U.S. Bankruptcy Court in Manhattan, Picard is seeking the release of most of the $1.45 billion that was held in reserve as part of the ongoing litigation with Madoff's early victims who had been seeking "time-based damages," that is inflation or interest adjustments on their claimed losses. An appellate court rejected the time-based claims in February.

Sedgwick LLP has reached a tentative settlement to resolve a lawsuit over its role in a $1 billion Ponzi scheme in California, the National Law Journal reported today. Sedgwick spokesman Christopher Carter said that the law firm denies all liability in the case. The case against Sedgwick, brought in 2011, alleges that the firm caused $210 million in investor losses when it failed to alert its client, Medical Capital Holdings Inc., a purported medical receivables purchasing firm, about unauthorized loans its officers were making. Individual Sedgwick attorneys were not named as defendants. Thomas Seaman, appointed receiver in 2009 as part of a U.S. Securities and Exchange Commission case, claimed that Sedgwick failed to disclose conflicts or obtain the necessary waivers on the loans and that it aided and abetted Medical Capital’s officers in breaching a fiduciary duty to its client. The receiver claimed that Medical Capital raised about $1.7 billion from 20,000 investors between 2003 and 2009. In 2011, former Medical Capital president Joseph Lampariello pleaded guilty to wire fraud in connection with his role in the Ponzi scheme. He is scheduled to be sentenced on May 4. The Sedgwick case focused on 22 allegedly fraudulent loans.