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Corzine, Others Settle with MF Global Trustee over Collapse

Jon Corzine has reached a settlement with the trustee for the former New Jersey governor's collapsed brokerage MF Global Holdings Ltd, as part of a series of accords expected to provide about $132 million to creditors, Reuters reported yesterday. The trustee, Nader Tavakoli, on Wednesday asked a U.S. bankruptcy judge to approve payments being made on behalf of Corzine and several other defendants, including MF Global's former Chief Operating Officer Bradley Abelow and former Chief Financial Officer Henri Steenkamp. Insurers will make payments on behalf of the defendants, who did not admit wrongdoing, the court papers show. The accord does not resolve the U.S. Commodity Futures Trading Commission's civil lawsuit against Corzine and Edith O'Brien, a former MF Global assistant treasurer, but provides a reserve to help fund their defenses.

Aeropostale to Challenge Sycamore's Status as Creditor

U.S. teen retailer Aeropostale Inc. plans to challenge in court private equity firm Sycamore Partners' claims as a creditor in its bankruptcy, Reuters reported yesterday. The fight between Aeropostale and Sycamore stands out from other bankruptcy cases of U.S. teen retailers, because very few of them triggered litigation. It could also complicate any effort by Sycamore to take over the retailer. The lawsuit, expected to be filed today, would follow an investigation by Aeropostale over the past several weeks into whether Sycamore drove the company into bankruptcy, in part by making the terms of its debt investment in the company in 2014 deliberately onerous. Sycamore affiliates loaned Aeropostale $150 million in 2014, and, as part of the deal, required that the chain make merchandise purchases from one of Sycamore's companies, MGF Sourcing. Aeropostale has said that MGF imposed new, burdensome terms on the retailer that precipitated its bankruptcy.

Judge Shrinks Madoff Trustee $905 Million Lawsuit Versus Florida Firm

A federal bankruptcy judge yesterday narrowed a $905 million lawsuit filed by the trustee seeking money for Bernard Madoff's victims against executives who ran a now-defunct Florida accounting firm that had close ties to the swindler, Reuters reported. Bankruptcy Judge Stuart Bernstein said that Irving Picard cannot recover alleged improper transfers made before 2001 to Palm Beach-based Avellino & Bienes, which ran the earliest "feeder funds" that sent client money to Madoff. The decision is a setback for Picard, in one of the larger of his more than 1,000 lawsuits seeking to recoup money from people he believes benefited improperly from Madoff's fraud. Picard accused principals Frank Avellino and Michael Bienes of helping conceal Madoff's Ponzi scheme, including in 1992 when Madoff created fake account statements to help their firm defend itself in a U.S. Securities and Exchange Commission probe. The trustee said the duplicity enabled Avellino, Bienes and their wives to reap millions of dollars to buy multiple luxury homes, art by Pablo Picasso and Edgar Degas for the Avellinos, and a cold storage compartment to store Dianne Bienes' furs. But in a 62-page decision, Judge Bernstein agreed with the defendants that Picard lacked power to recover transfers made before Jan. 1, 2001. Read more

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case

Study Points a Finger at the Fed in the Lehman Disaster

Laurence M. Ball, chairman of the economics department at Johns Hopkins University, has produced the most comprehensive and persuasive argument yet that the Federal Reserve could have saved Lehman from the precipitous and chaotic bankruptcy that occurred that fateful weekend in September 2008, the New York Times reported today. He recently presented the result of four years of research, “The Fed and Lehman Brothers,” to a group of economists gathered in Cambridge, Mass. Prof. Ball takes issue with the established narrative that the Fed was powerless to lend to Lehman in its waning hours: “Fed officials have not been transparent about the Lehman crisis. Their explanations for their actions rest on flawed economic and legal reasoning and dubious factual claims.”

Amazon Tiptoes Into Banking Business Through Student Loans Inc. is stepping into the student-loan marketplace, the Wall Street Journal reported today. The online retailer has entered into a partnership with San Francisco lender Wells Fargo & Co. in which the bank’s student-lending arm will offer interest-rate discounts to select Amazon shoppers. An Amazon spokeswoman said this is the first time members of the company’s “Prime Student” service are receiving a student-loan offer by a lender through its site since that service was launched in 2010. The discount will be offered both to students who want loans to attend college and those who want to refinance existing loans. Wells Fargo, the largest U.S. bank by market value and the second-largest private student lender by origination volume, will shave a half a percentage point off the interest rate on student loans it extends to applicants who are members of Amazon’s Prime Student. The subscription-based service charges $49 a year, half the cost of Amazon Prime, and offers free two-day shipping and unlimited instant streaming of movies, among other perks.

Singapore Seeks U.S. Chapter 11 Prowess in Bankruptcy Reform

Singapore is seeking to enhance its position as a center for debt restructuring by giving its insolvency law some of the powers of the U.S. Bankruptcy Code’s Chapter 11, just as companies worldwide default on bonds at the fastest pace since the global financial crisis, Bloomberg News reported yesterday. The government has “broadly accepted” 17 recommendations submitted by a committee after a yearlong review, the Ministry of Law said in a statement. Those include offering automatic stay of legal and enforcement actions for debtors, creating a bench of specialist judges for its bankruptcy court and increasing rescue-financing capital by enticing distressed-debt funds and private equity firms to set up shop in the city-state. “We have all the basic building blocks for dealing with restructuring and we see that Singapore will be able to fill this space,” Indranee Rajah, senior minister of state for law, told reporters on Wednesday. “Singapore should not just be a debt restructuring place for Singapore companies and businesses but a global debt restructuring center much in the way as New York and London. We should be playing that role to the region and beyond.”