Law and legal issues

CHICAGO — The promise of personal financial benefits drove former Illinois Gov. Rod Blagojevich’s decision in 2003 to choose Bear, Stearns & Co. to run the books on the state’s general obligation pension bond sale and to give his go-ahead on the day of pricing to issue the full $10 billion authorization, the governor’s former chief of staff alleged in a plea agreement with federal prosecutors filed yesterday.

Opponents of the Atlantic Yards project in Brooklyn yesterday filed a lawsuit in New York State Supreme Court in Manhattan to try to stop the mega-development from going forward.

SAN FRANCISCO — A bond deal expected to approach $2 billion is heading for the November calendar, after a California Senate vote this week.

SAN FRANCISCO — The recent bankruptcies of two community hospitals in California show how difficult the current economic environment is for health care providers — and how much effort is required to actually bankrupt a hospital.

BRADENTON, Fla. — The long-awaited pay-to-play trial of Birmingham, Ala., Mayor Larry Langford is slated to start Monday with jury selection.

BRADENTON, Fla. — Florida Gov. Charlie Crist has asked that a statewide grand jury be impaneled to investigate government corruption in the Sunshine state.

BRADENTON, Fla. — The Alabama Public School and College Authority next week plans to sell $775.8 million of revenue bonds, much of which will refund outstanding debt associated with swap options that the issuer is challenging in federal court.

The Metropolitan Transportation Authority broke state law when it agreed to new sale terms for the Vanderbilt rail yards in Brooklyn, plaintiffs allege in a suit filed yesterday in New York State Supreme Court.

SAN FRANCISCO — California Gov. Arnold Schwarzenegger backed off on a blanket threat to veto more than 700 bills if he didn’t get a water infrastructure deal, taking action on all of them Sunday, his deadline to act on bills the Legislature approved in its 2009 regular session.

SAN FRANCISCO — The Sierra Kings Health District in Reedley, Calif., last week filed for Chapter 9 municipal bankruptcy protection after discovering that the proceeds of bond sales in 2006 and 2007 were misused.

WASHINGTON — The trustee for millions of dollars of toll revenue bonds issued in 1998 to finance South Carolina’s first publicly owned and privately built toll road, the Southern Connector Project, is warning investors that the bonds will probably default on Jan. 1, 2010, because of insufficient revenue.

PHILADELPHIA — The Securities and Exchange Commission cannot set up a corporate-style disclosure regime for the municipal market under its rules because it does not have the statutory authority to do so, the SEC’s muni chief told financial advisers here yesterday.

SAN FRANCISCO — The tangled tale involving bonds issued for the failed Copia “wine shrine” in Napa, Calif., could reach a major turning point later this month when a bankruptcy judge will consider confirming a plan to conclude the museum’s almost 11-month-old bankruptcy case.

BRADENTON, Fla. — Two appeals now have been filed contesting a Florida judge’s decision to validate $650 million of certificates of participation sought by the South Florida Water Management District to finance the purchase of U.S. Sugar Corp.’s land for Everglades restoration.

WASHINGTON — A Securities and Exchange Commission official asked a congressional committee yesterday to strengthen its draft bill to regulate over-the-counter derivatives so that all securities-based swaps are treated as securities. However, the request was met by resistance from the panel’s chairman and another regulator.

SAN FRANCISCO — The Los Angeles World Airports Board of Directors on Monday agreed to a $75 million settlement with bondholders in a seven-year-old dispute over United Airlines special facilities revenue bonds sold to make improvements at Los Angeles International Airport.

The House Financial Services Committee late Friday distributed a discussion draft of legislation to regulate over-the-counter derivatives that appears to be substantially similar to one floated by the Obama administration this summer. The move left unresolved technical glitches that render meaningless a provision intended to restrict small municipalities from participating in derivatives transactions, attorneys said yesterday.

SAN FRANCISCO — If there was any doubt before, it was removed Thursday by the California Supreme Court: the state’s current budget is out of balance.

WASHINGTON — The Municipal Securities Rulemaking Board could bring in roughly $2 million in additional revenue from a rule change proposed this week that would eliminate the exemptions on underwriting fees for most short-term municipal securities, the board’s spokesperson said yesterday.

WASHINGTON — Moody’s Investors Service conducts “virtually no surveillance” of its municipal bond ratings, despite its claims to the public and Congress that it robustly monitors all the securities it rates, a former chief compliance officer warned the Securities and Exchange Commission in a March letter.