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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.

Five former aides to Bernard Madoff, who spent decades working for his firm, were found guilty of helping run the biggest Ponzi scheme in U.S. history, a $17.5 billion fraud exposed by the 2008 financial crisis, Bloomberg News reported yesterday. The three men and two women, hired by Madoff with little financial experience, were convicted on all counts. The defendants failed to persuade a federal jury in Manhattan they were ignorant of the fraud despite being part of the inner circle at his New York-based firm. Prosecutors began probing Madoff’s highest-ranking employees soon after his arrest. While the con man claimed to have carried out the fraud alone, several of his former workers later pleaded guilty, including his ex-finance chief, Frank DiPascali, who testified at the trial as the government’s key witness. The defendants are Annette Bongiorno, who ran the investment advisory unit at the center of the fraud; Joann Crupi, who managed large accounts; Daniel Bonventre, the ex-operations chief of Madoff’s broker-dealer; and computer programmers George Perez and Jerome O’Hara, accused of automating the scam as it grew rapidly in the 1990s.

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.

Broadband company LightSquared has urged a judge not to re-open a trial that ended last week over Dish Network Corp Chairman Charles Ergen's purchase of LightSquared debt, saying that it would delay resolution of LightSquared's bankruptcy proceedings, Reuters reported yesterday. In a court filing on Friday, lawyers for LightSquared said that the company should not have to bear the "tremendous cost" in money, time and distraction and have its efforts to emerge from bankruptcy imperiled. LightSquared, which filed for bankruptcy in 2012, presented closing arguments last week in a trial over whether Ergen improperly acquired $1 billion of the company's debt to take control of its wireless rights. Bankruptcy Judge Shelley Chapman has not yet issued a ruling in the trial, which ended yesterday.

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.

Dolan Co., a provider of legal-support services and publishing, filed for bankruptcy after agreeing to be taken over by lenders to cut debt linked to its former mortgage foreclosure-processing business, Bloomberg News reported yesterday. The Minneapolis-based company listed debt of $185.9 million and assets of $236.2 million as of Sept. 30 in a Chapter 11 petition filed today in Wilmington, Delaware. Dolan said that it didn’t expect its DiscoverReady LLC document-review unit to join it in bankruptcy. All company services, including those provided by DiscoverReady, will continue without interruption, according to the statement.

The Trenton Titans, the Philadelphia Flyers’ minor league affiliate, is winding down in chapter 7 bankruptcy after canceling its 2014 season, the Wall Street Journal reported on Saturday. The team — which filed for bankruptcy on March 11 with the U.S. Bankruptcy Court in Trenton, N.J., as Blue Line Sports LLC — claimed no assets and nearly $500,000 in debts in court documents. Not included in that debt load is the amount the Titans may owe to its head coach, Vince Williams. He is suing the team in New Jersey Superior court for breach of employment contract. The Titans listed this liability as disputed with an “unknown” amount.

Money Centers of America, which operates check-cashing services in American Indian casinos, filed for chapter 11 protection on Friday amid continuing legal disputes with several American Indian groups, the Wall Street Journal reported on Saturday. Last year, a federal judge in Minnesota ordered the suburban Philadelphia company to pay the Mille Lacs Band of Ojibwe Indians $5.6 million. That judgment now exceeds $6.7 million, according to court papers. The case involved Money Centers’ soured deal with the Corporate Commission of the Mille Lacs Band. The tribe would advance cash to Money Centers for use in its transactions with gamblers at two casinos. Money Centers was to repay the advances but, when it fell behind, the tribe sued. Money Centers has appealed the ruling.

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.