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Bankruptcy Abuse Prevention Takes Aim at Attorneys

"I don't
think you can make a lawyer honest by an act of legislature. You've got
to work on his conscience. And his lack of conscience is what makes him
a lawyer." [1]

While
the lawyer joke is an art form dating back centuries, it is not
actually the case that firms throughout the country are staffed with
snakes, shysters, and snollygosters. Nor is there much evidence that
attorneys who counsel clients through bankruptcy proceedings are a
particularly shady lot. So it has come as a surprise to many attorneys
that Congress has enacted strict requirements, backed by monetary and
criminal sanctions, for attorneys practicing in consumer bankruptcy.
The burden of personal liability raises fundamental questions about the
role of the attorney and the sanctity of the attorney-client
relationship under the new bankruptcy law.

As
a whole, the Bankruptcy Code as currently in effect reflects an
underlying disapproval of bankruptcy … Read the rest

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Real Estate in the Aftermath of Hurricane Katrina

Hurricane Katrina struck the Gulf Coast on August 28, 2005 and was one of the worst natural disasters in American history.  Heavy rain and strong winds destroyed much of New Orleans and surrounding areas, leaving the Gulf Coast under water for weeks.  For houses not completely blown to the ground by the 145 mph winds, the amount of damage sustained generally depends on the length of time the home was submerged in floodwaters, allowing mold and rot to thrive in the structure of the home.  Because much of New Orleans was submerged for 2 weeks or more, the secretary of the Louisiana Department of Environmental Quality currently estimates that between 140,000 and 160,000 homes need to be leveled and completely rebuilt.  [1] 

How is the real estate market affected in the wake of a devastating hurricane? 

According to the National Association of Realtors, hurricanes have historically had only short-term effects

… Read the rest
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Will Time Help?: SOX 404 Compliance

September 21, 2005 marked the first open meeting of the Securities & Exchange Commission (SEC) under its new Chairman Christopher Cox.
More importantly, at that meeting the SEC approved a one year extension
for compliance with Sarbanes Oxley (SOX) section 404 for
non-accelerated filers.  [1]  The
Commission also proposed creating new categories for large accelerated
filers, who would be the only category subject to the initial phase-in
period and would make it easier for some companies to move from
accelerated to non-accelerated filer status. [2]

Section 404 of SOX requires companies to perform an audit of internal controls.  One
of the most controversial sections of the act, under the current rules
accelerated filers must include in its annual report an audit by
independent auditors and a report by management that cover the
company’s internal controls over financial reporting. [3]  For
accelerated filers the … Read the rest

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Under Pressure: Delphi Files Chapter 11 in Advance of New Law

On Saturday October 8th, Delphi Corporation ended the intense
speculation of media and industry watchers by filing for Chapter 11
bankruptcy protection in the U.S. Bankruptcy Court for the Southern
District of New York.[1]  Sources inside Delphi had indicated as late
as Friday that such a move was likely unless Delphi could negotiate a
last-minute reprieve in the form of a bailout package from its largest
creditors, General Motors and the United Autoworkers Union.

While Delphi is surely struggling, it is not currently strapped for
cash. So why file now? The answer lies in both the legal climate and in
business strategy.

Avoiding the New Bankruptcy Law

Delphi Corporation, along with 38 domestic subsidiaries and affiliates, filed voluntary petitions per 11 U.S.C. §
311 of the Bankruptcy Code, seeking relief under Chapter 11. [2]  In
one of the 40-plus motions filed on Saturday, Delphi requested joint
administration [3] to allow … Read the rest

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Regulation FD: Siebel Fought the Law and Siebel Won

Five years after the Securities & Exchange Commission (SEC) passed Regulation FD (“Fair Disclosure”) a court finally had a chance to interpret its application.  On September 1, 2005 the United Stated District Court for the Southern District of New York dismissed the SEC’s claims against Siebel Systems, Inc. [1]  Regulation FD prohibits a company from disclosing information to analysts and investors that is non-public. [2]   Adopted
in 2000, the regulation has often been criticized for being overly
broad. However until Siebel no company challenged the regulation in
court.

 

Regulation
FD is based on the idea that no group should have advance access to
information about a public company that may impact stock prices or that
may influence trading.  Unsurprisingly, one of the regulation’s main purposes is to prevent insider trading.  In
an effort to help companies comply Regulation FD considers information
to become … Read the rest

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Should Katrina Victims be Exempted from the New Bankruptcy Law?

The aftermath of Hurricane Katrina has sparked renewed debate over
stricter provisions in the new bankruptcy law that takes effect on
October 17th. Higher filing fees, more stringent document requirements,
and mandatory credit counseling are all cited as especially burdensome
for victims of natural disasters. Democrats are concerned that the
controversial financial means test will deny Katrina victims the
ability to declare a fresh start, and have proposed an exemption in a
bill referred to the Senate Committee on the Judiciary on September
8th. [1]

Republican backers of the new law instead urge that the stricter
standards won't apply to those most in need and that judges will retain
the discretion to take Katrina into account when processing bankruptcy
claims. The reluctance to accept any exemption could be a costly move
politically, given the much-publicized lag in aid at the outset of
Katrina. Now with recovery efforts in full swing, … Read the rest