PRICE TAG FOR WALL STREET BAILOUT GOES UP IN THE PRESIDENT'S LATEST BUDGET PROPOSAL
Though the Obama administration has repeatedly said that the rescue of Wall Street will cost taxpayers far less than originally expected, the budget proposal released yesterday showed that the price tag of the bailout is suddenly going up, the Washington Post reported today. As a result, the administration said that it will seek twice as much money from its proposed bank tax compared with last year, $61 billion vs. $30 billion. A main reason for the increased bailout cost is that the government's stock holdings of companies rescued by taxpayers have fallen in value. Insurance giant American International Group's stock has fallen 36 percent in the past year, while General Motors's has tumbled 30 percent. The administration put the cost of the government’s financial rescue at $28 billion in 2011, but now it is expected to reach $54 billion. Read more.
DOJ PITCHES BUDGET THAT FOCUSES ON FINANCIAL FRAUD
The U.S. Justice Department's proposed 2013 budget includes bolstering the ranks of prosecutors across the country to step up civil and criminal enforcement in the financial and mortgage fraud arena, the National Law Journal reported today. Justice officials yesterday outlined $55 million in new spending, included in the overall $27.1 billion budget, to combat securities and mortgage fraud, including hiring 184 attorneys. DOJ wants to add 16 attorneys in the Criminal Division and 38 lawyers to the Civil Division. Additionally, the department would hire 120 new assistant U.S. attorneys in offices around the country. Deputy Attorney General James Cole touted the ongoing work of the Financial Fraud Enforcement Task Force and its work in the investigation and prosecution of mortgage fraud. Read more.
ANALYSIS: UNCLAIMED MONEY HAUNTS FIRMS WINDING DOWN IN BANKRUPTCY
Businesses that dissolve in chapter 11 can leave behind pools of cash that, years later, sit forgotten in bank accounts because of a loophole in the U.S. Bankruptcy Code, according to a Dow Jones DBR Small Cap analysis yesterday. The oversight leaves the final destination for the cash---money left unclaimed by creditors or unexpected payments that trickle in long after a company's demise---unclear to even the bankruptcy industry's leading experts. Some attorneys and judges are trying to push this leftover money to charity instead of letting it age in banks or transferring it to pay off the national debt, where unclaimed money from most consumer bankruptcy cases goes. Read more. (Subscription required.)
FORECLOSURE DEAL MAY HELP STATES PROP UP BUDGETS, RAZE HOMES
The $25 billion foreclosure settlement will be used by states in a number of ways ranging from plugging budget holes to tearing down foreclosed properties, Bloomberg News reported yesterday. Wisconsin Governor Scott Walker (R) and Attorney General J.B. Van Hollen said that $25.6 million of the state’s $140 million share would be put toward a projected $143 million deficit. Missouri has similar plans as Governor Jay Nixon (D) and Attorney General Chris Koster said $40 million of its $155 million settlement would be set aside to lessen cuts to colleges and universities. Ohio, which is receiving $97 million in its direct payment from last week's settlement, plans to allocate $75 million to demolish vacant and dilapidated homes dragging down the values of neighboring properties, Attorney General Mike DeWine said when the settlement was announced on Feb. 9. Read more.
JUDGE RULES THAT WELLS FARGO DIRECTORS MUST FACE CLAIMS OVER FORECLOSURE PROBE
U.S. District Judge Susan Illston ruled that directors of Wells Fargo & Co., the largest U.S. mortgage lender, must face investors' claims that the bank failed to properly disclose details of its foreclosure practices to government investigators, Bloomberg News reported today. Judge Illston rejected Wells Fargo's request to dismiss shareholders' allegations that directors wrongfully failed to disclose their opposition to a government probe of the bank's mortgage lending and foreclosure policies. "The fact that the company was allegedly stymieing the government regulators is certainly material to stockholders when considering whether to authorize a more serious internal investigation," Illston ruled on Feb. 9. Read more.
ABI IN-DEPTH
LATEST CASE SUMMARY ON VOLO: SHCOLNIK V. RAPID SETTLEMENTS LTD. (IN RE SHCOLNIK; 5TH CIR.)
Summarized by John Jones of Bickerstaff Heath Delgado Acosta LLP
The Fifth Circuit reversed and remanded granting of summary judgment in debtor Shcolnik's favor on the issue of willful and malicious injury under 11 U.S.C. 523(a)(6) if the debtor's claims of ownership were made in bad faith as a pretense to extract money from the company by threatening to expose illegal activities and falsely claiming ownership. The court also clarified and broadened scope of the "willful and malicious injury" test set out in Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974 (1988), to cover the award of attorneys' fees (only) in arbitration against the debtor because it was foreseeable that the debtor's actions in inflicting the expense of a meritless legal claim would constitute a malicious and willful injury.
More than 400 appellate opinions are summarized on Volo. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: TWO YEARS POST-BANKRUPTCY, CHRYSLER BRINGS IN PROFIT
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog examines how Chrysler, just two years after emerging from bankruptcy protection, has earned a profit and appears to be on target to continue doing so in the coming years.
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.
ABI Quick Poll The requirement that all individual debtors receive financial management training as a prerequisite for discharge should be repealed. Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
