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Jon Corzine, the former MF Global Holdings Ltd chief executive, and two former colleagues failed to win the dismissal of a lawsuit by a trustee seeking to hold them responsible for the futures brokerage's rapid demise and bankruptcy, Reuters reported yesterday. U.S. District Judge Victor Marrero said on Monday that the trustee may pursue damages over claims that Corzine, former chief operating officer Bradley Abelow and former chief financial officer Henri Steenkamp breached their duties of care and loyalty to the company. "Defendants and other MF Global officers repeatedly increased the company's exposure to risky bets on sovereign debt and shuffled funds among MF Global's subsidiaries to cover a growing liquidity crisis," Marrero wrote. "These facts give rise to reasonable inferences that defendants acted in bad faith."

Bankruptcy attorneys representing two of the criminally charged former Dewey & LeBoeuf leaders lost a bid to stay discovery of a trustee and a creditor's suit against their clients, the New York Law Review reported yesterday. Bankruptcy Judge Martin Glenn said that he would not require Joel Sanders, Dewey's former chief financial officer or Stephen DiCarmine, the former executive director, to be deposed for now, but he said that they won't "get a free pass" for document production. The judge, however, approved a request by creditor ePlus to amend its complaint to reflect "recent disclosures in criminal and civil proceedings arising from the failure of Dewey & LeBoeuf." Sanders and DiCarmine, along with the firm's ex-chairman, Steven Davis, and former client relations manager Zachary Warren were indicted earlier this month by the Manhattan District Attorney for their role in an alleged scheme to defraud and steal from investors and others. The Securities and Exchange Commission has also filed a civil fraud complaint against Sanders, DiCarmine, Davis and two other former officials at Dewey.

Eric A. Bloom, chief executive officer of the failed investment firm Sentinel Management Group Inc., fraudulently misled its clients about how their assets were being used, Bloomberg News reported yesterday. “Sentinel was a fraud” led by Bloom, Assistant U.S. Attorney Patrick Otlewski said yesterday in U.S. District Court in Chicago. He asked for “the only verdict consistent with the evidence: a verdict of guilty on all counts.” Bloom was indicted in 2012 charges he and another man cheated at least 70 investors of more than $500 million through Sentinel, a suburban Chicago firm that managed short-term investments for commodity pools, hedge funds, a pension fund and other customers. Sentinel filed for bankruptcy in August 2007 days after Bloom told clients it was freezing their accounts due to financial market turbulence and saying some customers joined in the panic, Otlewski told the jury in his closing arguments. In fact, the firm had been using client assets as collateral for loans taken from the Bank of New York Mellon Corp., putting that money toward its heavily leveraged house trading account, Otlewski said.

The trustee overseeing the bankruptcy of the investment firm once led by the flashy money manager Alphonse Fletcher Jr. has reached a $4.25 million settlement with the law firm Skadden, Arps, Slate, Meagher & Flom, the New York Times DealBook blog reported on Friday. A court-appointed trustee claimed that Skadden, which represented Fletcher’s hedge fund, Fletcher Asset Management, failed to “adequately” protect the firm’s funds and their investors. The hedge fund, which once reported 300 percent returns, also stands accused in a separate civil suit of defrauding three Louisiana pension funds out of more than $100 million. While Skadden called the trustee’s findings “devoid of merit” in the court filing, both parties agreed to the settlement in order to avoid a lawsuit. Skadden made it clear, however, that it could have defended itself had such a suit been filed.

A U.S. appeals court on Wednesday that commodities brokerage INTL FCStone Inc. can keep a $15.6 million payout of customer funds related to the bankruptcy of Sentinel Management Group in 2007, Reuters reported yesterday. The decision overturned a federal district court's previous order that New York-based FCStone return the money to the trustee overseeing Sentinel's bankruptcy. The previous ruling said FCStone had received too large a payout compared with other former customers of Sentinel, an investment adviser and futures broker. However, the appeals court said that fund transfers to FCStone before and after Sentinel's bankruptcy were proper.

General Motors Co. was hit with a lawsuit on Wednesday demanding that the company be held liable for allegedly concealing ignition problems before its 2009 bankruptcy, Reuters reported yesterday. The ignition switch problems led to the recall of 1.6 million vehicles last month. GM is a different legal entity from the one that filed the 2009 bankruptcy that sent shock waves through the U.S. economy. The so-called new GM is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the "old" or pre-bankruptcy GM. But the proposed class action, filed in federal court in California, said plaintiffs should be allowed to sue over the pre-bankruptcy actions, "because of the active concealment by Old GM and GM."
http://news.yahoo.com/gm-must-pay-pre-bankruptcy-ignition-deception-law…

In related news, Chief Executive Officer Mary Barra is scheduled to testify at a U.S. congressional hearing on April 1 amid a probe into why it took more than a decade to recall vehicles equipped with an ignition defect that’s been linked to a dozen deaths, Bloomberg News reported yesterday. National Highway Traffic Safety Administration Acting Administrator David Friedman will also testify to the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee, said committee chairman Fred Upton (R-Mich.).
http://www.bloomberg.com/news/2014-03-21/gm-ceo-barra-to-testify-before…

A bankrupt British Virgin Islands luxury resort owner was assailed by lender FirstBank Puerto Rico for an allegedly “false and misleading” court filing saying a settlement had been reached over the bank’s claims, Bloomberg News reported today. The resort owner, Scrub Island Development Group Ltd., filed a restructuring proposal on Wednesday in U.S. Bankruptcy Court in Tampa, Fla., saying that it had an agreement with FirstBank on the treatment of almost $120 million in claims. The statements in the proposed reorganization plan and an accompanying explanatory disclosure statement are “completely false and misleading” and the bank “never agreed to the terms of this nature,” said Lawrence Odell, FirstBank’s general counsel. FirstBank filed an initial objection to the plan making similar statements. Under the proposed plan as filed by Scrub Island, the bank would get a new claim of $37.5 million against the reorganized company, which would be reduced to $30 million with an initial cash payment and then paid over five years. FirstBank would get $84.9 million in unsecured deficiency claims that would receive no recovery.

A newly formed shareholder group is ready to rumble in Overseas Shipholding Group Inc.'s bankruptcy, arguing in its first court appearance that the shipping company's restructuring deal doesn't offer enough value to equity and is the product of "flawed" negotiations, the Wall Street Journal reported today. Appointed this week, the official committee of Overseas Shipholding's equity holders said that it needs time to investigate a deal that locks in the company's lenders to a restructuring deal that would see the lenders own nearly all of the company and pay creditors in full while leaving existing shareholders roughly $60 million in stock and warrants. Shareholder committee attorney Steven Pohl yesterday told Bankruptcy Judge Peter Walsh that shareholders believe there's "a whole lot more value" for equity than what the plan currently proposes. He accused the company and its lenders of pushing a restructuring strategy that ignores shareholders' interests.

The collapse of the Jacoby & Meyers Bankruptcy LLP law firm, which was formed in 2012 by two consumer law giants, has mobilized some unpaid creditors to push for their final payments, the Wall Street Journal reported yesterday. LegalZoom.com Inc., which says it is owed about $1 million for leads it provided to Jacoby & Meyers Bankruptcy last fall, joined several other creditors to file an involuntary bankruptcy petition against Jacoby & Meyers Bankruptcy last week. The move is meant to pressure the assignee, Chicago financial professional Robert Handler, to investigate the firm’s former managers and to look other places for potential lawsuits that might win money — some of which could repay the firm’s bills. According to lawyers who are representing creditors, Handler said that the firm will pay what debts it could from its few remaining assets: contingency fees receivable, furniture and equipment. If the firm enters bankruptcy, their lawyers would be given more power to recover money, and it would provide more transparency and information for creditors, lawyers for creditors said in court papers.

Freedom Industries President Gary Southern requested an order in bankruptcy court documents filed on Saturday to collect paychecks for work following the company's Jan. 17 chapter 11 filing, the Associated Press reported yesterday. The documents say that Southern earns a $230,000 salary. He last received a paycheck covering services through Jan. 19. Southern is requesting that his paychecks be negotiated and issued until Freedom can appoint a chief restructuring officer. Court papers say he worked 46 straight days through Feb. 26.
http://www.huffingtonpost.com/2014/03/17/freedom-industries-president-g…

For further analysis of the Freedom Industries bankruptcy, including an examination of the company’s environmental liabilities in chapter 11, be sure to listen to ABI’s recent podcast featuring James Redwine: http://news.abi.org/podcasts/145-examining-recent-cases-involving-envir…