Attorneys for Jon Corzine and other former MF Global officials have an "urgent need" to tap the company's insurance money to continuing defending themselves against a deluge of litigation tied to the brokerage's collapse, Dow Jones Daily Bankruptcy Review reported today. More than a dozen former directors, officers and employees of MF Global Holdings and its defunct brokerage on Tuesday filed a letter urging a bankruptcy judge to let them draw additional insurance proceeds, which a pending legal battle has blocked them from tapping for almost a year.
Without clear instructions from the Bankruptcy Code on what to do with the unclaimed money that is too small to distribute among a liquidated company’s creditors, ABI is encouraging members to donate the money to the organization’s own nonprofit endowment fund, the Wall Street Journal reported today. “Rather than having it [turn over] to the state, why not recycle it into the bankruptcy community?” said ABI executive director Sam Gerdano. ABI has a 131-word passage posted on its website that bankruptcy attorneys can copy and paste into creditor payout plans to direct the money to the fund, which pays for scholarship and bankruptcy research. The trade group’s initiative comes at a time when many restructuring professionals are confused over what to do with unexpected leftover money in a liquidating chapter 11 bankruptcy case. That money can come from uncashed creditor checks, tax rebates or returned utility deposits. ABI’s endowment fund pays for bankruptcy-related research into topics such as the high fees in corporate bankruptcy cases or the cost of bankruptcy for individuals. “In lieu of people throwing around anecdotes or impressions or first-hand experiences, we provided data-supported conclusions,” said University of Maine Law Professor and Bankruptcy Attorney Lois Lupica.
For more information about donating unclaimed liquidation funds to the ABI Endowment Fund, please click here: http://endowment.abi.org/unclaimed
A bankruptcy court on Thursday will review a proposal by MF Global’s trustee that would return 93 percent of the firm's missing money to customers, the New York Times DealBook blog reported today. The trustee who has submitted the proposal, James W. Giddens, has also identified a way that, if sent to the judge and approved, could plug the remaining shortfall for customers in the U.S. If a series of settlements with JPMorgan and other firms fall into place, people involved in the case said, Giddens could ultimately return 100 percent of MF Global's missing money. To plug the gap, he must also pursue a small pot of money sitting in MF Global's general estate, a move that would require court approval. Even if he takes that path, foreign clients will still face significant shortfalls.
Bankruptcy Judge Martin Glenn on Friday approved a plan by bankrupt law firm Dewey & LeBoeuf to foot some of the cost of destroying old client files, a bill that could ultimately reach almost $1.4 million, Reuters reported on Friday. In a written order, Judge Glenn approved Dewey's plan to chip in about $4 per box to help destroy an estimated 345,000 boxes of old records, some dating back to the 1930s. Dewey, now liquidating, filed the largest-ever bankruptcy by a U.S. law firm in May. In October it reached a $71.5 million settlement with former partners to help pay back about $260 million owed to secured creditors. The question of how to destroy files that go unclaimed by former clients has framed a difficult legal issue, pitting Dewey's fiduciary responsibility to creditors against its ethical duty to clients.
Lehman Brothers Holdings Inc., which is due to make a third payment to creditors in March, had $5.6 billion in free cash on Nov. 30, an increase of $1.1 billion during the month, Bloomberg News reported yesterday. Cash that was restricted, or unavailable at Lehman and its affiliates was $13.7 billion, including $5.8 billion set aside for disputed claims, according to a post-bankruptcy report filed in court yesterday. The defunct investment bank, which has already paid creditors half of the $65 billion it aims to pay by 2016 or so, last month agreed to sell its Archstone Inc. unit for $6.5 billion to AvalonBay Communities Inc. and Sam Zell’s Equity Residential, scrapping plans for an initial public offering after a four-month slide in U.S. apartment stocks. Lehman also has been whittling down claims by some creditors, which would potentially add cash for distribution.
The California Public Employees' Retirement System is trying to rewrite the rules for bankrupt cities, claiming that it should get paid before almost everyone else, including bondholders, Bloomberg News reported yesterday. The biggest U.S. public pension fund would set a legal precedent should courts adopt Calpers's position that, as an arm of the state, it is exempt from rules that apply to other creditors in the chapter 9 bankruptcy cases of San Bernardino and Stockton. A Calpers victory would threaten public services in a city trying to reorganize in bankruptcy, or in an extreme case, cause a city to disincorporate, said attorney James E. Spiotto. "Chapter 9 was never intended to cause the liquidation of a municipality or the reduction of services," said Spiotto. "What Calpers is doing is threatening the basic tenet of Chapter 9." Pension costs for retired public employees are straining local governments from California to Rhode Island. In the private sector, when bankrupt corporations fall behind on such payments, the shortfall is considered an unsecured debt owed to the pension fund. Calpers is arguing that all of its debt should be treated as an administrative claim, which means only a handful of creditors would be paid first, such as the lawyers and financial advisers working on the bankruptcy case. "What Calpers is trying to do is rewrite the priorities of the Bankruptcy Code," said Kenneth N. Klee, a professor at UCLA School of Law who helped revise chapter 9 of the U.S. Bankruptcy Code in the 1970s as a lawyer working for Congress. "The city's failure to make these contributions is a violation of state law," Calpers said in court papers. However, San Bernardino officials counter that if the city is forced to pay Calpers, "the city's ability to continue to function would be seriously threatened."
