All items from Bankruptcy Beat

Party-goods supplier Event Rentals Inc. is kicking off the week in bankruptcy with a Monday auction of its assets.
A group of the company’s senior lenders, including Cerberus Capital Management, has been approved as the lead bidder with a $124 million credit bid. If it emerges as the winner, the lender group would forgive Event Rentals’ debt in exchange for the company’s assets.
Event Rentals filed for bankruptcy protection on Feb. 13 with roughly $148 million in assets and $246 million in liabilities. The company blamed its financial problems on an ill-timed growth spurt and the reluctance of corporations in recent years to throw lavish parties.
On Tuesday, plus-size women’s clothing retailer Ashley Stewart will seek a Trenton, N.J., bankruptcy court’s blessing of its proposed sale to Clearlake Capital Group for approximately $18 million.

Posted 21 hours 15 min ago

Downtown Detroit
Paul Sancya/Associated Press

Wayne State University is trying to pull college kids who are home in Michigan for the summer into the heart of Detroit with a new class about the city’s quest for financial redemption.
College officials are advertising the 13-week class, “Detroit: Metropolis in Transition,” both to their own students and to students at other universities who want to take a summer class. It’s a good opportunity, they said, for the school to pull outsider students into the heart of the 700,000-resident city, which filed the largest municipal bankruptcy in U.S. history in July.
Detroit officials have blamed the city’s financial problems on the loss of residents who fled in large numbers for safer suburbs and took their tax dollars with them. But the 28,000-student school is still rooted in downtown Detroit.
“It’s really booming,” said college spokesman Mike Brinich.

Posted 22 hours 28 min ago

In this Tuesday, April 15, photo, Homeland Security Investigators raid telecommunications and marketing firm TelexFree in Marlborough, Mass.
Alan Jung/Associated Press

The Securities and Exchange Commission has filed charges against a Massachusetts telephone marketing company for allegedly running a pyramid scheme that targeted primarily Dominican and Brazilian immigrants. Read the DBR article here.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
Mt. Gox suitors are launching a last-ditch effort to revive the bitcoin exchange after it said it would move to liquidate, WSJ reports.

Posted 1 day 13 min ago

Leonard M. Rosen, a founder of New York law firm Wachtell, Lipton, Rosen & Katz.

Leonard M. Rosen, a founding partner of elite New York law firm Wachtell, Lipton, Rosen & Katz, has died.
The influential bankruptcy lawyer passed away on Wednesday, April 16, at the age of 83 years, according to the firm. A consensus-builder, he helped pull New York City back from the brink of fiscal collapse in the 1970s and, during the 1980s government bailout of Chrysler Corp., forged an agreement between the company and its creditors that allowed the cash-strapped automaker to survive.
“When it was over, the financial institutions gave him a memento with a glass block and a gold sword—Excalibur,” Harvey Miller, a bankruptcy partner at Weil, Gotshal & Manges LLP and longtime friend of Mr. Rosen’s, told Law Blog. “He was the only one who could pull that sword out.”

Posted 1 day 17 hours ago

Mikel R. Bistrow and Christopher Celentino have joined law firm Ballard Spahr LLP as partners in the San Diego office. Ms. Bistrow and Mr. Celentino have experience in insolvency and have worked on bankruptcy filings and wind-downs. Mr. Celentino focuses on creditor rights, business reorganizations and workouts, while Ms. Bistrow specializes in commercial finance and lending. They both joined Ballard Spahr from Foley & Lardner LLP.
Werner Meier has joined King & Spalding as a partner in the Frankfurt, Germany, office, where he’ll help launch the law firm’s European restructuring practice. He focuses on international restructuring, German restructurings and high-yield transactions. Most recently, he was a finance and restructuring partner with Cleary Gottlieb Steen & Hamilton LLP.

Posted 1 day 21 hours ago

Mark Karpeles attends a news conference at the Tokyo District Court in Tokyo on Feb. 28.

Mt. Gox Chief Executive Mark Karpelès said he would not come to the U.S. later this week to answer questions about the Japanese bitcoin exchange’s U.S. bankruptcy case, Mt. Gox lawyers told a federal judge on Monday. Read the Daily Bankruptcy Review article via The Wall Street Journal.
A federal judge Wednesday said a lawsuit filed by a former MF Global Holdings Ltd. futures customer against former Chief Executive Jon S. Corzine and other top officials could move forward but dismissed all claims against the failed brokerage’s independent directors and investment firm J.C. Flowers & Co. Read the DBR article in WSJ.

Posted 2 days 4 min ago

The company behind the chemical spill that tainted the water supply of 300,000 people in West Virginia spent $1.9 million on attorneys and advisers in the first months of its bankruptcy case.

Freedom Industries Inc.’s lead bankruptcy law firm, McGuireWoods LLP, billed top dollar, according to court papers filed Tuesday. The law firm charged nearly $746,000 in fees and expenses for work performed between Jan. 17, when Freedom filed for bankruptcy, and the end of March.
Two specialist law firms, one for environmental matters and one for litigation, billed a combined $535,000 in fees and expenses for work during the same timeframe.
Less than 5% of the bills from bankruptcy professionals come from lawyers representing Freedom’s committee of unsecured creditors, whose members include people claiming injury or other damages from the disastrous Jan. 9 chemical spill from a Freedom-owned tank farm.

Posted 2 days 20 hours ago

Defunct bitcoin exchange Mt. Gox has given up its plan to rebuild under bankruptcy protection and said it has agreed with a Tokyo court on the first step toward liquidation. Read the Daily Bankruptcy Review article via The Wall Street Journal.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
The city of Detroit got closer to ending its municipal bankruptcy case, WSJ reports.
Five former Bernard Madoff staffers want guilty verdicts against them thrown out of a new trial, the New York Post reports.
The banks being sued by Lehman Brothers Holdings Inc. in a long-simmering derivatives fight say Lehman is seeking an “undue advantage” in the litigation by prohibiting the banks from seeking a dismissal without first receiving class-action status. Read the DBR article in WSJ.

Posted 3 days 22 min ago

Bankruptcy attorney James Selbach is used to being told he’s overreacting.
That’s because Mr. Selbach, based in upstate New York, spends his days pursuing creditors for legal infractions, like asking someone who has already filed for bankruptcy protection to pay an overdue $80 bill.
Since 2006, Mr. Selbach has focused his practice on defending individuals who are being hounded to pay debts that are in the process of being reduced or discharged in bankruptcy.
His specialty, Mr. Selbach says, is “greatly misunderstood,” mainly because creditors don’t like being dragged into court over something they often claim was an unintentional mistake. They also don’t understand why, after agreeing to stop sending the overdue bills, they are told to pay Mr. Selbach’s $275-an-hour legal tab.
Defense of the so-called automatic stay in bankruptcy, which shields debtors from creditors’ payment demands, comes with a fee-shifting provision that requires losing creditors to pay their opponent’s legal bill. Mr. Selbach argues that without the rule, aggrieved debtors would have no recourse, because the legal bills often end up dwarfing the amount of recovered money.

Posted 3 days 22 hours ago

The conviction of four former DBSI Inc. officials was a victory for the prosecution, although the government attorney acknowledged “the human price” of the case.
Monday afternoon, a federal jury found former DBSI president Douglas Swenson and three others guilty of fraud in their operation of the failed Idaho real-estate firm. The conviction came after a 42-day trial that was upended when one of the prosecutors’ main witnesses, FBI Special Agent Rebekah Morse, was found dead of a self-inflicted gunshot wound.
“Let me be clear, the human price of this case was too high,” U.S. Attorney Wendy J. Olson said Monday in a statement.
The death of Ms. Morse, 34, in March followed questioning from the court over a juror’s claims that she was texting while on the witness stand. Under oath, Ms. Morse told the court that she was simply turning off her mobile phone; however, after the court ordered her to turn over her phone, phone records showed she had texted her husband while on the stand.

Posted 4 days 17 min ago