Financial Advisors

Analysis: The Courts Weigh In on the Definition of a “Whistle-Blower”

 
  

January 6, 2015

 
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  NEWS AND ANALYSIS   

Analysis: The Courts Weigh In on the Definition of a “Whistle-Blower”

The vagaries of the Dodd-Frank Act have left much room for interpretation of what protections Congress intended to provide financial fraud whistle-blowers, according to an analysis on the New York Times DealBook blog yesterday. One of the central questions of the provision has been whether a whistle-blower has to first report information about questionable practices to the Securities and Exchange Commission in order to be protected from firing, demotion or harassment. The federal courts have been split on this question. But the anti-retaliation provision in the Dodd-Frank Act provides a strong and important protection for whistle-blowers. To encourage disclosure of corporate wrongdoing, the SEC has taken an expansive view that would protect from retaliation any employee who reports information either internally or to a government agency. The legal problem is that Congress appeared to require reporting to the SEC as a prerequisite to applying the anti-retaliation provision. The law defines a whistle-blower as someone who provides "information relating to a violation of the securities laws to the commission." The U.S. Court of Appeals for the Fifth Circuit found in Asadi v. G.E. Energy that the law "clearly expresses Congress's intention to require individuals to report information to the SEC to qualify as a whistle-blower under Dodd-Frank." Read more.

DELAWARE RULINGS UPHOLD STATE COURT DISCRETION

The Delaware Supreme Court held in December that a lower court could limit a plaintiff's use of a books and records inspection to litigation in the state. On Jan. 2, a Chancery Court judge held that he didn't have to permit an interlocutory appeal of a ruling to prevent a shareholder vote on the Family Dollar Stores Inc. merger in the face of a competing offer, Bloomberg News reported yesterday. The Delaware Supreme Court case resulted from the fallout from a federal investigation into United Technologies Corp. for allegedly exporting technology to China illegally. The company entered into a deferred-prosecution agreement settling the case in 2012. Two shareholders subsequently sued. One sought to inspect the company's records under section 220(c) of Delaware's corporate law, but United Technologies argued to limit the use of the information to litigation in Delaware. The lower court held that it lacked the power to restrict the use, but the Supreme Court reversed and sent the case back to the lower court. The court also said that corporate bylaws that restrict litigation to Delaware — which United Technologies had — are valid even if adopted after a plaintiff has purchased the shares in the company. Separately, in the case involving Family Dollar, judge Andre Bouchard denied an appeal of his decision last month in which he refused to block Family Dollar Stores Inc. shareholders from voting on Dollar Tree Inc.'s $8.5 billion takeover bid. That vote was nonetheless postponed until Jan. 22. Read more.

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WHY NEW CREDIT CARDS MAY FALL SHORT ON FRAUD CONTROL

Big U.S. banks are steering clear of an advanced security measure used in credit cards around the world, opting for a system that is more convenient for shoppers but may leave them vulnerable to fraud, the Wall Street Journal reported yesterday. This year, firms ranging from JPMorgan Chase & Co. to Discover Financial Services Inc. are expected to roll out more than a half-billion new credit cards embedded with computer chips that create a unique code for each transaction, making counterfeiting much more difficult. In a retreat for the industry, however, the new cards don't use some technology that could prevent fraud if a card is lost or stolen. Instead of requiring customers to put in a personal identification number, or PIN, the new cards need users to authenticate credit card transactions the same way they often do now, with a signature. PINs are widely considered to be more secure than signatures, which can be easily copied. Read more. (Subscription required.) For more on cybersecurity and financial products, be sure to watch Winter Leadership speaker Theresa Payton, former White House CIO, provide her perspectives on cybersecurity and privacy.

OBAMA SAID TO PICK FORMER HAWAII COMMUNITY BANKER TO BE FED GOVERNOR

President Barack Obama plans to nominate Allan Landon, the former chief executive officer of the Bank of Hawaii Corp., to be a Federal Reserve Board governor, Bloomberg News reported today. Landon was chairman and CEO of Bank of Hawaii from September 2004 to July 2010, according to a biography on the website of the University of Hawaii at Manoa's William S. Richardson School of Law, which lists him as a lecturer with a degree from Iowa State University. While the Fed Board traditionally has had a community banker or supervisor on the seven-seat board, that role hasn't been filled since Governor Elizabeth Duke, a former executive at a Virginia community bank, retired in August 2013. The Fed Board has had two empty seats since the departure of governors Sarah Bloom Raskin in March and Jeremy Stein in May. Obama hasn't yet nominated a Fed vice chairman for supervision, a new position created by the Dodd-Frank Act of 2010. The role has been unofficially performed by Fed Governor Daniel Tarullo. Read more.

COMMENT DEADLINE FRIDAY: USTP NOTICE OF PROPOSED RULEMAKING ON CHAPTER 11 MONTHLY OPERATING REPORTS

Section 602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) authorizes the U.S. Trustee Program (USTP) to issue rules requiring uniform periodic reports by debtors in possession or trustees in non-small business cases under chapter 11. The USTP just published in the Federal Register a notice of proposed rulemaking seeking public comment on the proposed rule and periodic report forms. The proposed rule is published in the Federal Register at 79 FR 66659 (Nov. 10, 2014) (to be codified at 28 C.F.R. pt. 58). The proposed rule, along with the proposed periodic report forms and instructions, may be viewed on the USTP's website. The proposed rule may also be accessed at www.regulations.gov. All public comments must be submitted on or before January 9, 2015, via www.regulations.gov. Please note that the proposed rule and forms only apply in chapter 11 cases filed by debtors that are not small businesses. Small business debtors are already required to use Official Form 25C, "Small Business Monthly Operating Report."

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DON'T MISS THE ACB FOURTH CIRCUIT FREE PROGRAM EXAMINING ABI'S REPORT ON CHAPTER 11 REFORM ON FEB. 13 IN WASHINGTON, D.C.

Register today for the American College of Bankruptcy Fourth Circuit Program, "Considering ABI's Report on Chapter 11 Reform," being held held on Feb. 13 on Capitol Hill. The free event will take place in Room 226 of the Rayburn House Office Building from 9:30 a.m. to 1:00 p.m. (EST). The program will include discussion of:

- The Commission's overall philosophy and approach

- Treatment of SMEs

- 363 sales, DIPs, safe harbors, and labor issues

- Valuation and distribution issues. Faculty will include:

- Hon. Thomas Ambro, U.S. Court of Appeals for the Third Circuit

- Michael Bernstein, Arnold Porter

- Mark Ellenberg, Cadwalader

- Professor Michelle Harner, University of Maryland Francis King Carey School of Law

- Craig Goldblatt, WilmerHale

- Bob Keach, Bernstein Shur

- Danielle Spinelli, WilmerHale

- Steven Schwarcz, Duke Law

Additional faculty to be announced.

For more information and to register, please click here.

NEW CASE SUMMARY ON VOLO: ARAYA V. JPMORGAN CHASE BANK, N.A., ET AL. (D.C. CIR.)

Summarized by Bruce Weiner of Rosenberg, Musso & Weiner

 

The U.S. Court of Appeals for the D.C. Circuit ruled that the federal district court abused its discretion when it maintained jurisdiction over a removed case involving only state law and common law claims after the federal claims were dismissed. There are more than 1,500 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: THE KEY TO WIPING OUT OLD TAX LIABILITY

A recent blog post examines how to wipe out old tax liability in a bankruptcy case. Be sure to check the 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

"Executoriness" should be dropped as a threshold requirement in § 365.

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 43 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.

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  CALENDAR OF EVENTS
 

2015

January
- New Orleans Consumer Bankruptcy Conference
    Jan. 19, 2015 | New Orleans
- Rocky Mountain Bankruptcy Conference
    Jan. 22-23, 2015 | Denver

February
- Caribbean Insolvency Symposium
    Feb. 5-7, 2015 | Grand Cayman, Cayman Islands
- VALCON 2015
    Feb. 25-27, 2015 | Las Vegas
 

  

 

March
- Paskay Bankruptcy Seminar
    March 5-7, 2015 | Tampa, Fla.
- Bankruptcy Battleground West
    March 24, 2015 | Los Angeles, Calif.

April
- Annual Spring Meeting
    April 16-19, 2015 | Washington, D.C.

 

 

 
 
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January Bankruptcy Filings Decrease 11 Percent from Previous Year Commercial Filings Fall 26 Percent

ABI Bankruptcy Brief | February 5 2013
 
  

February 5, 2013

 
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  NEWS AND ANALYSIS   

JANUARY BANKRUPTCY FILINGS DECREASE 11 PERCENT FROM PREVIOUS YEAR, COMMERCIAL FILINGS FALL 26 PERCENT

Total bankruptcy filings in the United States decreased 11 percent in January over last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 78,471 in January 2013, down from the January 2012 total of 88,028. Consumer filings declined 10 percent to 74,743 from the January 2012 consumer filing total of 83,022. The total commercial filings in January 2013 also decreased to 3,728, representing a 26 percent decline from the 5,006 business filings recorded in January 2012. Total commercial chapter 11 filings experienced the largest decrease as they fell 36 percent from the 749 commercial chapter 11 filings in January 2012 to 479 filings in January 2013. Read more.

ANALYSIS: REGULATIONS LEADING COMPANIES TO SHIFT FROM PUBLIC TO PRIVATE DEBT ISSUANCES

A tectonic shift is under way in how companies raise money--and it will have a profound impact on U.S. investors and markets, according to an analysis in yesterday's Wall Street Journal. According to the Securities and Exchange Commission's most recent estimates, businesses have been raising more funds through private transactions than through debt and equity offerings registered under the securities laws and offered to the general public. Overall public debt and equity issuances fell by 11 percent between 2009 and 2010, to $1.07 trillion, while private issues rose by 31 percent, to $1.16 trillion. This shift, which has been driven by the rising costs of public-market participation and regulation, will likely accelerate when the SEC implements reforms in the Jumpstart Our Business Startups Act, which the president signed into law last April. The crowdfunding provisions in the JOBS Act are intended to democratize investment opportunities using the Internet and have attracted the most public attention. Experts anticipate a paradigm shift in how companies raise money, as they increasingly shun the highly regulated, costly and volatile public markets in favor of now deeper and more efficient private markets. Read more. (Subscription required.)

For further insights, be sure to read "'Crowdfunding' a Chapter 11 Plan" in the February edition of the ABI Journal.

MUNICIPAL DEFAULT RISK AT 18-MONTH LOW AS CONFIDENCE CLIMBS

Investor confidence in U.S. municipal debt is at its highest level since 2011, buoyed by local governments showing the fewest defaults since at least 2009 while revenue recovers to pre-recession levels, Bloomberg News reported yesterday. It cost the annual equivalent of as little as $172,000 last week to protect $10 million of munis for 10 years through credit-default swaps, according to Markit Group Ltd. data compiled by Bloomberg. That is the cheapest since July 2011. The price of swaps for California, which had its credit upgraded last week for the first time in six years after forecasting a surplus, also set an 18-month low. The declining price shows investors in the $3.7 trillion muni market view that the three bankruptcy filings last year by California cities were isolated events that are running counter to the state's trend of improving its finances. Defaults fell the past two years, running counter to the jump forecast in 2010 by banking analyst Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group. Read more.

For more on municipal defaults, distress and chapter 9 filings, be sure to pick up a copy of ABI's Municipalities in Peril: The ABI Guide to Chapter 9, Second Edition, available now in ABI’s Bookstore.

ANALYSIS: "TOO BIG TO FAIL" MAY BE TOO HARD TO FIX AMID CALLS TO CURB BANK GROWTH

Top U.S. bank regulators and lawmakers are pushing for action to limit the risk that the government again winds up financing the rescue of one or more of the nation's biggest financial institutions, according to a Bloomberg News analysis yesterday. Officials leading the debate, including Federal Reserve Governor Daniel Tarullo, Dallas Fed President Richard Fisher and Senator Sherrod Brown (D-Ohio), share the view that the 2010 Dodd-Frank Act failed to curb the growth of large banks after promising in its preamble to "end too big to fail." Strategies under consideration include capping the size of big banks, making them raise more capital, discouraging mergers and requiring that financial firms hold specified levels of long-term debt to convert into equity in a failure. JPMorgan's 2012 trading loss of more than $6.2 billion from a bet on credit derivatives raised questions anew about whether the largest institutions have grown too complex to oversee effectively. That loss is among events that "have proven 'too big to fail' banks are also too big to manage and too big to regulate," Brown said. "The question is no longer about whether these megabanks should be restructured, but how we should do it." Brown and fellow Banking Committee member David Vitter (R-La.) are considering legislation that would impose capital levels on the largest banks higher than those agreed to by the Basel Committee on Banking Supervision and the Financial Stability Board, which set global standards. Brown also plans to reintroduce a bill he failed to get included in Dodd-Frank or passed in the last Congress that would cap bank size and limit non-deposit liabilities. Read more.

COMMENTARY: DESPITE REORGANIZATIONS, SCANT SIGNS OF CHANGE IN AIRLINE INDUSTRY

Airlines rarely seem to use chapter 11 as an opportunity to try something new, even though a reorganization presents an ideal time to alter their business practices, according to a commentary yesterday by Prof. Stephen J. Lubben of Seton Hall Law in the New York Times DealBook blog. Not long after the Bankruptcy Code was enacted in 1978, major airlines began filing bankruptcy, beginning with classic cases like Eastern Airlines and Pan Am. More recently, major airlines have followed one of two main paths in their reorganization cases. Some sell themselves to another airline. TWA's last chapter 11 case, when it sold its assets under § 363 of the Code to American, is a good example. The other path is to reorganize as a stand-alone entity. Under this approach, the airline imposes some pain on shareholders, employees and creditors, but otherwise comes out the other side essentially the same company as it was before bankruptcy. Airlines find themselves in bankruptcy often, much like the railroads of an earlier age, as they have high fixed costs and are highly sensitive to economic conditions. Read the full commentary.

JUSTICE DEPARTMENT ACCUSES CRIME RING OF $200 MILLION CREDIT CARD FRAUD

The Justice Department said that an international crime ring created thousands of fake identities to obtain tens of thousands of credit cards and steal more than $200 million, Bloomberg News reported today. Charges against 18 people were unsealed today in federal court in Newark, N.J., where U.S. Attorney Paul Fishman said that the scam was "one of the largest credit card fraud schemes ever uncovered" by the Justice Department. The conspirators created thousands of false identities and credit profiles, burnished their creditworthiness, and took large loans that were never repaid, according to the U.S. Federal Bureau of Investigation arrest complaint. Millions of dollars were wired overseas to Pakistan, India, the United Arab Emirates, China, Romania, Japan and Canada, the FBI claims. Read more.

LAW FIRM BANKRUPTCIES AMONG TOPICS TO BE EXAMINED AT ABI'S 31ST ANNUAL SPRING MEETING

The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• Current Issues for Financial Advisors in Bankruptcy Cases
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Register today!

ABI IN-DEPTH

ABI LIVE WEBINAR: REVISITING RADLAX AND HALL – NEW LEGAL AND PRACTICAL IMPACT OF THE DECISIONS

See why this was the top-rated panel at the ABI Winter Leadership Conference last month! Join the expert panel on Feb. 19 from 12:00-1:15pm EST as the summarize and discuss the legal impact and practical implications of the Supreme Court’s 2012 decisions in Radlax and Hall. Participants include:

Susan M. Freeman of Lewis and Roca LLP (Phoenix)

Adam A. Lewis of Morrison & Foerster LLP (San Francisco)

• Prof. Charles J. Tabb of the University of Illinois College of Law (Champaign, Ill.)

Eric E. Walker of Perkins Coie LLP (Chicago)

Click here to register!

DON'T MISS THE 9TH ANNUAL WHARTON RESTRUCTURING AND DISTRESSED INVESTING CONFERENCE ON FEB. 22!

The University of Pennsylvania's Wharton School of Business will be holding the 9th Annual Wharton Restructuring and Distressed Investing Conference on Feb. 22 at the Hyatt at The Bellevue in Philadelphia. The theme of this year's conference is “Health of Nations: Distress, Recovery or Revival?” It will offer a unique opportunity to hear from a distinguished gathering of keynote speakers and panelists in their discussion of the current economic climate and issues of debt, investing, and restructuring across the globe. To register, please click here.

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!

An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: IN RE PORAYKO (7TH CIR.)

Summarized by George Spathis of Horwood Marcus & Berk

A recent ruling by the Seventh Circuit found that a checking account constitutes "personal property" that remains within the "control" of the account's holder, and therefore is subject to a citation lien under Illinois law.

There are more than 750 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: REFLECTING ON THE LESSONS LEARNED FROM MAMMOTH LAKES' CHAPTER 9 CASE

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines some of the lessons learned from the chapter 9 filing of Mammoth Lakes, Calif.

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

After Stern, bankruptcy courts do not have the constitutional authority to enter final judgments on fraudulent conveyance claims.

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.

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THURSDAY:

 

 

 

ACBPIKC 2013
Feb. 7-9, 2013
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COMING UP:

 

 

 

ABI Live Webinar: Revisiting RadLAX and Hall- New Legal and Practical Impact of the Decisions
Feb. 19, 2013
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ACBPIKC 2013
Feb. 20-22, 2013
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9th Annual Wharton Restructuring and Distressed Investing Conference
Feb. 22, 2013
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Paskay 2013
March 7-9, 2013
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BBW 2013
March 22, 2013
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"Nuts and Bolts" Program at ASM- A Must for Junior Professionals or Those New to Bankruptcy Practice
April 18, 2013
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ASM 2013
April 18-21, 2013
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ASM 2013
May 16, 2013
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  CALENDAR OF EVENTS
 

2013

February
- Caribbean Insolvency Symposium
     February 7-9, 2013 | Miami, Fla.
- ABI Live Webinar: Revisiting RadLAX and Hall- New Legal and Practical Impact of the Decisions
     February 19, 2013
- VALCON 2013
     February 20-22, 2013 | Las Vegas, Nev.
- 9th Annual Wharton
Restructuring and Distressed Investing Conference

     February 22, 2013 | Philadelphia, Pa.


  

 

March
- 37th Annual Alexander L. Paskay Seminar on Bankruptcy Law and Practice
     March 7-9, 2013 | St. Petersburg, Fla.
- Bankruptcy Battleground West
     March 22, 2013 | Los Angeles, Calif.

April
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.

May
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.


 
 
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Report Many Cant Pay Their Direct Federal Student Loans

ABI Bankruptcy Brief | August 6, 2013
 
  

August 6, 2013

 
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  NEWS AND ANALYSIS   

REPORT: MANY CAN'T PAY THEIR DIRECT FEDERAL STUDENT LOANS

Just about four in 10 borrowers with direct federal student loans are paying them back, according to a report released yesterday that offers the first comprehensive snapshot of the program since the government created it in 2010, the Wall Street Journal reported today. Many of the 27.8 million borrowers with these newer direct federal loans aren't yet required to make payments: About 35 percent are still in school or within a six-month grace period after graduation, the report said. But about 18 percent are in programs designed to help distressed borrowers or have returned to school. Nearly 8 percent are in default, meaning the borrower hasn't made a payment in at least a year, according to the Consumer Financial Protection Bureau, the federal regulator that released the report. The report indicates that a significant number of borrowers in the new program are unable to repay. Excluding borrowers who don't yet have to make payments because they are still in school or within the grace period, more than a fifth -- about 22 percent -- are in default or forbearance. Read more. (Subscription required.)

Click here to read the CFPB's report.

COMMENTARY: MOTOWN'S PENSION SHOWDOWN

Detroit's unions have found an unlikely ally in Michigan's Republican Attorney General Bill Schuette, who has taken up their argument that the state constitution precludes federal bankruptcy court from reducing pension benefits, according to an editorial in the Wall Street Journal today. If this view holds, according to the editorial, unions and politicians in financially strapped cities will be able to use chapter 9 as a new political default to shed their bond debts. The Detroit case is likely to set precedents because it's the first large city that has tried to force haircuts on pensioners through bankruptcy. Politicians in the bankrupt cities of Vallejo and Stockton, Calif., sidestepped the issue of whether federal bankruptcy law pre-empts state pension protections after the California Public Employees' Retirement System threatened an expensive legal fight. But with $3.5 billion in unfunded pension liabilities, Detroit can't afford to duck. While the U.S. Constitution's Supremacy Clause would seem to give federal bankruptcy law the upper hand, Congress has traditionally sought to straddle the U.S. system of dual sovereignty by including explicit pre-emptory language in statutes that are intended to supersede state laws. Chapter 9's language doesn't explicitly pre-empt state laws, according to the editorial, but there's a strong case to be made that pre-emption is intrinsic to municipal bankruptcy. The legal tension comes because Michigan's constitution, which passed in 1963, holds that "accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby." Read more. (Subscription required.)

A similar commentary in yesterday's New York Times finds that while it isn't politically feasible for the federal government to bail out Detroit, President Obama and Congress must step in to avert the worst fiscal collapse in urban American history. The commentary makes the case that the government must intervene because the symptoms of the municipal illness that made Detroit, with an estimated $18 billion in liabilities, the largest city in American history to declare bankruptcy are showing up in other cities. Emergency response times are lengthening in cash-starved cities. Libraries, parks and recreation facilities are shortening their hours or closing. Potholes go unfilled, sidewalks unrepaired and trees untrimmed. All that makes urban life rewarding and uplifting is under increasing pressure, in large part because of unaffordable public employee pension and health care costs. Read the full commentary.

For the latest information and analysis about the Detroit case, be sure to visit ABI's dedicated website, http://news.abi.org/Detroit.

PRIVATE-EQUITY PAYOUT DEBT SURGES

Private-equity firms are adding debt to companies they own in order to fund payouts to themselves at a record pace, as fears are mounting that the window for these deals will close if interest rates rise, the Wall Street Journal reported today. So far this year, $47.4 billion of new loans and bonds have been sold by companies to pay dividends to the private-equity firms that own them, according to data provider S&P Capital IQ LCD. That is 62 percent more than the same period last year, which wound up being the biggest year on record, with $64.2 billion sold to fund private-equity payouts. The added debt, known as a recapitalization, can increase companies' risk of default, according to a recent study by Moody's Investors Service. As dividend deals increase, many also are unusually risky lately, carrying low credit ratings and paying historically low interest rates to investors. "This is the leveraged-finance debt market that you can't quite kill," said Richard Farley, a lawyer with Paul Hastings LLP who represents banks in buyouts. Read more. (Subscription required.)

ANALYSIS: RETURN OF MEGA-MERGERS REFLECTS GROWING CONFIDENCE IN ECONOMY

Analysts say that the recent spike in merger activity reflects the return of the mega-merger and a gradual uptick in business confidence in the economy, the Washington Post reported today. It has been most evident in the ongoing battle for Dell computers, with founder Michael Dell upping his bid for the company to $25 billion Friday, and the high-profile buyout of H.J. Heinz by Warren Buffett's Berkshire Hathaway. Although the number of mergers is down compared with the corresponding period last year, a series of mega-mergers has helped increase the value of merger activity in 2013 to $607 billion from $486 billion during the corresponding period in 2012. Activity is picking up after an uneventful 2012, when no mega-mergers were announced, analysts said. But it is still far from 2011 levels, when low valuations contributed to a rush for deals. Read more.

CONSUMER SPENDING, INCOME CLIMB IN JUNE

U.S. consumer spending increased and inflation pushed higher in June, which could strengthen expectations that the Federal Reserve will curtail its bond purchases later this year, Reuters reported on Friday. The Commerce Department said on Friday that consumer spending rose 0.5 percent, lifted by automobile purchases and higher gasoline prices. May's increase was revised down to 0.2 percent from a previously reported 0.3 percent. June's increase in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was in line with economists' expectations. With prices picking up, consumer spending adjusted for inflation nudged up 0.1 percent. The consumer spending numbers were included in the second-quarter GDP report on Wednesday, which showed that the economy grew at a 1.7 percent annual pace after expanding at a 1.1 percent rate in the first three months of the year. Read more.

IN CASE YOU MISSED IT - abiLIVE WEBINAR DISCUSSING § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES RECORDING IS NOW AVAILABLE!

If you were not able to attend ABI's recent abiLIVE webinar examining § 1111(b), a recording of the program is now available for downloading! Utilizing a case study, ABI's panel of experts explored the issues surrounding a lender's decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel also walked attendees through the necessary mathematical analyses used to examine these issues. The 90-minute recording is available for the special price of $75 and can be purchased here.

abiLIVE WEBINAR ON AUGUST 20: HOW WILL THE NEW U.S. TRUSTEE FEE GUIDELINES IMPACT YOU?

The new U.S. Trustee Fee Guidelines will affect all attorneys and firms who work on larger chapter 11 cases filed on or after Nov. 1. ABI's Ethics & Professional Compensation Committee will present a panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, to discuss some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. Register today to hear government, attorney and academic perspectives speak on this important and timely topic.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE MID-ATLANTIC BANKRUPTCY WORKSHOP ON FRIDAY

The 5th stop for the ABI Golf Tour is the Hershey Country Club, held in conjunction with this week's Mid-Atlantic Bankruptcy Workshop. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Conference. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!

Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

NEW CASE SUMMARY ON VOLO: CHARLES W. RIES V. SCARLETT & GUCCIARDO, PA, ET AL. (8TH CIR.)

Summarized by Michael Cooley of Akin Gump Strauss Hauer & Feld LLP

Applying the plain language of Fed. R. Civ. P. 15(c)(1), the Eighth Circuit affirmed the principle that whether the party seeking to amend a pleading knew, when the original pleading was filed, of the identity of the party left out is irrelevant to the question of whether the amended pleading may relate back to the date of the original pleading. Rather, the ability to relate back an amendment to the date of the original pleading depends on whether the party to be added knew or should have known that, but for the mistake, it would have been named in the original pleading. Additionally, this case serves as an important reminder of the value in structuring settlement agreements to safeguard against the possibility that a bankruptcy filing thereafter could leave the nondebtor party to disgorge settlement payments as preferential transfers without the ability to resurrect the claims originally settled in consideration therefore.

There are more than 900 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: ONLY CONGRESS THINKS MAIN STREET BANKS ARE "TBTF"

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Removing the arbitrary size designation for systemically important financial institutions would reduce costly regulation for regional banks, encourage industrywide competition and concentrate regulators' efforts on firms that actually warrant attention, according to a recent blog post.

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

A class of claims should not be considered impaired for purposes of § 1129(a)(10) if the impairment results from the plan proponents' exercise of discretion (i.e., artificial impairment) and not driven by economic need. (In re Village at Camp Bowie I LP).

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 43 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.

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MA 2013
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SW 2013
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  CALENDAR OF EVENTS
 

2013

August
- Mid-Atlantic Bankruptcy Workshop
    August 8-10, 2013 | Hershey, Pa.
- abiLIVE Webinar: How Will the New U.S. Trustee Fee Guidelines Impact You?
     August 20, 2013
- Southwest Bankruptcy Conference
    August 22-24, 2013 | Incline Village, Nev.

September
- ABI Endowment Golf & Tennis Outing
    Sept. 10, 2013 | Maplewood, N.J.
- ABI Endowment Baseball Game
    Sept. 12, 2013 | Baltimore, Md.
- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
    Sept. 18-19, 2013 | New York
- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors
     Sept. 24, 2013
- Bankruptcy 2013: Views from the Bench
    Sept. 27, 2013 | Washington, D.C.

October
- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum
    Oct. 4, 2013 | Kansas City, Mo.
- Professional Development Program
    Oct. 11, 2013 | New York, N.Y.


  


- Chicago Consumer Bankruptcy Conference
    Oct. 14, 2013 | Chicago, Ill.
- International Insolvency & Restructuring Symposium
    Oct. 25, 2013 | Berlin, Germany

November
- Complex Financial Restructuring Program
   Nov. 7, 2013 | Philadelphia, Pa.
- Corporate Restructuring Competition
   Nov. 7-8, 2013 | Philadelphia, Pa.
- Austin Advanced Consumer Bankruptcy Practice Institute
   Nov. 10-12, 2013 | Austin, Texas
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.

December
- Winter Leadership Conference
    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.
- ABI/St. John’s Bankruptcy Mediation Training
    Dec. 8-12, 2013 | New York


 
 
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Regulators and 13 Banks Complete 9.3 Billion Deal for Foreclosure Relief

ABI Bankruptcy Brief | February 26 2013
 
  

February 28, 2013

 
home  |  newsroom  |  chart of the day  |  blogs  |  bankruptcy code and rules  |  statistics  |  legislative news  |  volo
  NEWS AND ANALYSIS   

REGULATORS AND 13 BANKS COMPLETE $9.3 BILLION DEAL FOR FORECLOSURE RELIEF

Federal banking regulators have reached a $9.3 billion pact with 13 major lenders to settle claims of foreclosure abuses like bungled loan modifications and flawed paperwork, the New York Times DealBook blog reported today. The settlement is made up of $3.6 billion in cash relief and $5.7 billion in relief to avert foreclosures. Under the deal, homeowners can receive up to $125,000 in cash relief. Despite the banner numbers in the settlement, consumer groups and a range of lawmakers have criticized it for not providing enough relief for aggrieved homeowners. The agreement formalizes the tentative deals that were reached in January between the mortgage servicing companies and the regulators from the Office of the Comptroller of the Currency and the Federal Reserve. Read more.

FORECLOSURE SALES IN 2012 HIT LOWEST MARK IN FIVE YEARS

While 2012 had the fewest foreclosure-related sales of homes since 2007, RealtyTrac released figures today showing that levels remained far higher than before the bursting of the housing-market bubble, MarketWatch.com reported today. Almost 950,000 U.S. properties in some state of foreclosure or owned by a bank were sold in 2012, down 6 percent from the prior year, according to RealtyTrac, an online foreclosure marketplace. Despite the decline, these sales remain far above the pre-bubble-burst levels: There were about 46,000 foreclosure-related sales in 2005, according to RealtyTrac. Foreclosure-related sales made up about 21 percent of all U.S. residential sales last year, down from 23 percent in the prior year, but much greater than the roughly 1 percent of foreclosure sales in 2005. Meanwhile, properties sold as short sales rose 4 percent from the prior year. These short sales made up about 22 percent of all residential sales last year. Read more.

CFPB DECELERATES REVIEW OF CHECKING OVERDRAFT RULES

The Consumer Financial Protection Bureau (CFPB), which last year began exploring whether to tighten rules on checking overdraft fees, has decided against quick action after hearing from smaller U.S. banks that rely on the revenue, Bloomberg News reported today. The bureau announced Feb. 22, 2012, that it was collecting data on overdraft practices and would complete the inquiry by the end of 2012. Nine large banks, including Bank of America Corp., U.S. Bancorp and Regions Financial Corp., are providing information. This month, CFPB director Richard Cordray said that no decisions have been made about possible new rules, adding that "over the next couple of years" the agency will continue to work on the matter. Camden Fine, president of the Independent Community Bankers of America, said revenue from overdraft fees represents 3 percent to 15 percent of total income for institutions in his association. In 2011, bank customers paid $31.6 billion in overdraft fees, down from $33.1 billion in 2010, according to Moebs Services, a research firm. About 15 million Americans overdraw their accounts 10 or more times a year, Moebs reported. Read more.

COMMENTARY: "TOO BIG TO FAIL" RULES HURTING "TOO SMALL TO COMPETE" BANKS

Almost five years have passed since governments in Europe, the U.K. and the U.S. used about $600 billion in capital to shore up banks during the worst financial crisis since the Great Depression, and regulators are still trying to ensure that it never happens again, according to a Bloomberg News commentary today. "With all the debating going on, the financial market structure didn't change very much," Zhu Min, the International Monetary Fund's deputy managing director, said in January. Some say the industry's biggest banks should be forced to break up, including Sanford Weill and John Reed, who created New York-based Citigroup Inc. They have said that financial conglomerates could be more valuable and safer if split apart. So have former Merrill Lynch & Co. Chief Executive Officer David Komansky and former Morgan Stanley CEO Philip Purcell. Investors such as Joshua Siegel, founder and managing principal at New York-based StoneCastle Partners LLC, see bigger changes at the other end of the spectrum. Small banks will seek mergers because their management teams are aging and new regulations are too costly to bear, he says. JPMorgan's Jamie Dimon, a critic of regulations he views as unnecessary or excessive, has recently touted the benefits. He told Citigroup analysts this month that new rules will help banks such as JPMorgan, the largest in the U.S., win market share from smaller competitors, the analysts wrote in a report. Read more.

ANALYSIS: FOR SEC, A SETBACK IN BID FOR MORE TIME IN FRAUD CASES

The Supreme Court yesterday delivered a swift and decisive rejection of the Securities and Exchange Commission's argument that it should operate under a more forgiving statute of limitations in pursuing penalties in fraud cases, the New York Times DealBook blog reported yesterday. As a result of the decision, the agency will have to find a long-term solution to give itself more time to investigate cases. In Gabelli v. Securities and Exchange Commission, Chief Justice John G. Roberts Jr. wrote in the unanimous decision rejecting the SEC's argument that a federal statute that limits the government's authority to pursue civil penalties should commence when a fraud is discovered, not when it occurs. The SEC was hoping that the court would apply what is known as the "discovery rule." In 2010, the Supreme Court endorsed this rule in a private securities fraud class-action suit, Merck & Co. v. Reynolds, stating that "something different was needed in the case of fraud, where a defendant's deceptive conduct may prevent a plaintiff from even knowing that he or she has been defrauded." In the Gabelli case, the SEC filed fraud charges in 2008 against mutual fund manager Marc Gabelli and a colleague, Bruce Alpert, saying that they had violated the Investment Advisers Act of 1940 for permitting an investor to engage in market timing. In its complaint, the SEC sought civil monetary penalties based on market timing that it claimed had taken place from 1999 to 2002, which resulted in the preferred investor purportedly reaping significant profits while ordinary investors suffered large losses. Read more.

LATEST BLOOMBERG "BILL ON BANKRUPTCY" VIDEO: SECRET MADOFF AGREEMENT MAY HARM VICTIMS

Money stolen from victims of the Bernie Madoff Ponzi scheme is earmarked for someone who may have been an accomplice in the fraud, and the agreement is being kept secret by a federal district judge. That's the first item on the new video with Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle. Click here to view.

DON’T MISS THE ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"

A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.

ABI'S ANNUAL SPRING MEETING: CONSUMER PROGRAMMING WITH CROSS-OVER APPEAL

With four session tracks looking at issues geared toward chapter 11 restructurings, financial advisors, professional development and consumer bankruptcy, a number of sessions at ABI's Annual Spring Meeting have cross-over appeal for both consumer and business practitioners. Sessions include:

The Appellate Process: This distinguished panel will explore recent issues in appellate practice that are of interest to both consumer and business practitioners, including the ability to bypass intermediary appellate courts and take appeals directly to the circuit courts.

Consumer Class Actions: This panel will explore the potential benefits and pitfalls of class actions by debtors/trustees against creditors in chapter 13 cases, which are highlighted by two recent decisions of the Fifth Circuit. Many of the issues discussed during this panel will be useful in business cases as well.

The Individual Conundrum - Chapter 7, 11 or 13?: Deciding on the appropriate chapter for a high net worth individual contemplating a bankruptcy filing can be a daunting task. This panel will explore the considerations that guide the practitioner in advising individual clients in making this decision.

To register for the Annual Spring Meeting and to see the full schedule of program tracks and events, please click here.

ABI IN-DEPTH

MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"

Do not miss the "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. ABI's panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:

  • Prof. Daniel A. Austin of Northeastern University School of Law (Boston)

  • Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)

  • Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)

CLE credit will be available for the webinar. This webinar is sure to sell out; register now for the special ABI member rate of $75!

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!

An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: CLINTON AVENUE CLO FUND LTD. V. BANK OF AMERICA, N.A. (11TH CIR.)

Summarized by Weston Eguchi of Willkie Farr & Gallagher LLP

Affirming the district court's rulings, the Eleventh Circuit concluded that (A) the plaintiff term lenders lacked standing to enforce the defendant revolving lenders' promise to lend to borrowers under a credit agreement; and (B) summary judgment on the issue of whether the revolving lenders were required to fund under the credit agreement was inappropriate where the relevant contractual language was ambiguous such that consideration of extrinsic evidence of the parties' intent would be necessary.

There are more than 750 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: ASSIGNMENT OF RENTS: SIXTH CIRCUIT THROWS OUT DEBT-BUYER SETTLEMENT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post reported that the Sixth Circuit recently threw out a nationwide settlement involving Midland, a robo-signing debt buyer, and more than a million consumers. This will allow other class and individual actions to proceed against Midland. The suit was thrown out for faulty notice to class members, who were not told in the settlement notice that they’d lose their individual fraud claims against Midland.

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

As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.

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.

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Paskay 2013
March 7-9, 2013
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BBW 2013
March 22, 2013
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BBW 2013
April 5, 2013
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BBW 2013
April 10, 2013
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BBW 2013
April 18, 2013
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ASM 2013
April 18-21, 2013
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NYCBC 2013
May 15, 2013
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ASM 2013
May 16, 2013
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ASM 2013
May 21-24, 2013
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ASM 2013
June 7, 2013
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ASM 2013
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  CALENDAR OF EVENTS
 

2013

March
- 37th Annual Alexander L. Paskay Seminar on Bankruptcy Law and Practice
     March 7-9, 2013 | St. Petersburg, Fla.
- Bankruptcy Battleground West
     March 22, 2013 | Los Angeles, Calif.

April
- ABI Live Webinar: "Legacy Liabilities : Dealing with Environmental, Pension, Union and Similar Types of Claims"
     April 5, 2013
- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"
     April 10, 2013
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.


  

 

May
- "Nuts and Bolts" Program at NYCBC
     May 15, 2013 | New York, N.Y.
- ABI Endowment Cocktail Reception
     May 15, 2013 | New York, N.Y.
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.
- Litigation Skills Symposium
     May 21-24, 2013 | Dallas, Texas

June
- Memphis Consumer Bankruptcy Conference
     June 7, 2013 | Memphis, Tenn.
- Central States Bankruptcy Workshop
     June 13-16, 2013 | Grand Traverse, Mich.


 
 
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Analysis Better Lending Standards Helping to Reduce Foreclosure Starts

ABI Bankruptcy Brief | February 19 2013
 
  

February 19, 2013

 
home  |  newsroom  |  chart of the day  |  blogs  |  bankruptcy code and rules  |  statistics  |  legislative news  |  volo
  NEWS AND ANALYSIS   

ANALYSIS: BETTER LENDING STANDARDS HELPING TO REDUCE FORECLOSURE STARTS

While numerous foreclosure prevention efforts at the national, state and local levels, along with rising home values, have helped drop U.S. foreclosure starts to a six-year low in January, the fundamental factor driving the reduction is better lending practices, according to a Forbes.com commentary yesterday. More than 5 percent of still-active loans originated in 2006 were in some stage of foreclosure as of the fourth quarter of 2012 -- the highest foreclosure rate of any year going back to 2000. That was followed by 2007 vintage loans with a 4.75 percent foreclosure rate, 2005 vintage loans with a 3.52 percent foreclosure rate, and 2008 vintage loans with a 2.95 percent foreclosure rate. The only other loan vintage with a foreclosure rate above 2 percent was 2004, with a 2.16 percent foreclosure rate. The foreclosure rate on 2009 vintage loans dropped to 1.11 percent, and the foreclosure rate has steadily decreased on loans originated in the three years since -- all of which have foreclosure rates below 1 percent. Read more.

COMMENTARY: THE SECOND-MORTGAGE SHELL GAME

Though the federal government and 49 state attorneys general reached a $25 billion deal last February with the country's five largest mortgage servicers (Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial), it is now clear that the settlement has not worked as planned, according to a commentary in yesterday's New York Times. Banks have dragged their feet on modifying first mortgages, much less agreeing to forgive part of the principal on homes that are underwater. A lesser-known but equally grave problem is that banks have been given a backdoor mechanism to continue foreclosures at the same pace as before. The problem involves second mortgages, which millions of homeowners took out during the housing bubble. It is estimated that as much as a quarter of all mortgage debt in the U.S. is in the form of second mortgages. Some of these loans were taken out to finance home improvements, others were part of a subprime product known as an "80/20 mortgage," in which 80 percent of the purchase price was covered by a first, adjustable-rate mortgage, and the remainder by a second mortgage, often with a much higher interest rate. The second mortgages have given the banks a loophole: each dollar a bank forgives goes toward fulfilling its obligation under last year’s settlement. But many lenders have made it a point to almost exclusively modify secondary loans while all but ignoring the troubled, primary mortgages, according to the commentary. Read the full commentary.

SHIFTING STRATEGY, PROSECUTORS BUILD NEW CASES AGAINST BIG BANKS

Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks, the New York Times DealBook Blog reported today. In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations. So far, the Justice Department has extracted guilty pleas only from remote subsidiaries of big foreign banks, a move that has inflicted reputational damage but little else. The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks' Japanese subsidiaries pleaded guilty to felony wire fraud. Read more.

ANALYSIS: FISCAL TROUBLE AHEAD FOR MOST FUTURE RETIREES

For the first time since the 1930s, a majority of Americans are headed toward a retirement in which they will be financially worse off than their parents, jeopardizing a long era of improved living standards for the nation’s elderly, the Washington Post reported yesterday. The Great Recession and the weak recovery darkened the retirement picture for significant numbers of Americans. The economic downturn exacerbated long-term factors that were already eroding the financial standing of aging Americans: an inexorable rise in health care costs, growing debt among older Americans and a shift in responsibility from employers to workers to plan for retirement. The consequence is that the nation is facing a huge retirement savings deficit -- as much as $6.6 trillion, or about $57,000 per household, according to a U.S. Senate report. Using data on household finances collected by the Federal Reserve, the Center for Retirement Research estimates that 53 percent of American workers 30 and older are on a path that will leave them unprepared for retirement. That marks a sharp deterioration since 2001, when 38 percent of Americans were at risk of declining living standards in old age. In 1989, 30 percent faced that risk. Read more.

REGULATOR PROBES "DARK POOL" INVESTING

The Financial Industry Regulatory Authority (FINRA) in late 2012 sent examination letters to about 15 dark-pool operators seeking information such as how the trading systems handle customer orders, what they disclose to clients and whether affiliates of the pool operators have access to client trading information, the Wall Street Journal reported on Saturday. In dark-pool investing, investors post buy-and-sell orders away from the public market. Most of the letters have been returned, and the regulator is evaluating the responses, said John Malitzis, executive vice president of market regulation at FINRA. Unlike stock exchanges, which are regulated by the Securities and Exchange Commission, the trading venues in dark pools are not required to regularly tell market regulators details about how they handle orders. Dark pools have become controversial as their share of stock trading has increased. One area of concern is whether certain dark-pool clients get more information than other investors about how the venues operate, giving them an edge, said Malitzis. "We asked a lot of questions about disclosure," he said. "We're trying to get a sense of what firms are doing and how they're doing it." Read more. (Subscription required.)

LIVE STREAM AVAILABLE FOR THURSDAY'S CHAPTER 11 COMMISSION HEARING AT VALCON 2013

For those not able to attend the VALCON 2013 conference starting tomorrow in Las Vegas, there will be a live webstream of Thursday's Chapter 11 Commission field hearing looking at valuation issues. The hearing will take place from 2-4 p.m. PT (5-7 p.m. ET) and will be streamed live at http://commission.abi.org.

JUST ADDED FOR APRIL! ABI LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS - BUT DOES CONGRESS?"

Do not miss the "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. ABI's panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:

  • Prof. Daniel A. Austin of Northeastern University School of Law (Boston)

  • Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)

  • Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)

CLE credit will be available for the webinar. This webinar is sure to sell out; register now for the special ABI member rate of $75!

EXPLORE CURRENT ISSUES FOR FINANCIAL ADVISORS IN BANKRUPTCY CASES AND MORE AT ABI'S 31ST ANNUAL SPRING MEETING

The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• Law Firm Bankruptcies
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Click here to register today!

ABI IN-DEPTH

DON'T MISS THE 9TH ANNUAL WHARTON RESTRUCTURING AND DISTRESSED INVESTING CONFERENCE ON FEB. 22!

The University of Pennsylvania's Wharton School of Business will be holding the 9th Annual Wharton Restructuring and Distressed Investing Conference on Feb. 22 at the Hyatt at The Bellevue in Philadelphia. The theme of this year's conference is “Health of Nations: Distress, Recovery or Revival?” It will offer a unique opportunity to hear from a distinguished gathering of keynote speakers and panelists in their discussion of the current economic climate and issues of debt, investing, and restructuring across the globe. To register, please click here.

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!

An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: BLACK V. BONNIE SPRINGS FAMILY LTD. PARTNERSHIP (IN RE BLACK; 9TH CIR.)

Summarized by Tom Phinney of Parkinson Phinney

The Ninth Circuit BAP affirmed the summary judgment in favor of the creditor, which excepted debts from discharge under § 523(a)(6) based on the preclusive effect of a Nevada state court judgment for abuse of process, nuisance and "oppression."

There are more than 750 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: S CORPORATION MAY NOT PAY SHAREHOLDERS' POST-PETITION TAX OBLIGATIONS

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Finding that it would violate the absolute priority rule, the U.S. Bankruptcy Court for the Western District of North Carolina in In re Carolina Internet Ltd. held that an insolvent S corporation may not pay post-petition taxes on behalf of its shareholders because a corporation’s creditors have priority over its shareholders, according to a recent blog post.

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

As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.

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.

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TOMORROW:

 

 

 

ACBPIKC 2013
Feb. 20-22, 2013
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COMING UP:

 

 

 

 

9th Annual Wharton Restructuring and Distressed Investing Conference
Feb. 22, 2013
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Paskay 2013
March 7-9, 2013
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BBW 2013
March 22, 2013
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NEW WEBINAR!BBW 2013
April 10, 2013
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"Nuts and Bolts" Program at ASM- A Must for Junior Professionals or Those New to Bankruptcy Practice
April 18, 2013
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ASM 2013
April 18-21, 2013
Enter code "LOVEASM50" at checkout to save $50 on a new registration this week!
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NYCBC 2013
May 15, 2013
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ASM 2013
May 16, 2013
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ASM 2013
May 21-24, 2013
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ASM 2013
June 7, 2013
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ASM 2013
June 13-16, 2013
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  CALENDAR OF EVENTS
 

2013

February
- VALCON 2013
     February 20-22, 2013 | Las Vegas, Nev.
- 9th Annual Wharton
Restructuring and Distressed Investing Conference

     February 22, 2013 | Philadelphia, Pa.

March
- 37th Annual Alexander L. Paskay Seminar on Bankruptcy Law and Practice
     March 7-9, 2013 | St. Petersburg, Fla.
- Bankruptcy Battleground West
     March 22, 2013 | Los Angeles, Calif.

April
- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"
     April 10, 2013
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.


  

 

May
- "Nuts and Bolts" Program at NYCBC
     May 15, 2013 | New York, N.Y.
- ABI Endowment Cocktail Reception
     May 15, 2013 | New York, N.Y.
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.
- Litigation Skills Symposium
     May 21-24, 2013 | Dallas, Texas

June
- Memphis Consumer Bankruptcy Conference
     June 7, 2013 | Memphis, Tenn.
- Central States Bankruptcy Workshop
     June 13-16, 2013 | Grand Traverse, Mich.


 
 
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