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When a former Dewey & LeBoeuf partner alleged in August that Citi Private Bank defrauded him by hiding the now-defunct firm's true financial state when Citi loaned him money to cover his capital contribution obligations, it turns out he was not the first person to publicly lodge such accusations at Citi, American Law Daily reported today. In the months following the March 2011 demise of Washington, D.C.-based litigation shop Howrey, a pair of former partners of that firm sued Citibank and one of its executives in San Francisco state court claiming that the bank had duped them by concealing Howrey's financial instability as it was arranging capital loan agreements with the two lawyers. Unless a settlement is reached, that suit is scheduled to go to trial in March. If it does, filings made in the 16 months since the litigation began that depict a firm relying on partners' money to stay afloat and a compliant bank keeping the scheme going.

The U.S. Trustee Program wants a bankruptcy court to strip law firm Kaye Scholer LLP and financial adviser Capstone of more than $10 million they earned through the bankruptcy of investment management firm GSC Group Inc., Reuters reported yesterday. The firms covered up key business relationships that may have served to inflate their fees, according to court papers filed on Friday by the U.S. Trustee Program. GSC, founded by former Goldman Sachs Group Inc partner Alfred Eckert III, declared bankruptcy in August 2010, hampered by a liquidity squeeze and declining asset values brought on by global recession. The case in U.S. Bankruptcy Court in Manhattan culminated in the 2011 sale of GSC's assets to lender Black Diamond Capital Management.

U.S. Trustee Roberta DeAngelis objected to Nortel Networks Inc.'s plan to offer $1.8 million in bonuses to employees as the once-mighty telecommunications company nears critical mediation talks to resolve its four-year bankruptcy, Reuters reported yesterday. Nortel last month asked a bankruptcy court to approve incentive payment plans that could reward 10 employees for taking on broader responsibilities if certain restructuring targets are met. DeAngelis objected to the proposal because it does not provide details on the employees expanded roles and does not disclose individual performance targets.

THQ Inc., the maker of “Saints Row” and “Company of Heroes” video-game franchises, won court approval of a revised, longer bankruptcy sale process and loan to help fund operations after reaching an agreement with creditors, Bloomberg News reported yesterday. Bankruptcy Judge Mary F. Walrath at a hearing yesterday approved guidelines that will govern the sale of the company's assets at a bankruptcy auction and the company's $37.5 million bankruptcy loan. The court "approved a process for a sale by Jan. 23" that keeps Clearlake Capital Group LP as the lead or so-called stalking-horse bidder, said Jeffrey C. Krause, a THQ attorney. Potential buyers will have to submit bids by Jan. 22, and the company will hold an auction later that day to determine the best offer for the assets. THQ will seek court approval of the sale at a hearing scheduled for the next day, with closing expected on Jan. 24.

U.S. District Judge James Zagel ruled that INTL FCStone must return $15.6 million to the trustee overseeing the bankruptcy of Sentinel Management Group because other former clients were not equitably repaid money they had invested in the failed futures brokerage, Reuters reported yesterday. FCStone, a New York-based commodities brokerage with many farmers as clients, has received about 70 percent of the money it had invested with Sentinel, while other former customers have received back roughly 35 percent, said trustee Frederick Grede. Grede had asked Judge Zagel to allow creditors to receive more balanced payouts. Sentinel collapsed in 2007 after it allegedly moved customer funds from protected accounts to other accounts so they could be used as collateral for loans to Sentinel's own trading operations.

The former head of defunct packaging firm Radnor Holdings Corp. is suing the law firm that led it through its 2006 bankruptcy and the hedge fund that acquired its assets, saying that they colluded to provide the fund, Tennenbaum Capital Partners, with a $100 million windfall, Reuters reported yesterday. Skadden Arps Slate Meagher & Flom, along with Tennenbaum and several legal and financial advisers, were named as defendants in a bankruptcy court complaint on Dec. 26. The plaintiff, former Radnor Chief Executive Michael Kennedy, said that he should be repaid more than $75 million and his company's 2006 sale to Tennenbaum voided. He claimed that Skadden and Tennenbaum concealed a longstanding business relationship and conspired to make sure Radnor wound up in Tennenbaum's hands.

A month after debuting a plan to reorganize around its remaining locations, Bakers Footwear Group Inc. is reversing course and plotting the full liquidation of its chain of shoe stores, Dow Jones DBR Small Cap reported today. The St. Louis-based retailer on Jan. 2 said that it has failed to come up with a restructuring that passes muster with its secured lender or other constituents in its bankruptcy case.

A U.S. brain-injury treatment center has filed for bankruptcy following reports of abuse and neglect of patients by their caregivers, Bloomberg News reported on Saturday. The Florida Institute for Neurologic Rehabilitation Inc. (FINR)and three affiliated corporations filed chapter 11 petitions on Friday. They said in court filings that they estimated they owe between $3 million and $30 million to 103 to 346 creditors and that their assets total $150,000 or less. The bankruptcy action came on the same day that a unit of Regions Financial Corp. sued FINR, claiming that it defaulted on $31 million in real-estate loans.

Confusion over how much legal protection former Dewey & LeBoeuf partners are getting under a settlement with the defunct firm's estate may slow what Dewey advisers hoped would be the swift confirmation of the chapter 11 plan they have drawn up for repaying creditors who say they are owed some $600 million, Law.com reported today. A handful of dissenters raised objections to that plan at a hearing yesterday during which Bankruptcy Judge Martin Glenn asked his own questions about the document and an accompanying disclosure statement. Together, the two filings—which were submitted to the court in November—are intended to serve as a roadmap for how the Dewey estate plans to allocate funds to secured and unsecured creditors and other constituents. Judge Glenn urged Dewey's bankruptcy counsel from Togut, Segal & Segal to describe exactly who can still sue whom if the so-called partner contribution plan reached last year with some 400 partners is approved as part of the larger chapter 11 plan.

A Walt Disney Co. unit asked a federal judge to block a bankruptcy court ruling that would allow another company to sell patents related to three- dimensional movies, Bloomberg News reported yesterday. Walt Disney Studios Motion Picture Production's rights to use the technology to convert traditional films into 3-D movies will be harmed, the company said in its appeal yesterday in U.S. District Court in Wilmington, Delaware. The dispute involves the shell company left in bankruptcy by the collapse of Digital Domain Media Group Inc., the provider of special effects for the movies “Transformers” and “Titanic.” That shell, known as DDMG Estate, held an auction for the patents last month that was won by RealD Inc. Disney claims it has the right to use the technology because of agreements it signed with the original patent holder in 2008 and 2009.