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The trustee liquidating Bernard Madoff's firm yesterday began distributing another $351.6 million to the swindler's former customers, boosting the amount recouped to nearly $6 billion, Reuters reported yesterday. Trustee Irving Picard said that the fourth interim payout will go to victims of the Ponzi scheme who had 1,081 accounts at Bernard L Madoff Investment Securities LLC. Payments range from about $500 to about $77.8 million and average $325,000. Most of the payout comes from a $325 million settlement of Picard's claims against JPMorgan Chase & Co., which had been Madoff's main bank for more than two decades. Claimants will receive 3.18 percent of what they are owed, unless their claims have been fully paid off, Picard said.

The American Bar Association is the latest group to offer its opinion in litigation aimed at resolving whether law firms that go bust in New York can continue to reap profits on hourly assignments that originated at the firm, the Wall Street Journal reported today. Bankruptcy administrators insist that such assignments are the property of a law firm’s estate and can be monetized, while most of the law firms that inherited the work argue that they shouldn’t owe the bankruptcy estates a penny. In a brief filed with the New York Court of Appeals, the ABA sided with its law firm constituency, arguing that the dissolution of a firm should not impact the long-standing principle “that the client has the right to control its relationship with its attorney, and to select and retain or change counsel at any time.” The filing comes in an appeal stemming from the bankruptcy of Coudert Brothers LLP, a law firm that sought chapter 11 protection in 2006 and is still in the process of paying back creditors. A May 2012 decision by a New York federal district court judge gave Coudert clearance to collect proceeds from unfinished business. Months later, the same court issued a conflicting decision related to the Thelen LLP bankruptcy, and both cases landed before the U.S. Court of Appeals for the Second Circuit.

Bankruptcy Judge Robert Gerber on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch, Reuters reported on Friday. Judge Gerber said that he would welcome the prospect of a resolution that avoided a "monstrous battle." "Frankly, it would be great if whatever money is available for injured people could go to them, and not to litigation costs and attorneys' fees," Gerber said at a court conference with GM and the plaintiffs. Gerber is the same judge who in 2009 oversaw GM's whirlwind chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Judge Gerber to enforce the bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall. Under the plan approved by Gerber, GM channeled its liabilities into a shell known as "Old GM," while selling its profitable assets to "New GM," a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.

The largest power company in Texas, Energy Future Holdings Corp, began its bankruptcy turnaround by securing approval for an interim loan after seven hours of contentious arguments in bankruptcy court, Reuters reported yesterday. Bankruptcy Judge Christopher Sontchi approved the loan that was originally proposed at $2.7 billion, but he authorized that only $20 million could be spent. The company and its creditors will return to bankruptcy court today to continue battling over the remainder of the money. Energy Future, created in the 2007 buyout of TXU Corp, filed one of the largest non-financial chapter 11 bankruptcies in U.S. history on Tuesday after struggling more than a year to work out a deal with its creditors.

Moody’s Investors Service said that Energy Future Holdings Corp.’s bankruptcy could put tax revenue in some Texas municipalities at risk should the company’s coal-fired generating plants be closed, Bloomberg News reported yesterday. The power plants account for 23 percent to 50 percent of the tax base in some Texas localities, the credit-rating company said yesterday in a report. The Dallas-based electricity provider filed for bankruptcy April 29 and no decisions have been made about whether to close facilities. Moody’s said that it “wouldn’t rule out the potential for an early retirement of a coal fired generating plant” during or after the company’s bankruptcy. In Titus County, in northeast Texas, a power plant provides 38 percent of the tax base. In Rusk County, in east Texas, 23 percent of the assessed value of its property-tax base is from the company’s Martin Lake plant, Moody’s said. The Franklin Independent School District in south-central Texas gets about half its property-tax collections from the Oak Grove plant, Moody’s said.

A new report said that the U.S. Treasury’s bailout fund lost $11.2 billion on the rescue of General Motors Co. with the government’s exit of the largest U.S. automaker, Bloomberg News reported today. The total includes $826 million that the Treasury wrote off in March for its remaining claim in old GM, the special inspector general for the Troubled Asset Relief Program said in a report to Congress yesterday. In December, the government had put the loss at about $10.5 billion on its $49.5 billion investment. The Treasury sold its remaining shares in GM in December, signaling the end of Government Motors, as the Detroit-based automaker was derisively labeled by some critics after the U.S. government stepped in with emergency funding in 2008. Bailouts from the George W. Bush and Barack Obama administrations helped GM avoid liquidation and reorganize in a 2009 bankruptcy that has given new life to the company.

The official winding down Lehman Brothers Holdings Inc.'s brokerage business says he plans to return more than $4 billion in cash to former employees and other creditors, the Wall Street Journal reported today. James W. Giddens, the court-appointed trustee winding down Lehman's broker-dealer, said yesterday that now that he has made whole the failed brokerage's customers, he can turn his full attention to creditors. "With the return of 100 percent of customers' assets, we are now able to lay out a clear plan for winding down the general estate and distributing assets to general creditors as quickly as possible," Giddens said. The distinction between "customer" and "creditor" is a crucial one in the Lehman case. Individual customers of the U.S. brokerage, which was under the purview of the bankruptcy court but not technically in bankruptcy like Lehman's parent, received all $92.3 billion they were owed almost immediately after Lehman's bankruptcy. But general creditors of Lehman's brokerage are set to recover much less.

A group of landlords and food suppliers expecting to go unpaid in Sbarro LLC's chapter 11 case are set to receive $1.25 million under a settlement reached last week with the Sbarro estate, the Wall Street Journal reported today. Cooley LLP attorney Seth Van Aalten, who represents the creditors, said that Sbarro's lenders have further agreed to continue doing business with the company's vendors and landlords once Sbarro emerges from bankruptcy. The lenders also agree not to sue trade creditors to recover money paid to them in the weeks before Sbarro filed for bankruptcy, Van Aalten said. Sbarro entered chapter 11 protection in March with a proposed bankruptcy exit plan backed by 98 percent of its lenders that swaps $140 million in debt for control of the restructured business. Sbarro said in court filings this week that it intends to go through with that plan after a deadline to bid on the company's assets passed with no potential buyers emerging.

General Motors Co. customers, who filed about 50 lawsuits demanding compensation for ignition-switch problems, picked three lawyers to speak for them in bankruptcy court when a judge considers the automaker’s request to pare their claims, Bloomberg News reported yesterday. At a meeting in New York yesterday convened by Edward Weisfelner of Brown Rudnick LLP, about a hundred law firms for GM car owners delegated their host and two others to put their views to Bankruptcy Judge Robert Gerber at a May 2 conference. Sander Esserman of Stutzman, Bromberg, Esserman & Plifka in Dallas and Elihu Inselbuch of Caplin & Drysdale in New York were the other two lawyers selected, Weisfelner said. GM wants Gerber to reaffirm rulings made during its 2009 bankruptcy, saying that customer demands for money aren’t allowed by those orders. The customers say that the Detroit-based carmaker didn’t tell the judge about its ignition-switch problems, so he needn’t renew his rulings.
http://www.bloomberg.com/news/print/2014-04-29/gm-customers-pick-lawyer…

Edward Weisfelner is the author of ABI’s latest book, Advanced Fraudulent Transfers: A Litigation Guide, available for purchase in the ABI Bookstore. http://bookstore.abi.org/advanced-fraudulent-transfers-litigation-guide

Dish Network Corp. Chairman Charles Ergen said that LightSquared Inc.’s plan to reorganize will improperly benefit lenders including JPMorgan Chase & Co., which will own all of the wireless-spectrum company’s assets after bankruptcy, Bloomberg News reported today. The plan was devised in talks where LightSquared’s controlling shareholder, Philip Falcone, “made it clear that he was interested in using the plan to enrich himself and equity holders,” Ergen said yesterday in a bankruptcy court filing. Falcone stated that he wanted to protect three parties: his investment firm Harbinger Capital Partners LLC, Fortress Investment Group LLC (FIG) and JPMorgan, Ergen said. SP Special Opportunities Inc., an Ergen fund that invested $1 billion in LightSquared debt, made the allegations following an eight-day trial on whether LightSquared can reorganize under a plan that puts Ergen’s debt behind other lenders and equity holders to be repaid.