PREVIEW: SCOPE OF PROTECTIONS FOR RETIREMENT FUNDS IN BANKRUPTCY AT ISSUE IN CASE BEFORE SUPREME COURT ON MONDAY
Scheduled for oral argument on Monday, Clark v. Rameker presents the Supreme Court with a case that has a clean and straightforward question of statutory interpretation, with no looming shadow of oppressive media scrutiny, according to a SCOTUSBlog preview of the argument. Among the assets exempt from the estate of a debtor in bankruptcy, Congress has with steadily increasing generosity included a wide variety of retirement funds. The specific question in this case is whether those provisions exempt the $450,000 IRA that petitioner Heidi Clark inherited upon the death of her mother. If the IRA is exempt, she can keep it and use it for support after her bankruptcy; if it is not exempt, the bankruptcy court will take it and use it to pay creditors. The relevant statute is Bankruptcy Code § 522(b)(3)(C), which exempts "retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under [seven listed sections] of the Internal Revenue Code." The parties agree that the inherited IRA is exempt from taxation under one of those sections. The sole issue in dispute is whether the inherited IRA constitutes "retirement funds" for purposes of paragraph (C). Read the full preview.
COMMENTARY: PLEAS FROM FORMER DEWEY EMPLOYEES SUGGEST FINANCIAL IRREGULARITIES WERE NOT ISOLATED INCIDENTS
The seven pleas from former Dewey employees suggest that the accusations of financial manipulation at the law firm, which at its peak employed more than 1,300 lawyers before collapsing into bankruptcy in May 2012, were not isolated incidents, according to a commentary today in the New York Times DealBook blog. The pleas also indicate that authorities have put together a case that will not rest solely on emails, in which some of the defendants openly talked about "cooking the books" at the law firm. Three of the seven people from whom New York District Attorney Cyrus R. Vance Jr. has taken pleas are Francis Canellas, the firm's former finance director; Thomas Mullikin, the firm's former controller; and Ilya Alter, who was the firm's director of budgeting and planning. Canellas and Mullikin were named as defendants in a parallel civil case filed by the Securities and Exchange Commission in connection with a 2010 sale of $150 million in bonds by the law firm. Regulators contend that the former Dewey executives participated in a scheme to mislead investors in the bond offering about the financial health of the law firm. Read more.
SHADOW BANKING DEALS PROMPT SEC PLAN TO CAP LEVERAGE FOR BROKERS
U.S. regulators concerned that banks and brokerage firms remain too dependent on risky types of short-term funding are weighing new rules designed to reduce reliance on parts of what is often called the shadow banking system, Bloomberg News reported today. Now the SEC is considering new funding rules for brokers, as well as a limit on leverage similar to those used by the Federal Reserve and other regulators for banks, according to a regulatory document and SEC officials familiar with the matter. The initiatives are aimed at financing tools such as repurchase agreements, or repos, that were relied on by Bear Stearns Cos. and Lehman Brothers Holdings Inc. until their failures accelerated the 2008 financial crisis. Lehman's bankruptcy provoked criticism of the Securities and Exchange Commission for lax oversight of investment banks. Federal Reserve officials have warned for years that the $4.5 trillion web of repo deals remains prone to unraveling during a panic, potentially leading to fire sales of assets that could spread losses across the financial system. Read more.
COMMENTARY: STRESS TESTS WON'T PREVENT THE NEXT FINANCIAL CRISIS
The Federal Reserve's decision to implement more complex stress tests doesn't address the root cause of the financial crisis of 2008, according to a commentary in today's Wall Street Journal. On March 26, the Federal Reserve will release the results of the "stress tests" it conducted on the nation's 30 largest banks that will purportedly reveal how well a bank can withstand a financial crisis. Banks are required to fund some fraction of their lending or securities purchases with equity capital, which can absorb losses. Under the Basel accords, the riskier the asset, the more capital funding is required. The Fed also requires tests on how well a bank's asset or investment portfolios hold up under different catastrophic scenarios. But the financial crisis of 2008 wasn't characterized by asset losses, according to the commentary. Rather, it was a run, or a collapse of short-term funding. Banks borrowed short to lend long, and were sometimes leveraged 30 to 1 on their short-term assets. When short-term funding suddenly dried up, banks were immediately and collectively in a crisis. Read more. (Subscription required.)
LENDING CLUB EXPANDS TO SMALL BUSINESSES
Lending Club, the biggest "peer-to-peer" consumer-lending platform, is expanding to businesses, the Wall Street Journal reported today. The San Francisco-based company today launched a platform for investors to fund loans to small companies. It joins a number of upstarts, including Dealstruck and Funding Circle, offering small businesses funding alternatives to banks, credit cards and short-term lenders. The ventures aim to capitalize on a crunch that has been growing since the financial crisis. The value of outstanding commercial loans under $1 million at federally insured banks -- a proxy for small business -- has declined nearly 15 percent since 2008 to $287.6 billion in 4Q 2013, according to the Federal Deposit Insurance Corp. Lending Club has originated $3.8 billion in consumer loans since it began in 2007. The company vets applications by examining credit scores and verifying job and bank information, then posts the applications online and sets interest rates according to the riskiness of the borrower. Read more. (Subscription required.)
LATEST ABI PODCAST FEATURES HARVEY MILLER REFLECTING ON IMPACT OF BANKRUPTCY LAW ON FINANCIAL RENEWAL IN AMERICA
The latest edition of ABI's podcast features a special presentation by Harvey Miller of Weil, Gothshal and Manges LLP drawn from the keynote address he gave at the 38th Annual Alexander L. Paskay Memorial Bankruptcy Seminar. Called the most prominent chapter 11 lawyer of all time, Miller reflects on the impact that bankruptcy law has had on financial renewal in America. Click here to listen to the presentation.
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ABI MEMBERS WELCOME TO ATTEND "THE LEGACY OF MR. PONZI: THE MADOFF AND STANFORD CASES" PROGRAM NEXT WEEK PRESENTED BY THE AMERICAN COLLEGE OF BANKRUPTCY
The American College of Bankruptcy First Circuit Fellows will present "The Legacy of Mr. Ponzi: the Madoff and Stanford Cases" program from 1-4 p.m. ET on March 28 at the Boston College Law School in Newton, Mass. The program will include a panel discussion featuring the Madoff trustee, a co-Liquidator of Stanford International Bank, and reporters from the New York Times and Associated Press who covered the Madoff and Stanford cases. There is no charge to attend the program. For more information or to register, please click here.
LEADING SCHOLARS TO PRESENT RESEARCH AND PROPOSALS FOR POTENTIAL CHAPTER 11 REFORMS AT THE ABI ILLINOIS SYMPOSIUM ON CHAPTER 11 REFORM APRIL 3-5
Advancing the dialogue on important reform issues in conjunction with ABI's Commission to Study the Reform of Chapter 11, ABI and the University of Illinois College of Law have assembled leading scholars to present academic papers on issues related to the Commission's work. Scholars will present papers and debate the consequences of the increased importance of secured credit to modern restructuring law to members of the Commission and fellow scholars at the ABI Illinois Symposium on Chapter 11 Reform at the Kirkland & Ellis Conference Center in Chicago on April 3-5. The papers presented at the Symposium will be published in a forthcoming issue of the University of Illinois Law Review.
For a schedule containing a list of all presenters and commentators at the Symposium and to register, please click here.
NEW CASE SUMMARY ON VOLO: RENTAS V. GONZALEZ (1ST CIR.)
Summarized by Michael Sugar of Lobel, Neue & Till LLP
The First Circuit Bankruptcy Appellate Panel reversed the bankruptcy court's grant of summary judgment in favor of the Trustee. The court determined that § 542 could not be used to compel a probate court to turn over proceeds of a property sale to the bankruptcy estate because the estate, at most, held an interest in the probate estate, not the probate estate's property. The BAP also determined that the probate exception to federal jurisdiction prevented the bankruptcy court from ordering a specific distribution of the probate estate's assets because the probate exception prevents a federal court from probating a will or administering a probate estate.
There are more than 1,200 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: PAPER EXAMINES STIGMA RELATED TO FILING FOR BANKRUPTCY
A new post on the ABI Blog Exchange examines a paper that provides insights about how consumer debtors have perceived their bankruptcy filings.
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.
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