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Bankruptcy Judge Peter W. Bowie decided to kick the struggling Santa Ysabel Resort & Casino, which is owned and run by the Iipay Nation, out of bankruptcy court after finding that the business was not legally separate from the tribe itself, Dow Jones DBR Small Cap reported today. Without the designation as an unincorporated entity, the casino is seen by the court as having the same status as the tribe itself: a "governmental unit" that is not on the Bankruptcy Code's list of entities that can receive chapter 11 protection.

U.S. District Judge William Pauley ruled yesterday that New York law does not recognize an expansion of the unfinished business doctrine to include pending hourly fee matters of a bankrupt law firm, the New York Law Journal reported today. Judge Pauley held that the former partners of bankrupt Thelen do not retain a property interest in hourly fee matters that former Thelen lawyers took with them to new firms. "Unlike in the contingency fee context, applying the unfinished business doctrine to pending hourly fee matters would result in an unjust windfall for the Thelen estate, as 'compensating a former partner out of that fee would reduce the compensation of the attorneys performing the work,'" Pauley said, citing the only New York case to consider the issue, Sheresky v. Sheresky Aronson Mayefsky & Sloan, 2011 WL 7574999 (N.Y. Sup. Ct. Sept. 13, 2011). "Such an expansion of the doctrine would violate New York's public policy restrictions on the practice of law," Pauley said as he issued rulings in two related cases, Geron v. Robinson & Cole, 11 Civ. 8967, and Geron v. Seyfarth Shaw, 12 Civ. 1364.

Ira Bodenstein, the bankruptcy trustee for Peregrine Financial Group, may use lawsuits to try to recover funds missing from customer accounts at the collapsed brokerage, Reuters reported yesterday. "The trustee believes that there are significant causes of action that have to be investigated and may have to be pursued," Bodenstein said in a court filing yesterday. Nearly two months have passed since Peregrine Financial's CEO Russell Wasendorf Sr. was found incoherent in his car with a hose hooked up his exhaust pipe and a note detailing years of bilking clients out of more than $100 million. The firm filed for Chapter 7 bankruptcy on July 10, but so far, none of the firm's 24,000 customers have had any of their money returned as part of the liquidation process.

SP Newsprint Holdings LLC wants permission to increase its bankruptcy loan to $67 million, saying that it needs the extra money to close the proposed sale of its assets, Dow Jones DBR Small Cap reported on Friday. The struggling newsprint company controlled by Interview and Art in America publisher Peter Brant is poised to hand its assets to its lenders under a $145 million deal composed mostly of debt forgiveness. But that transaction now hinges on the company's ability to access crucial extra funding, SP Newsprint said in court papers filed on Thursday.

Delaware Chancery Court judges sitting as arbitrators must hold public hearings and cannot exclude the public and news media, a federal judge decided, Bloomberg News reported yesterday. The decision, by U.S. District Judge Mary A. McLaughlin in Philadelphia, came in a case brought last year by the Delaware Coalition for Open Government against chief Delaware Chancery Court Judge Leo Strine and his four associates over a new practice of designating a judge as an arbitrator before closing the courtroom. "An arbitrator and a judge perform very different functions," McLaughlin decided in a 26-page opinion today. "The First Amendment protects a qualified right of access to criminal and civil trials." David Finger, the attorney who filed the case, said that the ruling will strengthen the courts and improve the economy of private arbitration using lawyers and retired judges who are experts in Delaware law.

Bankruptcy Judge Martin Glenn yesterday rejected Residential Capital LLC's proposal to pay as much as $7 million worth of incentive bonuses to 17 senior executives, Reuters reported yesterday. Judge Glenn said that the "key employee incentive plan" proposed by Residential Capital, the mortgage unit of Ally Financial Inc, did not link the bonus payout of $4.1 million to $7 million closely enough to meeting the "challenging financial and operational goals" meant by an incentive plan. ResCap's plan "is primarily retentive in nature," and "appears to attempt an end-run" around federal bankruptcy laws, Judge Glenn concluded. The judge gave ResCap permission to draft a new plan to address his objections, as well as objections previously voiced by U.S. Trustee Tracy Hope Davis.
http://www.reuters.com/article/2012/08/29/ally-rescap-bonuses-idUSL2E8J…

In related news, the U.S. Securities and Exchange Commission is investigating Ally Financial mortgage unit Residential Capital for possible misconduct in its loan origination and underwriting practices, Reuters reported yesterday. The SEC disclosed in court documents that it had issued a formal order of investigation on Feb. 22 to probe possible fraud in the offer and sale of mortgage-backed securities by ResCap. The SEC disclosed the ResCap inquiry in a court request on Monday to force R.R. Donnelley & Sons to turn over certain due diligence records the company prepared for investment banks that underwrote the ResCap securitizations under investigation. The agency said that it needed the reports to determine whether ResCap made "material misrepresentations or omissions about the mortgage loan pools that backed the securitizations under investigation."
http://www.reuters.com/article/2012/08/28/allyfinancial-sec-idUSL2E8JS2…

Bankruptcy Judge Stuart Bernstein on Friday denied a proposal to give eight top Hawker Beechcraft executives up to $5.3 million in bonuses, the Associated Press reported on Friday. Judge Bernstein found that the bonus plan sets the bar too low to qualify as anything other than a retention program for insiders. The International Association of Machinists and Aerospace Workers had opposed it, as did the U.S. Trustee in the case.

ATP Oil & Gas Corp., the Gulf of Mexico oil producer that filed last week for bankruptcy, was given preliminary approval by a judge for $618 million in financing, Bloomberg News reported today. Bankruptcy Judge Marvin Isgur in Houston yesterday gave interim approval to the financing from Credit Suisse Group AG and other lenders after requiring changes to some terms. The bankruptcy financing provides $250 million in new money and refinances $367.6 million in debt, according to court papers. Lenders include Credit Suisse, Fortress Credit Opportunities I LP and MSD Credit Opportunity Master Fund LP. ATP said that it plans to initially borrow as much as $80 million in new money, and it will return to court for final approval of the loan.

The U.S. Trustee overseeing Eastman Kodak Co.'s bankruptcy was asked to probe the photography pioneer's patent auction by a New York hedge fund, which said that the "unusually secretive" bidding process was not likely to benefit creditors, Bloomberg News reported yesterday. Esopus Creek Value Series Fund LP, which holds Kodak's 9.75 percent Senior Secured Notes, said press reports about two lead bidders joining forces, Apple Inc. and Google Inc., led the fund "to be concerned as to the integrity of the bidding process," according to a letter from the fund to U.S. Trustee Tracy Hope Davis. Rochester, N.Y.-based Kodak said on Aug. 16 it was continuing an extended auction of its digital-imaging patents and may not sell them if it concludes that creditors will benefit more if it holds them.

The U.S. National Slavery Museum's chapter 11 case has been dismissed and a donor has agreed to pay about $250,000 in back taxes owed to the city of Fredericksburg, Va., the Associated Press reported on Friday. Bankruptcy Judge Douglas O. Tice Jr. granted the museum's motion for dismissal motion on Friday after a ruling earlier last week that allowed Celebrate Virginia to be a party to the case. Celebrate Virginia donated land in Fredericksburg where the museum is to be built. The development company had asked Tice to convert the case to chapter 7 or dismiss it.