Law and legal issues

President Obama's nominee for the U.S. Supreme Court, Judge Sonia Sotomayor, made her mark on the municipal bond market when she presided over a case in 1995 involving kickbacks for a New Jersey muni bond deal.

Two tax lawyers who work in the municipal bond market have been tapped to serve two-year terms on the tax-exempt bond team of the Internal Revenue Service's Advisory Committee on Tax-Exempt and Government Entities, which is scheduled to meet here on June 10.

The group of hedge funds that sued MBIA Inc. and its insurance subsidiaries over their restructuring continued to make their caselast week, arguing that its allegations of a fraudulent conveyance should not be dismissed.

WASHINGTON - The Securities and Exchange Commission on Friday approved June 1 start dates for two Municipal Securities Rulemaking Board systems that form key parts of the board's EMMA central disclosure repository.

Sen. Kay Bailey Hutchison has introduced a bill that would prohibit states, private parties and others from adding tolls on existing toll-free federal highways, bridges and tunnels built with federal funding.

The Financial Accounting Foundation has named David Sundstrom, auditor-controller for Orange County, Calif., to the Governmental Accounting Standards Board, which is overseen by the FAF.

HALF MOON BAY, CALIF. - Half Moon Bay isn't declaring bankruptcy. Full stop. End of story.

WASHINGTON - The Obama administration is close to unveiling a three-pronged program to help state and local housing finance agencies, including a liquidity facility to support state HFA-issued variable rate demand obligations, a senior Department of Housing and Urban Development official will tell lawmakers this morning.

BRADENTON, Fla. - Alabama lawmakers went home last Friday without providing financial relief for Jefferson County commissioners struggling to restructure $3.2 billion of troubled sewer debt. Lawmakers also failed to reauthorize an occupational tax that supports more than one third of the county's general fund budget.

A Denver-based consulting firm is floating a plan to create a mutual bond insurance company, a modified version of a plan created by the National League of Cities that would be in lieu of the federal reinsurance program proposed by House Financial Services Committee members.

The Financial Industry Regulatory Authority has filed a complaint against Chicago-based Jordan P. Zaro, the owner and chief executive of Riverside Securities Inc., for swindling money from a 63-year old widow and creating false account statements showing fake municipal bond purchases to cover up the scheme.

WASHINGTON - The Municipal Securities Rulemaking Board announced yesterday that it has reached a memorandum of understanding with CUSIP Global Services over the use of Cusips on its EMMA system and is now seeking to proceed with the launch of two long-awaited components of the central repository.

The chairman of a House Financial Services Committee panel yesterday suggested Congress ought to consider legislation making it easier for investors to sue credit rating agencies for "grossly inaccurate" ratings, as lawmakers sharply criticized the agencies for their failure to accurately rate structured finance products and other securities.

CHICAGO - Illinois Gov. Pat Quinn yesterday outlined a grim picture that would result from deep spending cuts under a "doomsday" budget scenario if lawmakers don't approve his proposed $52.9 billion operating budget that relies on an unpopular income tax increase to help wipe out a $12 billion deficit.

WASHINGTON - Treasury Department and Federal Reserve officials are considering a plan to provide federal guarantees or other assistance to short-term cash-flow notes issued by state and local governments, congressional and other sources said yesterday.

SAN FRANCISCO - A troubled rural school district in California is poised to fall under state control as the result of its financial woes, and more districts may join it, according to a state education official.

Missouri Secretary of State Robin Carnahan announced on Thursday that the state has reached a finalized auction-rate securities settlement with two Bank of America subsidiaries and is continuing an investigation of ARS sales practices at Stifel Nicolaus & Co.

WASHINGTON - The National League of Cities is seeking $5 billion in seed money from the Treasury Department to establish an issuer-run mutual bond insurance company, according to a draft business plan NLC plans to release today.

DALLAS - A central Texas municipal utility district that has been in default for years is seeking to reorganize under Chapter 9 bankruptcy.

BRADENTON, Fla. - A Kentucky lawmaker said he will raise questions today about whether a lease transaction to finance the purchase of a hospital exposed a flagship state university to risks posed by an underlying swap and letter of credit.