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Court Rules that Madoff Trustee Cannot Sue Big Banks

Submitted by webadmin on Fri, 2013-06-21 00:00

The trustee seeking money for Bernard Madoff's victims suffered a big defeat as a federal appeals court rejected his bid to recover nearly $30 billion from JPMorgan Chase & Co. and other banks he accused of aiding in the swindler's fraud, Reuters reported yesterday. The U.S. Court of Appeals for the Second Circuit said that trustee Irving Picard lacked standing to pursue a variety of claims on behalf of former Madoff customers. It also said that because Picard "stands in the shoes" of the former Bernard L. Madoff Investment Securities LLC, he could not pursue other claims on behalf of the firm's bankruptcy estate over a fraud that the firm itself orchestrated.

ABI Tags

Bankruptcy Litigation

Court Administration

Fraud

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Friday, June 21, 2013 - 12:00

FTC Is Said to Plan Inquiry of Frivolous Patent Lawsuits

Submitted by webadmin on Thu, 2013-06-20 00:00

The chairwoman of the Federal Trade Commission is expected today to recommend a sweeping investigation of “patent trolls,” companies that buy large portfolios of technology patents and use them to sue software designers and makers of products like smartphones and tablet computers, the New York Times reported today. The chairwoman, Edith Ramirez, is planning to ask the full commission to approve an inquiry that will include the issuance of subpoenas to companies that are known as patent-assertion entities, or, unflatteringly, as “patent trolls.” The move comes after the issuance of several executive orders by President Obama directing executive agencies to take steps to “protect innovators from frivolous litigation.” If approved, which is likely, the FTC investigation will require patent-assertion companies to answer questions about how they conduct their operations, including whether they coordinate their lawsuits with other patent holders and if they funnel proceeds from lawsuits and patent licenses back to the original patent owner. Patent-assertion entities typically have no operations other than collecting royalties on patents. They accounted for more than 60 percent of the roughly 4,000 patent lawsuits filed last year, up from 29 percent two years earlier.

ABI Tags

Fraud

Mass Torts

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Thursday, June 20, 2013 - 12:00

Backstreet Boys Bankruptcy Claims Found to Be Incomplete in Pearlman Bankruptcy

Submitted by webadmin on Thu, 2013-06-20 00:00

Two decades after Lou Pearlman launched the Backstreet Boys, the pop stars are still dealing with the fallout from the one-time music mogul’s fraud, the Wall Street Journal reported yesterday. Pearlman is now serving a 25-year prison sentence for running a multimillion-dollar Ponzi scheme while his bankruptcy is drawing to a close. Shortly after a plan to pay Pearlman’s creditors and cheated investors was filed in bankruptcy court, the trustee overseeing the case filed objections to some $3.5 million in claims that the Backstreet Boys—Nick Carter, Howie Dorough, Brian Littrell, A.J. McLean and Kevin Richardson—filed against their ex-manager nearly six years ago. The claims, for reimbursement of legal fees BSB racked up in lawsuits involving Pearlman and his record company, lack the evidence needed to support them, according to bankruptcy trustee Soneet Kapila. Kapila is also objecting to the nearly $26,000 claim of Aaron Carter, Nick Carter’s brother and a solo artist once signed to Pearlman’s record label, for the same reasons. The Orlando, Fla., bankruptcy court will review Kapila’s creditor-payment plan at a July 17 hearing.

ABI Tags

Bankruptcy Litigation

Court Administration

Fraud

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Thursday, June 20, 2013 - 12:00

Rothstein Funds in Firm Account Not Subject to Forfeiture

Submitted by webadmin on Thu, 2013-06-13 00:00

A federal appeals court said that funds held in bank accounts of convicted Ponzi schemer Scott Rothstein’s bankrupt law firm can’t be forfeited to the government, Bloomberg News reported yesterday. The money in the law firm accounts, mixed with receipts from clients at the time Rothstein was charged, isn’t subject to forfeiture, the Atlanta-based U.S. Court of Appeals said today, reversing the lower court and handing a victory to the trustee of the law firm’s chapter 11 proceeding. The funds are so intermingled that it’s difficult to determine which money is from the Ponzi scheme and which is from the legitimate business of now-defunct Rothstein, Rosenfeldt & Adler PA, the Fort Lauderdale, Florida-based firm which included billings from 70 attorneys, the court ruled. Rothstein is serving a 50-year sentence for selling investors stakes in sex- and employment-discrimination cases that turned out to be non-existent. The scheme imploded in the fall of 2009. He pleaded guilty to five counts of money laundering, fraud and racketeering in 2010.

ABI Tags

Court Administration

Fraud

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Thursday, June 13, 2013 - 12:00

Stanford Judge Approves Interim Distribution to Victims

Submitted by webadmin on Fri, 2013-05-31 00:00

A plan by a court-appointed receiver to distribute assets recovered from R. Allen Stanford’s Ponzi scheme to investors was approved by a federal judge in Dallas, Bloomberg News reported yesterday. U.S. District Judge David C. Godbey accepted the plan by Ralph Janvey, the receiver appointed in 2009 to marshal and liquidate Stanford’s personal and business assets, to make a $55 million interim distribution to about 17,000 claimants, or about 1 cent for each of the $5.1 billion lost in the fraud scheme. A federal jury in Houston last year found Stanford guilty of lying to investors about the nature and oversight of certificates of deposit issued by his Antigua-based bank. The jurors decided he must forfeit $330 million in accounts seized by the U.S. government.

ABI Tags

Court Administration

Fraud

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Friday, May 31, 2013 - 12:00

Vegas Bankruptcy Lawyer Gets Federal Prison Time for Tax Evasion

Submitted by webadmin on Fri, 2013-05-24 00:00

A bankruptcy lawyer who advertised heavily on Las Vegas television with the catch line, "That's what I do," has been sentenced to two years in federal prison for tax evasion and ordered to pay more than $750,000 in restitution and fines, the Associated Press reported today. U.S. Attorney Daniel Bogden said that Randolph Goldberg was also ordered Thursday to surrender his law license for two years and serve three years of supervised release after prison. Goldberg pleaded guilty March 29 before U.S. District Judge Gloria Navarro to one count of attempt to evade or defeat tax for the year 2008. Bogden says Goldberg admitted he understated and tried to hide income using several bank accounts. Goldberg has been an attorney in Nevada since 1996.

ABI Tags

Bankruptcy Taxation

Fraud

Professional Compensation/Fees

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Friday, May 24, 2013 - 12:00

Dallas Woman Who Filed for Bankruptcy Six Times in Four Years Charged with Fraud

Submitted by webadmin on Fri, 2013-05-24 00:00

Estela Martinez was unsuccessful the first time she filed for bankruptcy in 2009, but the Dallas woman filed five more times between then and 2012, the Dallas Morning News reported yesterday. The feds took notice and charged her this month with bankruptcy fraud. It turns out that she omitted some key information from court filings during her failed attempts to make it through bankruptcy court in Dallas, such as her social security number, according to the May 21 indictment. Martinez also failed to disclose her previous bankruptcy filings, the indictment said. Martinez had a lawyer the first two times she filed, in 2009. After that, she filed on her own without an attorney, court records show. Each time, a bankruptcy judge dismissed her chapter 13 petitions because she failed to file certain required documents in time, such as a statement of current monthly income.

ABI Tags

Consumer Bankruptcy

Fraud

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Friday, May 24, 2013 - 12:00

Court Rejects New York Attorney Generals Complaints About Madoff Pact Counsel Fees

Submitted by webadmin on Mon, 2013-05-13 00:00

A federal judge has approved plaintiffs counsel fees in a $219 million settlement related to Bernard Madoff's Ponzi scheme, rejecting objections by the New York attorney general that the fees were "wildly excessive" but trimming a portion of the request for what she said were unnecessary hours reviewing some documents, the New York Law Journal reported on Friday. The settlement arises from separate actions brought by Attorney General Eric Schneiderman, the U.S. Labor Department and 13 plaintiffs firms on behalf of investors against Ivy Asset Management, a subsidiary of Bank of New York Mellon, accusing it of advising clients to invest with Madoff despite serious concerns about his operations. The parties reached a $219 million settlement, in which Ivy would pay most of the funds. Plaintiffs lawyers had requested $40.8 million in fees, about 20 percent, and $1.2 million in expenses as part of the settlement. Schneiderman and other objectors criticized the number of hours reflected in the request and said plaintiffs counsel had merely "piggybacked" on the attorney general's work to reach the settlement with Ivy (NYLJ, March 8, 18). But Southern District Judge Colleen McMahon rejected the attorney general's argument that the fee award should be rejected because the attorney general had earlier been offered a $140 million settlement.

ABI Tags

Fraud

Professional Compensation/Fees

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Monday, May 13, 2013 - 12:00

Enrons Skilling Reaches Deal for Shortened Sentence

Submitted by webadmin on Thu, 2013-05-09 00:00

Jeffrey Skilling, the convicted former Enron Corp. chief executive, could be freed from prison a decade earlier than originally expected over his role in bringing down the energy trader, in one of the biggest corporate frauds in U.S. history, Reuters reported yesterday. According to court papers filed on Wednesday, federal prosecutors and Skilling have agreed that he should be resentenced to between 14 and 17-1/2 years in prison, down from his original 24-year sentence. In exchange, Skilling agreed to end his appeals of his May 2006 conviction by a Houston federal jury on 19 counts of securities fraud, conspiracy, insider trading and lying to auditors. Skilling has long maintained his innocence. U.S. District Judge Sim Lake in Houston is scheduled to resentence Skilling on June 21. Skilling has been in prison since December 2006, and with good behavior could be released in 2018 if Lake resentences him as requested.

ABI Tags

Corporate Governance

Fraud

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Thursday, May 9, 2013 - 12:00

Fannie Mae Regulator Restricts New Purchases to Qualified Mortgages

Submitted by webadmin on Tue, 2013-05-07 00:00

ABI Bankruptcy Brief | May 7 2013

May 7, 2013

NEWS AND ANALYSIS

FANNIE MAE REGULATOR RESTRICTS NEW PURCHASES TO QUALIFIED MORTGAGES

Fannie Mae and Freddie Mac are being asked by their regulator to limit purchases to loans meeting qualified-mortgage requirements and those exempt from Dodd-Frank Act ability-to-repay rules, Bloomberg News reported yesterday. The change announced yesterday by the Federal Housing Finance Agency means that beginning Jan. 10 next year, the U.S.-owned companies will not purchase interest-only mortgages, loans with 40-year terms or those with points and fees exceeding thresholds set by the Consumer Financial Protection Bureau. The government-sponsored enterprises will continue to buy loans that meet their own underwriting and delivery eligibility standards, FHFA said. Most loans purchased by Fannie Mae and Freddie Mac already meet qualified mortgage standards. Read more.

DEBT-REPAIR FIRM CHARGED IN FIRST CFPB CRIMINAL REFERRAL

In the first criminal referral from the Consumer Financial Protection Bureau, a debt-settlement company was accused by the U.S. of defrauding more than 1,200 people struggling with credit card debt, Bloomberg News reported today. U.S. Attorney Preet Bharara’s office today announced the unsealing of an indictment against New York-based Mission Settlement Agency, its manager, Michael Levitis, and three employees. Prosecutors allege that the defendants “systematically exploited and defrauded” people across the country. The case against Mission is the first criminal referral from the CFPB, according to the U.S. attorney’s office. In December, a Florida debt-relief company, Payday Loan Debt Solution Inc., was ordered to pay as much as $100,000 in refunds to customers under the first joint enforcement action between the agency and states. Mission and its employees lied about its fees, taking thousands of dollars from funds that its customers had set aside because they believed the money would be used to pay creditors, according to the indictment. For the majority of customers, Mission did little or no work and failed to reduce debt, prosecutors said. Read more.

INTERNET SALES TAX BILL FACES TOUGH SELL IN HOUSE

Traditional retailers and cash-strapped states face a tough sell in the House as they lobby Congress to limit tax-free shopping on the Internet, the Associated Press reported yesterday. The Senate voted 69-27 yesterday to pass a bill that empowers states to collect sales taxes from Internet purchases. Under the bill, states could require out-of-state retailers to collect sales taxes when they sell products over the Internet, in catalogs, and through radio and TV ads. The sales taxes would be sent to the states where the shoppers live. Current law says that states can only require retailers to collect sales taxes if the merchant has a physical presence in the state. The bill got bipartisan support in the Senate but faces opposition in the House, where some lawmakers regard it as a tax increase and anti-consumer. Read more.

COLLEGES CUTTING PRICES BY PROVIDING MORE FINANCIAL AID

Private U.S. colleges, worried that they could be pricing themselves out of the market after years of tuition increases, are offering record financial assistance to keep classrooms full, the Wall Street Journal reported yesterday. The average "tuition discount rate"—the reduction off list price afforded by grants and scholarships given by these schools—hit an all-time high of 45 percent last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers. It is likely that some private colleges will be forced to be even more generous with discounts this fall. As of the May 1 deadline for many high-school seniors to commit for their freshman year of college, early reports suggest some non-top-tier schools fell 10-20 percent short of enrollment targets, said Jim Scannell, president of Scannell & Kurz, a consulting firm in Pittsford, N.Y., that works with colleges on pricing and financial-aid strategies. The jump in aid shows that many colleges are losing pricing power as more families focus on cost and value. Read more. (Subscription required.)

LISTEN TO THE MEDIA TELECONFERENCE EXAMINING ABI’S ETHICS TASK FORCE REPORT!

ABI held a media teleconference on May 3 that examined the recommendations contained in the ABI Ethics Task Force’s final report. Experts included Task Force reporters Profs. Nancy B. Rapoport of the UNLV William S. Boyd School of Law (Las Vegas) and Lois R. Lupica of the University of Maine School of Law (Portland, Maine), as well as Task Force member Edward T. Gavin of Gavin/Solmonese LLC (Wilmington, Del.). To listen to the teleconference, please click here.

For a copy of the report, please click here.

NEW ABI LIVE WEBINAR ON MAY 29 WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES

Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will highlight the case law and explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE

Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. Final scoring to win the Great American Cupsponsored by Great American Groupis based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour, and women are most welcome.

ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO

ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: FISHER ISLAND LTD. V. FISHER ISLAND INVESTMENTS, INC. (11TH CIR.)

Summarized by Kathleen DiSanto of Jennis & Bowen, P.L.

Affirming the district court, the Eleventh Circuit Court of Appeals held that the district court properly dismissed an appeal from the bankruptcy court for lack of standing. The district court affirmed the bankruptcy court’s order requiring six creditors who filed involuntary bankruptcy petitions to post a $100,000 bond in accordance with Section 303(e) of the Bankruptcy Code. Fisher Island Limited, a non-debtor third party, sought an extension of time to appeal the district court’s order affirming the bankruptcy court’s order on the bond requirement and filed an untimely notice of appeal. The district court denied Fisher Island Limited’s motion for extension and dismissed the appeal based on a lack of standing.

There are more than 800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: INSURANCE COVERAGE FOR PONZI SCHEME LOSSES?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines whether it would be possible to provide insurance against losses from investing in a Ponzi scheme.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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