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Madoff Trustee Strikes $860 Million Deal with Kingate Funds

The trustee liquidating Bernard Madoff’s defunct investment-advisory business said he had reached an $860 million settlement with a pair of offshore funds that shunted money to the con man’s company for years, Bloomberg News reported. <b>Irving Picard</b> reached the accord with the liquidators for Kingate Global Fund Ltd. and Kingate Euro Fund Ltd., he said in a statement Wednesday. The arrangement essentially forces the funds to use their recoveries from the Madoff bankruptcy case to finance the settlement. The $860 million covers 93 percent of the withdrawals made by the Kingate funds from their accounts at Madoff’s New York-based firm, Picard said. The trustee has used such litigation to recover more than $13 billion for thousands of victims who invested directly with Madoff. The Kingate funds were founded in the British Virgin Islands in 1994 by two Italian investment advisers operating out of London. Picard sued the funds a decade ago, not long after Madoff’s $20 billion Ponzi scheme collapsed. Among Madoff’s biggest offshore “feeder” funds, they had invested about $1.7 billion with Madoff for their clients and lost about $750 million when the scam unraveled.

Puerto Rico Faces Tougher Scrutiny over Federal Medicaid Funding

U.S. lawmakers yesterday called for heightened scrutiny of Puerto Rico’s Medicaid program as the bankrupt territory seeks increased federal health care funding while it deals with repercussions from a government corruption scandal, Reuters reported. The House Committee on Energy and Commerce agreed to several accountability measures linked to a $12 billion funding boost over four years for the low-income health care program in Puerto Rico. A group of Republican U.S. senators, meanwhile, sought information on whether any safeguards are in place to deter misuse of the island’s federal Medicaid dollars. Last week, Angela Avila-Marrero, former executive director of Puerto Rico’s Health Insurance Administration, pleaded not guilty to conspiracy and other charges related to her role in an alleged scheme to steal federal Medicaid dollars through a corrupt bidding process with private contractors. The charges were part of a 32-count indictment brought by U.S. law enforcement officials against six people in a government corruption probe. The House committee adopted an amendment proposed by U.S. Representative Greg Walden (R-Ore.) that added provisions for federal audits and probes of contracts related to Puerto Rico’s Medicaid program, as well as a quarterly reporting requirement on how much of the money was spent.

Pension Rescue Proposal Headed to House Floor Next Week

House Democrats will bring a $64.4 billion measure that would provide financial lifelines to union pension plans to the floor next week, <em>Roll Call</em> reported. House Majority Leader Steny H. Hoyer (D-Md.) and House Ways and Means Chairman Richard E. Neal (D-Mass.), the bill’s author, yesterday confirmed the schedule for the legislation, which has gone through the Ways and Means as well as Education and Labor panels. The Congressional Budget Office estimate released last week outlined expected costs over the next decade for the measure, which would provide low-interest, 30-year loans to cash-strapped multiemployer pension plans. That was, however, before the number of plans eligible for assistance was increased through changes in a substitute amendment. About 130 pension plans covering more than 1 million workers are projected to become insolvent over the next 20 years. Even before then, by 2025, the Pension Benefit Guaranty Corporation is expected to run out of funds to fulfill its role of assisting failing and failed union plans to make benefit payments.

Frac Sand Producer in Wisconsin Declares Bankruptcy

Emerge Energy Services, which owns eight frac sand mining and processing facilities in Wisconsin under subsidiary Superior Silica Sands, has filed for chapter 11 protection on Monday, Wisconsin Public Radio reported. Officials in Chippewa and Barron counties are working to find out how the bankruptcy might impact plans to reclaim idled sand mines. Emerge Energy has one mine, and two processing facilities are still in operation. The filings list more than $338 million in debt from creditors around the country, including construction, excavating and contracting companies in Wisconsin. Emerge Energy listed a $6,206,699 debt owed to Market & Johnson Inc., which is based in Eau Claire. The frac sand mining company was already in financial trouble. In May, Emerge Energy announced that it was entering into a debt restructuring agreement with its lenders outside of court but said that bankruptcy was a possibility if talks broke down.

U.S. Reform Plan for Fannie, Freddie Seen by September

The Trump administration’s hotly anticipated blueprint for overhauling mortgage guarantors Fannie Mae and Freddie Mac may not be published until September as the U.S. Treasury juggles several other pressing issues, the housing regulator told Reuters. Mark Calabria, director of the Federal Housing Finance Agency (FHFA), which oversees the government-sponsored enterprises, said in an interview it was his “hope” that they would have exited or be ready to exit conservatorship before his term ends in 2024. However, Calabria is not operating toward a hard deadline, he noted. “That’s my time horizon,” he said, referring to the end of his term. “I’m under no expectation to try to get all this done. ... So if in four years, nine months they’re not out of conservatorship, I’m not pushing them out.” Calabria’s comments will temper market expectations for a speedy overhaul of Fannie and Freddie before the 2020 presidential election.

Seattle-Based Restaurant Chain Cites High Minimum Wage Among Reasons for Bankruptcy Filing

Restaurants Unlimited declared in its chapter 11 filing last week that “over the last three years, the company’s profitability has been significantly impacted by progressive wage laws along the Pacific coast," reported. "The result was to increase the company’s annual wage expenses by an aggregate of $10.6 million.” It went on to cite three examples where minimum wages have risen dramatically over the last three years. Portland now requires $12.50 an hour, an increase of 35 percent. San Francisco’s minimum wage has climbed 41 percent to $15.59 per hour. And Seattle, the first city with a $15 minimum wage, now forces large employers to pay at least $16 an hour. Restaurants Unlimited, which is based in Seattle, did raise menu prices and even added a living wage surcharge to bills. But it still lost money. Despite the high minimum wage in Seattle, 111 new restaurants have opened in the city since May. The unemployment rate is at 3.4 percent, slightly less than the 3.7 percent U.S. jobless rate. Proponents of a higher minimum wage say Restaurants Unlimited is making worker’s pay a convenient scapegoat.