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The global consulting firm McKinsey and Company faced claims on Friday that it had failed to disclose the dual roles it was playing in three bankruptcy cases, potential violations of federal requirements meant to prevent an undisclosed conflict of interest from tainting the outcomes, the New York Times reported. In one case, the Justice Department asked a judge in Virginia to reopen the bankruptcy of Alpha Natural Resources and force McKinsey to return about $20 million in fees because, the department said, McKinsey concealed for years that it was a secured creditor of the coal company while advising it. Separately, a bankruptcy judge in Texas asked the Justice Department to look into allegations of similar activity by McKinsey in the current case of another coal company, Westmoreland Coal, and the closed case of GenOn Energy, a power company. The Office of the U.S. Trustee, a division of the Justice Department, took the unusual step of seeking to reopen the Alpha Natural Resources bankruptcy after investigating the complaint of another creditor.

As Orianna Health Systems LLC’s hard-fought chapter 11 case draws nearer to a close, interest in the case turned yesterday to fees for lawyers that have steered the bankruptcy through months of contentious litigation, WSJ Pro Bankruptcy reported. During a hearing at the U.S. Bankruptcy Court in Dallas, Orianna’s landlord and chief antagonist throughout much of its bankruptcy, Omega Healthcare Investors Inc., said attorneys for Orianna and the nursing-home operator’s unsecured creditors shouldn’t immediately be paid for work done earlier in the case. Orianna, once the operator of more than 40 nursing homes in seven states, filed for bankruptcy in March with a prearranged restructuring deal, which Omega voted to support. But a clash over how much of the plan’s expenses would be borne by Omega caused the deal to fall apart, and the two sides have since become adversaries. Omega, a publicly traded real-estate investment trust, now says that for months lawyers from DLA Piper pursued a debt-restructuring plan that wasn’t in line with the bankruptcy code. Court papers show DLA Piper is currently seeking approval and payment of about $2.2 million in fees. Working with DLA Piper, Orianna has since modified its restructuring plan and is pressing forward with it. Bankruptcy Judge Harlin DeWayne Hale ruled on Tuesday that the new version of the plan doesn’t significantly impact Omega, which limits its options for contesting it. A final hearing on the plan is set for Jan. 8. Read more.

Examine how current challenges facing the health care industry will lead to future opportunities. Don't miss ABI's “Disruption, Consolidation and Innovation in the Health Care Industry” Program scheduled for January 17 at Georgetown University Law Center. Register here. 

A Wisconsin bankruptcy judge is trying to speed up an appealed dispute over how much money bankrupt companies should pay as a fee to the Justice Department for using the U.S. court system, WSJ Pro Bankruptcy reported. On Wednesday, Judge Catherine J. Furay of the U.S. Bankruptcy Court in Eau Claire, Wis., asked a panel of appeals court judges to weigh in on the payment confusion, which she said heightened after federal lawmakers voted to increase the fee last year. Under a new law, companies using chapter 11 protection that spend more than $1 million a quarter on operating expenses pay a fee to the Justice Department equal to 1% of those expenses up to $250,000. The previous cap was $30,000. Government officials estimated the change would affect 10% of companies that file for chapter 11 protection. “Such a drastic increase will have ripple effects across chapter 11 cases in the coming years,” Judge Furay wrote in her request, adding that higher fees will cut into the amount of money that creditors split at the end of a bankruptcy case. Lawmakers who ordered the increased fee payments didn’t define which expenses count toward the fee, leading companies and Justice Department officials to fight over which expenses count, especially for companies with complex financial arrangements.

Ariane Holtschlag of the Law Office of William J. Factor, Ltd. (Chicago) and a member of ABI’s Commission on Consumer Bankruptcy will testify today before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law to provide Commission recommendations on trustee compensation. The hearing was called to examine H.R. 3553, the “Bankruptcy Administration Improvement Act of 2017,” introduced last year by House Judiciary Subcommittee Chair Tom Marino (R-Pa.). The bill aims to increase the amount of compensation paid to chapter 7 bankruptcy trustees for services rendered. “In written comments and in statements made to the Commission and its committees, the need to raise trustee compensation appears to enjoy almost unanimous support,” Holtschlag said in prepared testimony. “Congress has not increased the $60 fee for a no-asset case since 1994.” Click here to read Holtschlag's testimony.

To watch a live stream of the hearing at 10 a.m. EDT, review the witness list and view the all prepared statements for the hearing, please click here.