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McKinsey & Company has spent months fighting in court over how it should disclose potential conflicts of interest when it advises bankrupt companies. The powerful consulting firm has defended itself by arguing that federal disclosure rules are so vague and confusing that almost no one can agree on how to comply. But for years McKinsey has had a 57-page primer — titled “Bankruptcy 101” — that lays out how to identify possible conflicts and make proper disclosures, according to a New York Times analysis. The only problem: McKinsey hasn’t been following its own instruction manual. “It is critical that the disclosure rules and guidelines in these materials be followed,” the document says. It adds, “Failure to adequately disclose material connections may result in severe penalties and fines.” The disclosure rules are intended to protect the integrity of the bankruptcy courts, where valuable corporate assets and vast sums of cash regularly change hands, by safeguarding against secret deals. They allow regulators to make sure that the advisers retained by bankrupt companies are not improperly favoring one creditor or bidder over others. That’s precisely the situation McKinsey now finds itself in. The court battles have already cost McKinsey millions of dollars in penalties, and risk costing it millions more.

ABI Editor-at-Large Bill Rochelle talks with Bankruptcy Judge Kevin Carey (D-Del.; Wilmington), Paul Hage of Jaffe Raitt Heuer & Weiss (Southfield, Mich.) and Lindsay Milne of Bernstein Shur (Portland, Maine) about the Supreme Court's decision in Mission Product Holdings Inc. v. Tempnology, LLC (17-1657). On May 20, the Court held that rejection of an executory trademark license does not bar the licensee from continuing to use the mark. Ms. Milne represented the party that prevailed in the Supreme Court. Click here to listen to the podcast.

A Justice Department fund fed by the quarterly fees that bankrupt companies pay to use the federal court system is growing but still falls short of the $200 million target that would prompt department officials to lower the fee rate, WSJ Pro Bankruptcy reported. The fund contained about $44 million as of September. The program’s account contained about $15 million on Sept. 30, 2017. Federal lawmakers in 2017 voted to increase fees starting Jan. 1, 2018, rattling bankruptcy industry professionals who said that they were concerned that already-struggling companies wouldn’t be able to afford higher fees. Under the new fee system, companies using chapter 11 protection that have operating expenses of more than $1 million must pay a fee to the Justice Department equal to 1 percent of those expenses, up to $250,000. The previous cap was $30,000.