May 19th, 2012
By Mike Spector and Jennifer Smith
New York law firm Dewey & LeBoeuf LLP is readying a possible bankruptcy-protection filing for sometime in the next several weeks, said people familiar with the matter, a move that would initiate official liquidation of the beleaguered institution.
Dewey within the last week brought aboard an operational turnaround and restructuring firm to help the law firm collect receivables and attempt to return money to lenders and other creditors, according to the people familiar with the matter. Deweys remaining lawyers and outside advisers are working to be ready to file for bankruptcy protection by the end of next week, though the actual filing could come well after, these people said.
Interactive Graphic: See who else has left Dewey and where they have gone.
Most of Deweys partners, including its crisis leadership team, have left the firm over the past five months, as disputes over compensation and towering debts brought the 1,000-lawyer law firm to its knees. Many of Deweys U.S. offices were closed or nearly empty in the past week, with 433 people laid off in New York alone, according to a notice filed with the state Labor Department.
Exactly how Dewey officially ceases operations remains under discussion and no final decisions have been made, the people said. Dewey lawyers have said recently that they planned to wind down without going through a bankruptcy court.
But a bankruptcy filing has become an increasingly likely option as Deweys remaining employees and advisers huddle to chart Deweys end game, one of the people said. Dewey will have to negotiate with landlords who could at some point move to seize office equipment in lieu of rent payments unless the law firm seeks bankruptcy protection, this person said. Dewey needs computers and access to offices to wind down, the person said.
A Dewey spokesman had no immediate comment.
Dewey tapped restructuring firm Zolfo Cooper in the past week for additional help winding down the law firms operations. Joff Mitchell, a senior managing director at Zolfo, is now serving as Deweys chief restructuring officer, said people familiar with the matter. Albert Togut, a bankruptcy lawyer at Togut, Segal & Segal LLP, would handle the bankruptcy filing, one of the people said.
Zolfo Cooper, meanwhile, usually helps companies restructure their operations, sometimes offering advisers to take interim management roles. The firm also enlists advisers to oversee defunct operations and develop plans for returning money to creditors. Stephen Cooper, one of the firms namesakes, has alongside teams at the firm overseen Enron Corp. as it liquidated and film studio Metro-Goldwyn-Mayer Studios Inc. before and during prepackaged bankruptcy proceedings. Mr. Cooper is no longer with the firm and isnt working on the Dewey situation.
Dewey owes $75 million on a $100 million credit line from banks led by J.P. Morgan Chase & Co. Distressed-debt investors have been circling around Dewey creditors in recent days to buy up potential claimsbetting that they can nab them at discounts and get a better recovery when the law firm ultimately winds down.
Posted in Information | No Comments »
May 19th, 2012
NEW YORK (Reuters) – Ailing law firm Dewey & LeBoeuf is considering a bankruptcy filing as new debtholders take a more aggressive track, shifting away from earlier attempts at an out-of-court liquidation, a person familiar with the matter said on Friday.
The majority of Dewey‘s partners have quit as a result of concerns about compensation, and $225 million in bank loans and bond debt.
Buyers of distressed debt who have acquired Dewey’s debt at a discount on the secondary market are more open to seeing the firm wound down in bankruptcy court rather than out of it, said the person, who requested anonymity because the information was not public.
With the emergence of new creditors, Dewey on Tuesday replaced restructuring adviser Development Specialists Inc. (DSI) with competitor Zolfo Cooper. Joff Mitchell, a senior managing director at Zolfo, is now Dewey’s chief restructuring officer, two people familiar with the situation said.
Bill Brandt, chief executive of DSI, confirmed that his firm’s involvement in the matter was coming to an end.
“Our firm is transitioning out,” Brandt said. “We’ve been replaced by Zolfo at the insistence of the debt holders. It now becomes a creditor-driven case.”
A bankruptcy filing is not certain, and the timing of any potential filing remains unclear. The firm has been consulting with restructuring lawyers since April at the latest, and has retained bankruptcy attorney Albert Togut of law firm Togut Segal & Segal.
Neither Stephen Horvath III, Dewey’s executive partner, nor Janis Meyer, its general counsel, responded to requests for comment. Mitchell and a spokesperson for Zolfo also did not respond to requests for comment.
Togut did not respond to a request for comment on Friday.
A spokesman for the firm’s primary bank lender, JPMorgan Chase & Co, declined to comment late on Friday.
Once one of the largest law firms in the United States, Dewey & LeBoeuf has lost all but a handful of the 300 partners with which it opened 2012. It has laid off 433 of 533 employees in New York, according to the New York State Labor Department.
Dewey’s debtholders have been selling their stakes during the firm’s downfall. As of May 3, bankruptcy analyst Kevin Starke of CRT Capital Group said Dewey’s $150 million in notes privately placed following a 2010 bond offering were trading at between 45 cents and 55 cents on the dollar on the secondary market.
The shift toward a possible bankruptcy filing would be a major change in direction. As recently as March 12, Martin Bienenstock, formerly a top bankruptcy partner at Dewey and an outgoing member of the firm’s office of the chairman, told the Wall Street Journal that the firm had “no plan to file a Chapter 11 bankruptcy.”
“We’ve had a completely non-adversarial relationship with our lenders, and right now the cash we’re using is the lender’s collateral,” he said at the time.
Bienenstock did not respond to a request for comment late on Friday. He was one of four members of Dewey’s top management team, the office of the chairman, to decamp to other firms in recent days, joining Proskauer Rose. The last member of that office, Washington, D.C., lobbyist L. Charles Landgraf, said he had joined Arnold & Porter on Wednesday.
Lawsuits are mounting against Dewey. The U.S. Pension Benefit Guaranty Corporation sued the firm Monday in Manhattan federal district court in order to take control of three of the firm’s pension plans, which the agency said were underfunded by $80 million.
Bankruptcies are often driven by creditors. On Wednesday, Annette Jarvis of Dorsey & Whitney, a bankruptcy lawyer who represents a group of 51 retired pension partners at Dewey predecessor LeBoeuf Lamb Greene & MacRae, said that in her view the firm “has to be put into a bankruptcy.”
Jarvis did not respond to a request for comment on Friday.
(Reporting By Nate Raymond and Nick Brown; Editing by Daniel Magnowski)
Posted in Information | No Comments »
May 17th, 2012
Learn more: www.romneyeconomics.com Kansas City’s GST Steel had been making steel rods for 105 years when Romney and his partners took control in 1993. They cut corners and extracted profit from the business at every turn, placing it deeply in debt. When the company eventually declared bankruptcy, workers not only lost their jobs but were denied their full pensions and health insurance, and the government was forced to step in and provide a bailout.
Posted in Videos | No Comments »
May 17th, 2012
The bankruptcy case against “Octomom” Nadya Suleman has been thrown out of court after she failed to complete the necessary paperwork, records show.
The mother of 14, including the octuplets that plunged her into the spotlight, did not meet Monday’s deadline to file paperwork showing she could not pay off her debts.
Creditors can now resume efforts to collect their debts from Suleman, and foreclosure proceedings can resume on her rented La Habra home.
The bankruptcy filing had put a temporary freeze on a foreclosure auction of Suleman’s house.
The home was supposed to go on the auction block at Orange City Hall on May 7, but it was put on hold until May 21. The house is expected to sell in the $400,000 range.
Suleman filed for bankruptcy April 30, just one month after going on welfare to support herself and her 14 children.
In court documents reviewed by the Orange County Register, Suleman said she had $50,000 in assets and up to $1 million in debts.
“I have had to make some very difficult decisions this year, and filing Chapter 7 was one of them,” Suleman said in a statement released to the Register by her spokeswoman. “But I have to do what is best for my children, and I need a fresh start.”
Suleman is currently on welfare and receiving $2,000 a month in food stamps. The original owner of Suleman’s house, Amer Haddadin, says his credit and finances have been a mess ever since Suleman moved into the four-bedroom, three-bathroom home on Madonna Lane in 2009.
She was supposed to pay Haddadin $3,000 a month, but he says he hasn’t seen a penny in about a year.
“She is behind in rent 11 months and she owes $483,000,” Haddadin told KTLA after the May 7 auction was delayed. “I’m very disappointed and wish it to be resolved as soon as possible.”
Haddadin is facing off with Suleman in court June 14.
ALSO:
Author claims huge coverup in Zodiac Killer investigation
Solar eclipse 2012: The best place to view it in California?
Ex-cop on Zoloft, mentally ‘unconscious’ during rape, lawyer says
– KTLA News
Posted in Information | No Comments »
May 17th, 2012
SANTA ANA, Calif., May 16 (UPI) — Nadya Suleman‘s bankruptcy case has been dismissed because the so-called octomom failed to complete the necessary paperwork, court records in California show.
Suleman is once again in danger of losing her house in La Habra, The Orange County Register reported Wednesday. She lives there with her four daughters and 10 sons, all conceived through in vitro fertilization.
A court lifted the stay on foreclosure Tuesday and threw out her bankruptcy petition.
Suleman filed for Chapter 7 bankruptcy in late April. She said she owed at least $500,000 and possibly twice that, and said she had no money for expenses like utilities.
In 2009, Suleman became one of the world’s most controversial women when she gave birth to octuplets. She already had six children.
Under Chapter 7 bankruptcy, the court could have used any assets available to pay Suleman’s creditors. She said at the time she filed she might have no assets.
Posted in Information | No Comments »
May 15th, 2012
(Reuters) – Hedge fund manager Philip Falcone‘s dream of bringing another wireless network to the United States likely came to an end on Monday, when LightSquared Inc, the ailing telecommunications company he bankrolled, filed for bankruptcy protection.
LightSquared and many affiliates, as widely expected, filed for protection from creditors with the U.S. bankruptcy court in Manhattan. Falcone, once one of the hedge fund industry’s most powerful figures, and LightSquared’s creditors failed to reach an agreement.
Still Falcone, who dramatically overhauled his portfolio in the last two years by putting nearly all assets into LightSquared, is not giving up on his dream of building a network to compete with AT&T, Verizon and others. He put a positive spin on the bankruptcy filing by saying it would give the company much needed breathing room and protect it from creditors who he said are looking for a quick profit.
The future of LightSquared, 96 percent-owned by Falcone’s Harbinger Capital Partners, has been in doubt since February when the U.S. government effectively told the company to stop building its network.
Falcone’s dream rested largely on the U.S. government’s permission for LightSquared to build out the wireless network. When tests showed that LightSquared’s network would interfere with global positioning systems used by the military and various industries, the U.S. Federal Communications Commission said it would revoke permission to build out a new high-speed wireless network.
ROOM TO BREATHE
“The filing is intended by LightSquared to give it the additional runway it needs to resolve regulatory issues so it can build the nation’s first integrated satellite-terrestrial 4G wireless network,” Falcone wrote to investors in a letter seen by Reuters. He did not mention the enormous losses his portfolio sustained because of this bet.
In the first two months of 2012 Harbinger Capital Partners lost 26.7 percent after having dropped 47 percent last year, largely due to LightSquared writedowns.
One of the issues that creditors and Falcone haggled over was what role he would have in the future, people familiar with the matter said.
Creditors no longer wanted Falcone to be the public face of LightSquared and they wanted to cut Harbinger’s ownership stake to 50 percent with bondholders getting the other half, people familiar with the matter said.
At the same time LightSquared firmly blamed the everyone on the other side including the GPS industry and the main lenders for its current troubles.
Marc Montagner, LightSquared’s chief financial officer, said in a filing that the GPS industry, which balked when tests showed the interference, “refused to compromise” and “sought to convince regulatory agencies to strip LightSquared of its ability to use its allocated spectrum for terrestrial purposes.”
THE GROUP
Meanwhile the biggest lenders, including hedge fund titan David Tepper’s Appaloosa Management, Capital Research and Management Company, Fortress Investment Group, Knighthead Capital Management and Redwood Capital Management, were seen by industry analysts as having been especially flexible. They had extended their deadline twice already even after LightSquared had violated the terms of its debt. Activist investor Carl Icahn had been part of the group until he sold out, likely making a tidy profit.
But by Monday it was clear that no last minute deal could be worked out even after lengthy meetings.
In its filing with the court, Reston, Virginia-based LightSquared said it has more than $1 billion of both assets and liabilities, according to the bankruptcy petition.
Financial statements for LightSquared reviewed by Reuters show that LightSquared has about $2 billion in outstanding debt.
According to the filing, some of LightSquared’s creditors include Boeing, which is owed $7.5 million, and Alcatel-Lucent, which is owed $7.4 million.
Milbank, Tweed, Hadley & McCloy is serving as general bankruptcy counsel to the company.
FALCONE’S HOPES AND DREAMS
For Falcone, who sank billions of dollars of his investors’ and his own money into LightSquared, the bankruptcy likely spells the end of the trader’s career as a professional investor, industry analysts said on Monday.
“It moves him one step closer to having lost everything he’s invested in it,” he said. “For him to get anything back he’ll have to come up with some deal that would deliver well in excess of $2 billion of value for this asset,” said Tim Farrar, an independent industry analyst who has followed the situation closely. “Without a spectrum swap or a strategic partner it’s very unlikely,” he said.
Only five years ago, Falcone had been crowned as one of the hedge fund industry’s biggest stars thanks to a savvy bet against the overheated housing market that helped increase his Harbinger Capital Partners to about $26 billion in assets under management. By earlier this year that had shrunk to roughly $4 billion.
When Falcone was hot, hundreds of endowments and funds of funds plus wealthy individual investors flocked to his New York-based hedge fund in hopes he would soon repeat the triple-digit gains of 2007.
Now Falcone, a former Harvard College hockey star, is being sued by at least one individual investor and other institutional investors who have not been able to get their money out as he locked down the portfolio to conserve cash. They acknowledge they are embarrassed to be ensnared in what could become the year’s biggest hedge fund collapse.
(Additional reporting by Jonathan Stempel in New York; Editing by Matthew Goldstein, Gerald E. McCormick and Phil Berlowitz)
Posted in Information | No Comments »
May 15th, 2012
On Monday May 14, 2012, beleaguered LightSquared finally filed for its long anticipated bankruptcy protection. It’s quite amazing that a year ago investors actually thought this pipedream would ever be able to overcome technical difficulties of interfering with Global Positioning Systems not only in the United States but in other countries as well. For reasons that were never entirely clear, the Obama FCC granted frequency to LightSquared that had originally been designated for satellite use but only if they could overcome the technical issues of interference and if they could bring their network offering on line within a stipulated time frame. Neither transpired. Military, aerospace, airlines, and a whole host of companies that sell products dependent on effective reliance on GPS rose up in opposition. The list included companies as diverse as Garmin and John Deere and any company that sells products that utilize global positioning for airline or sea navigation, for planting seeds in a field, for locating lost climbers or hikers in the wilderness and so forth.
Unfortunately for LightSquared’s true believer, Phil Falcone, time ran out before he could capitalize on the spectrum he was granted. His CEO left several weeks ago. Layoffs were abundant and the handwriting was pretty well on the wall. In recent weeks, players such as Charlie Ergin and Carl Icahn were trafficking in some of LightSquared’s debt. The largest equity holders were investors in Falcone’s Harbinger Capital Partners. Those poor folks were told in 2010 that they could not withdraw their funds from HCP even as it was not doing well unless they wished to be paid out in LightSquared stock, now worthless. Those rules allegedly did not apply to Goldman Sachs which was allowed to withdraw some funds. That was not greeted warmly by the SEC which filed Wells notices (of possible impending action) against Mr. Falcone and two others involved at Harbinger last December.
The only beneficiary of LightSquared’s flailings last year was Sprint. LightSquared had agreed to use the Sprint network in its offering and agreed to pay Sprint several billions of dollars to help it construct its Network Vision project. That obligation was secured by some of LightSquared’s frequencies and also by promised to pay it cash. Sprint did record a gain on the unwinding of this transaction in itslatest quarter.
We have a model of how this may all play out in the end game which might be as long as a decade from now. NextWave was spun out of Qualcomm in 1996. It embarked on an aggressive program of bidding for PCS spectrum in FCC auctions. It’s bids totalled $4.7 billion of which it paid $500 million as deposits. NextWave was never able to raise the cash for the rest of the payments for its bids. The FCC reclaimed the frequencies and reauctioned them off for a total of $17 billion. NextWave challenged the FCC and took its case all the way to the U.S. Supreme Court. The Supremos ruled 8:1 in favor of NextWave. It’s belief was that the very purpose of bankruptcy protection was to allow an entity like NextWave to raise capital and continue on. Over the decade this case was wending its way through the courts, the value of the spectrum increased dramatically. In the end, NextWave was able to resell the spectrum to Verizon, Cingular (now ATT) and Metro PCS. It was able to pay off all its debts, its lawyers and still have some money left. Even so, under the astute leadership of Allen Salmasi who is still its Chairman, NextWave made another round of bad investments and blew away its second chance as well to the extent that it filed for bankruptcy a second time.
It is not clear what path LightSquared will take going forward. One possibility is that it will argue to the FCC that it deserves an allotment of other bandwidth that will not interfere with GPS. There is no telling how long that will take or if it will ever happen. For now, the shareholders have little to say and it is the bondholders and possibly Sprint who will have something to say about its future. My guess is that LightSquared, like NextWave, will rise up again but probably not for a very long time.
Joan E. Lappin CFA Gramercy Capital Mgt. Corp.
In these turbulent times, put our decades of experience to work for your portfolio. Contact us for information at info@gramercycapital.com. Meet Joan Lappin at the Money Show in Las Vegas (free to you) where she will be presenting twice on Tuesday May 15,2012 .
Posted in Information | No Comments »
May 13th, 2012
By Andrea Ahles
aahles@star-telegram.com
The former head of a Newport News financial brokerage that closed amid a fraud probe two years ago won’t have to pay back millions of dollars that he owed to scores of creditors.
Jeffrey A. Martinovich, 46, the onetime chairman and chief executive officer of MICG Investment Management LLC, has been granted a discharge in a Chapter 7 bankruptcy case that he filed in U.S. Bankruptcy Court in Norfolk in early 2011.
That means that the more than 200 creditors or potential creditors listed in court filings are forever barred from trying to get Martinovich to pay them back.
“That’s the goal of a bankruptcy — to get a discharge of your debt to creditors,” said Larry Glanzer, a Norfolk bankruptcy attorney who represented a creditor and grilled Martinovich at a bankruptcy hearing last June. “Bankruptcy is there to give the honest debtor a fresh start in life.”
It’s a fresh start for the charismatic former head of the now-shuttered Oyster Point brokerage house that was formed 12 years ago. Martinovich once drove a Bentley, owned a large house on the James River, and attracted hundreds of wealthy investors from across the Peninsula and beyond to invest with his firm.
Some of those investors simply purchased stocks or mutual funds through the firm’s agents and brokers.
But others, often at Martinovich’s urging, poured tens of thousands of dollars — and even hundreds of thousands of dollars — into stocks and bonds in MICG itself. MICG stockholders gained an ownership stake in the company. MICG bondholders were promised a generous 9 percent annual return on the money they lent.
Moreover, some investors put hundreds of thousands of dollars into hedge funds associated with MICG and run by Martinovich. Those funds, in turn, invested millions in various ventures, ranging from a British soccer team to a start-up solar panel manufacturer that later filed for bankruptcy.
Before MICG collapsed in May 2010, investors who had simply bought stocks or mutual funds through the firm’s financial brokers were able to move their money out.
But those who held stocks and bonds in MICG itself could not sell those holdings. Hedge fund investors also have so far been unable to sell off their stake. They still stand a chance at getting some of their money back, but it’s unclear when that might happen or how much they might get.
Angry investors
What is clear is that Martinovich’s recent bankruptcy discharge — which has forever wiped away his pre-bankruptcy debts — has rankled some investors.
Two investors who declined to have their names used for this story told the Daily Press they did not believe Martinovich had intentionally scammed them. But others disagreed, not buying the notion that Martinovich deserved to have his debts wiped clean.
“I think the police ought to go get him and put him in jail,” said Dr. Thomas Stiles, 82, of Newport News, who said he’s out more than $544,000 that he poured into MICG hedge funds.
Stiles, who retired as an orthopedist two years ago, said that in part because of his lost nest egg, he is now planning to sell off the New York City apartment that he and his wife had once hoped to move into in the coming years.
He said he has had trouble sleeping at night because he tosses and turns thinking about how Martinovich swindled him.
Martinovich, contacted this week, declined to immediately comment on his bankruptcy discharge or the criticism. He said he would check with others on whether he could talk, but did not respond by press time for this story.
The Financial Industry Regulatory Authority, or Finra, began investigating MICG for possible securities violations, including fraud, in early 2010. Finra’s Department of Enforcement is an industry-funded regulator of U.S. securities firms that operates under oversight of the federal Securities and Exchange Commission.
In May 2010, Finra filed a disciplinary action against MICG and Martinovich, accusing them of committing securities fraud and misleading investors. Finra alleged that Martinovich “assigned unjustifiably high values” to hedge fund assets in order to inflate his management and incentive fees to the tune of hundreds of thousands of dollars.
Finra can impose a number of penalties, including censuring, suspending or expelling a firm or broker from trading securities, levying fines and ordering restitution to investors. Finra also can refer cases to the SEC or the federal and state court systems.
Posted in Information | No Comments »
May 11th, 2012
EMI plans to go forward with its copyright suit against MP3tunes.com and founder Michael Robertson even though the music-locker service has filed for bankruptcy. [Read more]
Posted in Information | No Comments »
|
|
