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Irving Picard, the trustee liquidating the estate of convicted Ponzi scheme mastermind Bernard Madoff, sued New York Attorney General Eric Schneiderman in Manhattan federal court to stop a settlement with former Madoff investor Ezra Merkin, Bloomberg News reported today. New York announced June 25 that it settled a lawsuit for $410 million with J. Ezra Merkin over claims that Merkin funds secretly placed client money with Bernard L. Madoff. The agreement provides $405 million to compensate investors and $5 million for the state, according to a statement yesterday by the office of New York Attorney General Eric Schneiderman. In the case, filed in 2009 by Schneiderman's predecessor, Andrew Cuomo, the state claimed Merkin steered assets to Madoff and concealed Madoff's role.

The trustee overseeing Peregrine Financial Group Inc. wants to subpoena financial records from 10 banks involved with the collapsed U.S. brokerage, the Wall Street Journal reported today. A federal judge is being asked to allow court-appointed trustee Ira Bodenstein to issue subpoenas to JPMorgan Chase & Co., US Bank, Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. and five other institutions, according to a court filing late yesterday. Bodenstein said in the filing that he was seeking information related to open and closed Peregrine accounts at the institutions. The trustee also wants information from Bank of New York Mellon Corp., First Premier, Jefferies Bache, Royal Bank of Scotland Group PLC and Commerzbank AG. The request is due to be heard by the judge at a hearing on Aug. 7.

The trustees for MF Global's creditor factions have resolved their dispute over the allocation of a $130 million payment from CME Group Inc., Reuters reported on Friday But the agreement also preserves the prospect of a future fight over how to divvy up money recovered by the trustees. Louis Freeh, the trustee recouping money for MF Global Holdings Ltd's bankruptcy creditors, agreed for now not to challenge a settlement under which exchange regulator CME would pay $130 million to be split between former commodities trader customers of MF Global's broker-dealer unit. The settlement was reached in June between CME and James Giddens, Freeh's counterpart working to recover money for the customers. Giddens delayed sending the deal to a judge for court approval earlier this month after Freeh raised concerns about it.

Unsecured creditors are protesting the sale process lined up by SP Newsprint Holdings LLC, saying their "greatest fear"---that the company is focused solely on benefiting its lenders---has come true, Dow Jones DBR Small Cap reported today. SP Newsprint wants to place its assets on the auction block with a $145 million deal from a group of top-ranking lenders kicking off the bidding, a sale process it said has to move swiftly because the company is running out of money.

The court-appointed examiner reviewing the bankruptcy of mortgage lender Residential Capital LLC plans to seek authority to issue subpoenas and expects his review to take six months, Reuters reported on Friday. Former Bankruptcy Judge Arthur Gonzalez, the examiner, wants authority to issue subpoenas on anyone possessing "information relevant to the investigation," and will need "a substantial amount of time" to prepare his report, his lawyers said in a court filing. Bankruptcy Judge Martin Glenn on Friday issued an order approving the scope of Gonzalez's probe. The approval does not cover the request for subpoenas. The examiner plans to review all material agreements between ResCap and its parent Ally Financial Inc, and with former majority owner Cerberus Capital Management LP. He also plans to review business decisions by top ResCap officers and its board, as well as the validity of claims by and against ResCap.

Wall Street banks and hedge funds like Goldman Sachs and D.E. Shaw are not entitled to ask Lehman Brothers to chip in for their legal fees in the biggest chapter 11 case of all time, according to U.S. Trustee Tracy Hope Davis, the Wall Street Journal reported yesterday. Davis is asking a judge to knock out, reduce or scrutinize more than $33 million in attorneys' and advisers' fees that Lehman creditors such as Goldman Sachs Group Inc., Bank of America Corp. and D.E. Shaw & Co. want to put on Lehman's tab. The banks and hedge funds say that they are entitled to be reimbursed for the fees on the grounds that their work made a "substantial contribution" to the Chapter 11 case, during which Lehman has already racked up more than $1 billion in professional fees.

Customers of Bernard Madoff's brokerage, who have received just $333 million from the liquidator of the con man’s estate, will get a second payment of $1.5 billion to $2.4 billion, an amount some investors found disappointing, Bloomberg News reported yesterday. Madoff trustee Irving Picard said that he will ask a judge to approve the distribution, which would bring payments to as much as 50 percent of allowed claims. Part of $5 billion received in a settlement with the Jeffry Picower estate would be used for the payment, although "a large portion" would be held in reserve, Picard said yesterday.

Bankrupt law firm Dewey & LeBoeuf revised its settlement offer to former partners yesterday, dropping its potential recovery to $90.4 million from $103.6 million, Reuters reported yesterday. The estate is seeking the money from the former partners in exchange for releasing the lawyers from potential clawback claims. Under the revised offer, detailed to partners during an afternoon meeting at the New York Hilton & Towers, the minimum amount was reduced to $5,000 from $25,000. The maximum contribution was increased to $3.5 million from $3 million. At the same time, the new plan calls for onetime members of Dewey's executive committee to pay a 20 percent premium on top of what they otherwise might contribute.

Apple Inc., which is fighting Eastman Kodak Co. over ownership of patents, argued a federal judge should transfer a Kodak lawsuit against the iPhone-maker out of bankruptcy court, Bloomberg News reported yesterday. Apple told U.S. District Judge George Daniels at a court hearing yesterday that Kodak's complaint over patent ownership should be considered in federal district court. Kodak and Apple are grappling over 10 patents that are included in a portfolio of patents Kodak is planning to sell as part of its bankruptcy restructuring. Kodak sued Apple in June in bankruptcy court, seeking an order that Apple does not own the assets. Apple argued in court papers that the bankruptcy court does not have the authority or "necessary expertise" to decide the dispute. Kodak opposes withdrawal of the case.

Tribune Co. creditors appealed the newspaper chain’s reorganization plan and asked a judge to temporarily halt the company's effort to exit bankruptcy, Bloomberg News reported yesterday. Aurelius Capital Management LP and other holders of Tribune’s oldest debts asked Bankruptcy Judge Kevin Carey to suspend his order approving the plan and a related legal settlement until a higher court reviews the case. Aurelius claims that Judge Carey erred when he approved a settlement that ended some lawsuits against lenders that financed the more than $8 billion leveraged buyout of Tribune in 2007. The creditors hold debt that preceded the buyout loans and claim that the settlement robbed them of the ability to collect by leaving Tribune insolvent. They want the settlement set aside so they can sue.