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State lawsuits against Standard & Poor's over ratings on securities are bolstered by legal victories that Connecticut and Illinois have already won against the company, attorneys general for those two states said, Bloomberg News reported yesterday. Illinois and Connecticut defeated attempts by S&P to throw out their lawsuits, which were filed before the U.S. Justice Department and other states sued the company this month. Those decisions undercut a free-speech defense S&P has relied on, Illinois Attorney General Lisa Madigan and Connecticut’s George Jepsen said.

American International Group Inc. filed legal papers yesterday asking its former chief executive to inform a federal court if he will challenge the company's decision to stay out of his lawsuit against the government, the Wall Street Journal reported today. The suit is being pursued by AIG's longtime former leader, 87-year-old Maurice R. "Hank" Greenberg, through a company he leads. The entity, Starr International Co., was long one of AIG's biggest shareholders. The suit contends the U.S. government extracted onerous terms in its rescue package for AIG, and seeks about $25 billion. The U.S. Court of Federal Claims in Washington, D.C., ruled in July that the case could proceed, after federal officials sought to dismiss it. The court also required AIG to decide whether it would join Starr's complaint. News of AIG's possible involvement in the lawsuit earlier this month unleashed a torrent of criticism that the insurer appeared ungrateful toward taxpayers for the government's rescue effort, one of the biggest of the 2008-09 crisis. AIG said in its filing yesterday that it wants to close the loop on its role in the lawsuit, after its board voted unanimously on Jan. 9 to pass on participating.

California cities and counties sued UBS AG, Barclays Plc and 20 other banks alleging that they lost millions of dollars because the financial institutions manipulated the benchmark Libor rate, Bloomberg News reported yesterday. California public entities have received reduced interest payments on swaps, corporate bonds and other investments tied to Libor, the law firm Cotchett, Pitre & McCarthy LLP said. The Burlingame, Calif.-based firm said complaints were filed in federal court in Los Angeles, San Francisco and San Diego on behalf of at least eight entities against 20 current and former banks that set Libor rates. The counties of San Diego and San Mateo, and the city of Riverside, California, are among the plaintiffs, according to the law firm.

JPMorgan Chase & Co. asked a federal judge to order the Federal Deposit Insurance Corp. to cover any costs or liabilities in a bondholder case stemming from the bank's takeover of Washington Mutual Bank, Bloomberg News reported yesterday. JPMorgan said that under the terms of a 2008 agreement with the FDIC it should not be on the hook for any damages, attorneys' fees or court costs in a lawsuit filed by Washington Mutual bondholders accusing the bank of being involved in a scheme to deprive them of their investments. When it picked up Washington Mutual banking operations in September 2008, JPMorgan "assumed only certain defined liabilities," which did not include WaMu’s bond obligations, according to the court filing. WaMu’s debt obligations -- including the bonds at issue in the case -- were liabilities that remained with the FDIC, the bank said.

W.R. Grace & Co. projected that it could complete its reorganization by the end of 2013 if it received positive outcomes regarding pending appeals of the order confirming its reorganization plan, the Deal Pipeline reported yesterday. Five appeals are pending in the U.S. Court of Appeals for the Third Circuit. The appeals generally deal with proposed interest rates, the validity of asbestos channeling injunctions and the classification of claims. W.R. Grace anticipates presenting oral arguments to the court in the first quarter of 2013 and receiving a ruling in the third quarter. Should the court rule in W.R. Grace's favor, the Columbia, Md., company would exit bankruptcy by the end of next year, more than 12 years after filing for chapter 11 on April 2, 2001.

A federal judge on Monday handed partial victories to both the Archdiocese of Milwaukee, Wis., and the sex abuse victims who make up the vast majority of creditors in its bankruptcy, the Milwaukee Journal Sentinel reported yesterday. The ruling, by U.S. District Judge Rudolph Randa, lets stand a February decision by Bankruptcy Judge Susan V. Kelley dismissing one victim's claim and allowing two others to move forward, at least for now. The three cases were seen as test cases in which the archdiocese argued that a significant number of victims of clergy sexual abuse had enough information on the church's handling of cases to have filed fraud claims years earlier, and that the statute of limitations expired before those victims stepped forward. It also sought to exclude cases that involve religious offenders, teachers and others it does not consider its employees, and cases where the victims received prior settlements.

The Diocese of Spokane (Wash.) Diocese is suing a law firm that represented it in its bankruptcy, alleging malpractice and seeking repayment of more than $12 million in legal fees, the Milwaukee Journal Sentinel reported yesterday. The lawsuit says that the firm did not pursue other means of resolving sexual abuse claims and that if failed to assess the risk of new claims, which nearly forced the foreclosure of churches and schools. It accuses the lawyers of conflict of interest because they also represented Spokane Bishop William S. Skylstad, now retired, and shielded him, from having to testify at the first civil trial in 2004 alleging abuse by a Spokane priest by filing for bankruptcy as the trial was about to begin.

ABI's Commission to Study the Reform of Chapter 11, whose 22 members constitute a venerable bankruptcy industry Hall of Fame, held a hearing yesterday to gather feedback on what is right and wrong with the statutory scheme that has governed chapter 11 bankruptcy since 1978, Reuters reported. The commission's charge includes "literally considering starting from scratch and re-inventing the statute," said Robert Keach, attorney and commission co-chairman. The commission plans to eventually submit a report to Congress, targeted for April, 2014, that could serve as "part blueprint, part outline" for new legislation, Keach said. The commission will study 13 areas of bankruptcy law, including labor & benefits issues, financing rules and government supervision. It is collecting feedback from several groups through a series of hearings, with upcoming dates at the National Conference of Bankruptcy Judges in San Diego on Oct. 26, and a convention of trade group the Turnaround Management Association in Boston on Nov. 3. Read more:
http://www.reuters.com/article/2012/10/18/bankruptcy-reform-idUSL1E8LHP…

To obtain the prepared witness testimony from yesterday's hearing, view background information on the Commission members or to see upcoming dates of activity, please click here: http://commission.abi.org/

Bank of America Corp., Barclays Plc and Credit Suisse Group AG were among the banks sued by an investor over alleged manipulation of the Libor benchmark interest rate, Bloomberg News reported yesterday. The investor, 33-35 Green Pond Road Associates LLC, bought an interest rate swap with a floating rate tied to the U.S.- dollar Libor, it said in a complaint filed court yesterday. Green Pond Road seeks to represent a class of investors that bought U.S. dollar Libor-based derivatives beginning on Aug. 1, 2007. Green Pond Road claims the banks illegally colluded to fix Libor, injuring investors in securities based on the rate. The suit seeks unspecified damages, which could be tripled under U.S. antitrust law.

Customers of Bernard Madoff's brokerage, who have received just $333 million from the liquidator of the con man’s estate, will get a second payment of $1.5 billion to $2.4 billion, an amount some investors found disappointing, Bloomberg News reported yesterday. Madoff trustee Irving Picard said that he will ask a judge to approve the distribution, which would bring payments to as much as 50 percent of allowed claims. Part of $5 billion received in a settlement with the Jeffry Picower estate would be used for the payment, although "a large portion" would be held in reserve, Picard said yesterday.