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Many financially vulnerable veterans fell into a carefully conceived trap that lured them into redirecting part of their monthly benefits for a cash advance from investors, USA Today reported. This business of buying and selling military benefits spread to at least 33 states before unraveling. In the last two years, investigators cracked down on the companies. More judges ruled that their transactions violate states and federal laws. The fallout created two sets of victims: Veterans and the people who provided them money. Veterans fell deeper into debt, while investors saw their nest eggs vanish as the veterans stopped paying and the companies collapsed. The architects of these arrangements were the only ones who truly profited. Their bank accounts swelled, sometimes into seven figures. Their riches came from high commissions, sometimes up to 50 percent, hidden fees and exorbitant interest rates as high as 240 percent. The company Future Income Payments ballooned into what's been described as a billion-dollar enterprise. Investors lost $451 million when that business burst last year, according to records obtained by the FBI. Its founder, Scott Kohn, was indicted in Greenville, S.C., on a federal charge of conspiracy to commit wire fraud and mail fraud in connection with the buying and selling of military benefits. The charge carries a maximum 20-year prison sentence. Jury selection is set for February. A Government Accountability Office report issued in October said the U.S. Department of Veterans Affairs should do more to prevent the financial exploitation of veterans. One recommendation in the report: "Centrally collect and analyze information, such as complaints against companies, that could show the prevalence of these scams, help VA target outreach to veterans, and help law enforcement go after scammers."

Bankrupt utility giant PG&E Corp. is trying to offer $13.5 billion in compensation to the victims of wildfires sparked by its power lines as part of a restructuring plan, Bloomberg News reported. In doing so, the San Francisco-based power company would be providing the same amount that a group of its creditors — led by Pacific Investment Management Co. and Elliott Management Corp. — has agreed to pay victims in a rival reorganization proposal. The two sides are at odds, however, over how to structure the payout and how much should come in the form of cash and stock. PG&E has spent months trying to come up with a restructuring plan that would get it out of the biggest utility bankruptcy in U.S. history by the middle of next year. The utility went bankrupt in January after its equipment was found to have started a series of catastrophic wildfires in 2017 and 2018, burying it in an estimated $30 billion worth of liabilities. Read more. 

In related news, California Gov. Gavin Newsom questioned PG&E Corp.’s $11 billion settlement proposal for insurance losses tied to wildfires and said it could derail the utility’s bankruptcy exit strategy, WSJ Pro Bankruptcy reported. In a court filing on Saturday, the Democratic governor raised several objections to the proposed deal with insurance creditors after it emerged as a sticking point in negotiations to resolve PG&E’s massive debts and wildfire liabilities. If the company can’t resolve an impasse over the insurance settlement and line up wide support for an exit from chapter 11, Newsom’s lawyers said the state government “will present its own plan” to resolve the bankruptcy. His threat marked the second time in less than a month that he has raised the possibility of taking PG&E’s exit strategy out of management’s hands. After years of disastrous wildfires linked to PG&E equipment, the company sought court protection in January and is attempting to cobble together an agreement on how it can tackle billions of dollars of death, injury and property damage claims. Closed-door talks aimed at creating a bankruptcy plan with broad creditor support are under way. Fire victims said in court papers that the insurance settlement is impeding those talks because it would tie up too much of PG&E’s cash. The insurance proposal is scheduled for discussion on Wednesday in the U.S. Bankruptcy Court in San Francisco. Read more. 

PG&E Corp., the California utility that went bankrupt in January after its equipment sparked deadly wildfires, said it’s facing as much as $6.3 billion in after-tax costs in this year alone from the blazes, its chapter 11 case and the recent blackouts, Bloomberg News reported. The troubled power giant reported a $1.6 billion loss for the third quarter. It was driven by $2.5 billion pre-tax charge for claims related to the 2017 Northern California wildfires and the 2018 Camp fire, the company said yesterday. PG&E is not providing 2019 earnings guidance. The earnings are the first PG&E has reported since its mass blackouts last month intended to keep power lines from sparking wildfires during windstorms, which drew outrage from state lawmakers and raised the specter of a government takeover. Despite the shutoffs, blazes continued to erupt. PG&E’s equipment has been identified as a possible cause of at least three. During October, PG&E enacted four massive blackouts to keep power lines from toppling in high winds and igniting more fires. The after-tax costs the company is estimating this year include $65 million for customer credits related to shutoffs on Oct. 9. PG&E said it doesn’t plan to issue rebates for future blackouts.

Mallinckrodt Plc plans to pay more than $4.2 million in bonuses to retain top executives, as the drugmaker looks to avoid bankruptcy and settle more than 2,500 state and local government lawsuits over its handling of opioid painkillers, Bloomberg News reported. The St. Louis-based drug distributor said in a Nov. 5 securities filing that it, or one of its units, may have to restructure the company’s “obligations in a bankruptcy proceeding” if a global deal can’t be reached to wipe out all opioid liability. In a separate filing the same day, Mallinckrodt said it agreed to pay retention bonuses to its top executives, including Chief Executive Officer Mark Trudeau, who stands to get more than $1.5 million. The company’s chief financial, legal and scientific officers will also get extra compensation to remain in their jobs. Mallinckrodt, along with fellow drug distributors McKesson Corp. and Cardinal Health Inc., and opioid makers Johnson & Johnson and Teva Pharmaceutical Industries Ltd., are talking with state attorneys generals and the municipalities’ lawyers about a global settlement. Some of those companies have floated a deal valued at almost $50 billion. The retention payments were determined to be appropriate by a committee of the board of directors, Mallinckrodt said in a statement.

Purdue Pharma LP and the company’s Sackler family owners will be shielded until April 8, 2020, from sprawling opioid litigation to give the maker of OxyContin time to try to reach a legal settlement the company says is worth $10 billion, Reuters reported. Bankruptcy Judge Robert Drain said yesterday that he would approve an order extending a stay on more than 2,600 lawsuits that accuse Purdue and the Sacklers of fueling a crisis that contributed to 400,000 U.S. deaths between 1999 and 2017. Drain, whose court is in White Plains, New York, ordered a brief stay of the litigation in October. While the litigation is on hold, Purdue and the Sacklers committed to share information with the states, municipalities, Native American tribes, hospitals, individuals and others who have sued. Purdue filed for bankruptcy in September to try to corral the parties to one court and build support for its proposed settlement, which will now be evaluated through the discovery process with the company and the Sacklers. Read more.

In related news, bankruptcy scholars on Tuesday called for an independent probe of the Sackler family’s dealings with OxyContin maker Purdue Pharma LP, which sought court protection from an avalanche of lawsuits over the opioid epidemic, WSJ Pro Bankruptcy reported. “The extraordinary public interest in these cases warrants a targeted bankruptcy examination,” law professors Jonathan Lipson, Adam J. Levitin and Stephen J. Lubben wrote in a letter to federal watchdogs overseeing the drugmaker’s bankruptcy. Purdue Pharma filed for chapter 11 protection with an agreement in hand for the Sacklers to settle allegations that their management of the company helped fuel a wave of addiction. Some state attorneys general also have alleged the Sacklers siphoned money from the company when they knew or should have known it was overrun by legal liabilities. The call for an outside investigation came on the eve of a hearing where Purdue Pharma is asking Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York to extend a standstill on litigation against the Sacklers. The Sacklers have denied wrongdoing but offered $3 billion and other concessions in exchange for a grant of immunity as part of Purdue Pharma’s bankruptcy. The company has agreed to hand over its business to creditors as compensation for its alleged responsibility for the opioid crisis. Read more.

Mallinckrodt PLC said it may have to file for bankruptcy protection over liabilities tied to the opioid crisis while offering creditors the opportunity to swap their claims for new, discounted debt, the Wall Street Journal reported. The generic drugmaker said on Tuesday that despite its efforts to resolve hundreds of lawsuits over its alleged role in fueling opiate addiction, it may be “necessary or advisable” for it to restructure its debts in a bankruptcy proceeding. Mallinckrodt previously signalled that it was under financial pressure and was preparing for a potential bankruptcy, hiring restructuring experts and drawing down the remaining $95 million of availability on a revolving credit facility. On Tuesday, Mallinckrodt also offered to exchange some of its bonds for new, secured debt at discounts of between 85 cents and 42.5 cents on the dollar. If creditors fully participate, Mallinckrodt would reduce its debt by more than $800 million, according to a securities filing. Deerfield Partners LP signed a separate exchange offer with the company and agreed to swap $500 million in bonds for new debt, Mallinckrodt said.

California Governor Gavin Newsom (D) pressed PG&E Corp. Chief Executive Officer Bill Johnson to reach a swift resolution to the company’s bankruptcy or face a potential state takeover in the face of a backlash from the utility’s mass blackouts designed to prevent its power lines from sparking wildfires, Bloomberg News reported. Newsom yesterday met Johnson behind closed doors and reiterated “the state’s frustration with PG&E and strongly urged the parties to get a resolution that ensures what we saw over the last month never happens again,” said a spokesman for the governor’s office, referring to the power shutoffs. Representatives of PG&E shareholders, bondholders, wildfire victims and other creditors also attended. The governor wants the utility to settle the chapter 11 proceedings before June 30 or the state will “intervene,” the spokesman said. Frustrated with PG&E, Newsom is trying to take on a bigger role in the largest U.S. utility bankruptcy in history, which will shape how power is delivered in the world’s fifth-largest economy. Some of Wall Street’s biggest names are jostling for control of the utility, including a group of bondholders led by billionaire Paul Singer’s Elliott Management Corp. The bondholders have aligned with wildfire victims to offer a reorganization plan that would largely wipe out existing PG&E shareholders including Seth Klarman’s Baupost Group LLC. Read more. 

In related news, more than two dozen California mayors and county leaders are calling for a customer-owned power company to replace Pacific Gas & Electric, the New York Times reported. In a letter delivered yesterday to the California Public Utilities Commission, the local officials embraced a proposal by Mayor Sam Liccardo of San Jose to create a cooperative that would use their collective resources to take over the utility. PG&E, which filed for bankruptcy protection in January after accumulating an estimated $30 billion in liabilities from wildfires caused by its equipment, is widely expected to emerge with a different structure. Any bankruptcy plan requiring a rate increase is subject to approval by the utilities commission. “The commission must do more than approve a plan — any plan — merely so that the bankruptcy can be concluded,” the government officials stated in the letter. “This situation requires a full and comprehensive effort to chart a sustainable course for the future of PG&E, one that will serve the interests of its customers, and position the company to meet the challenges we will face from a changing climate.” PG&E said it was aware of proposals to change the utility to a customer-owned or public power utility but said that it expected to emerge from bankruptcy as a strong and effective company. Read more. 

A federal judge overseeing the probation of utility giant PG&E Corp. is demanding information on a power line that failed minutes before a massive wildfire broke out last month in Northern California, Bloomberg News reported. U.S. District Judge William Alsup ordered PG&E to respond to several questions about so-called jumper cables after the San Francisco utility giant disclosed that one had broken where the Kincade fire erupted in Sonoma County on Oct. 23. The blaze is still burning north of San Francisco and has damaged or destroyed almost 450 structures. PG&E’s equipment has already been tied to wildfires that devastated parts of Northern California in 2017 and 2018, saddling the company with an estimated $30 billion in liabilities and forcing it into bankruptcy. Last year, a loose PG&E jumper wire was found to have contributed to the Camp fire, which killed 86 people and destroyed the California town of Paradise. PG&E said that it’s reviewing the judge’s order and will respond by a Nov. 29 deadline. 

California Governor Gavin Newsom (D) threatened a state takeover of PG&E Corp. unless the beleaguered utility giant makes a swift exit from bankruptcy and improves its operations to reduce wildfire risks, Bloomberg News reported. “We are gaming out a backup plan if Pacific Gas and Electric is unable to secure its own fate and future,” Newsom said on Friday. Among options being considered are a state-led restructuring of the utility, he said. Newsom has repeatedly bashed PG&E for its handling of a series of intentional and unprecedented mass blackouts — intended to keep power lines from igniting fires during high winds — that have left millions of Californians in the dark. The governor has expressed frustration that the utility hasn’t moved faster to improve operations and speed up investments needed to prevent future shutoffs. Newsom said that ne will hold a meeting this week with PG&E executives, shareholders, wildfire victims and creditors to help make sure the company meets a state-mandated target to exit chapter 11 by June 30, 2020. “If the parties fail to reach an agreement quickly to begin this process of transformation, the state will not hesitate to step in and restructure the utility,” he said in a statement. “All options are on the table.”