Law and legal issues

WASHINGTON - Justice Department officials, a spokesman for New Mexico Gov. Bill Richardson, and representatives of President-elect Barack Obama yesterday declined to comment on reports that a federal grand jury in Albuquerque is investigating whether swap adviser CDR Financial Products Inc. made payments to political action committees run by Richardson in exchange for state municipal derivatives business.

WASHINGTON - The Municipal Securities Rulemaking Board has hired Margaret "Peg" Henry as an associate general counsel.

WASHINGTON - In a potentially precedent-setting case that will determine how municipal and other derivatives are treated in bankruptcy proceedings, a federal bankruptcy court in Manhattan is to hold a hearing tomorrow to determine the fate of some 930,000 municipal and other derivatives contracts involving Lehman Brothers, which made the largest bankruptcy filing in history on Sept. 15.

CHICAGO - Illinois Attorney General Lisa Madigan on Friday asked the the state's Supreme Court to either temporarily remove Gov. Rod Blagojevich from office or strip him of his power to fill President-elect Barack Obama's vacant Senate seat, act on legislation, or award state contracts.

The Securities and Exchange Commission yesterday announced final auction-rate securities settlements with Citigroup Global Markets Inc. and UBS AG that will provide $30 billion of liquidity to investors who have been stuck holding illiquid ARS since the market froze in February.

CHICAGO - Chicago Mayor Richard Daley yesterday tapped chief financial officer Paul A. Volpe to serve as his chief of staff, filling a position being vacated by Lori Healey, who will take on a leadership role at the Chicago 2016 Olympic organizing committee.

Federal Reserve Board chairman Ben Bernanke is suggesting that state and local governments facing fiscal difficulties seek grants, loans, or guarantees from the Treasury, while a Treasury official contends they should ask the Fed about participating in its commercial paper purchasing program.

CHICAGO - Illinois Gov. Rod Blagojevich and his chief of staff, John Harris, yesterday were arrested and hit with federal corruption charges in a stunning complaint that alleges the governor engaged in pay-to-play schemes and conspired to trade or sell his selection of a Senate replacement for President-elect Barack Obama for personal gain.

BRADENTON, Fla. - Jefferson County, Ala., commissioners yesterday approved 11 forbearance agreements delaying sewer debt and swap payments until Feb. 20.

SAN FRANCISCO - If California lawmakers do not close the deficit in the state's approved budget, California could run out of cash and be forced to pay its bills with IOUs beginning in March, according to Controller John Chiang.

Municipal market participants said yesterday that they will need to boost outreach to smaller issuers in light of changes to the Securities and Exchange Commission's disclosure rules, which will require some of them to file annual financial information with the Municipal Securities Rulemaking Board's EMMA system.

BRADENTON, Fla. - Jefferson County, Ala., commissioners today will be asked in a special meeting to extend forbearance agreements on the county's ailing sewer system debt delaying payments until Feb. 20, 2009.

The National Association of Bond Lawyers has chosen Victoria P. "Penny" Rostow, a former bank lobbyist and Treasury Department official, to become its director of governmental affairs.

SAN FRANCISCO - The California Redevelopment Association has filed a lawsuit challenging a $350 million shift from redevelopment agencies to the state government.

WASHINGTON - The Securities and Exchange Commission has approved rulemaking changes to designate the Municipal Securities Rulemaking Board's EMMA system as a free, centralized repository to which issuers must file bond-related secondary-market disclosure documents beginning July 1, and is considering additional rulemaking to boost municipal disclosure standards.

WASHINGTON - A federal court in Indiana has blocked a company from obtaining a $120 million termination payment from the Hoosier Energy Rural Electric Cooperative Inc. in connection with a 2002 sell-in/lease-out, or SILO, transaction, which technically defaulted after the rating of guarantor Ambac Assurance Corp. was downgraded in June.

WASHINGTON - The Securities and Exchange Commission is expected to designate the Municipal Securities Rulemaking Board's EMMA system as the sole repository for issuers' secondary market disclosure documents "very soon," SEC chairman Christopher Cox said yesterday. The move came after the commission voted on unrelated proposals to boost transparency and reduce potential conflict of interests at credit rating agencies.

DALLAS - Indictments against Vice President Dick Cheney, former Attorney General Alberto Gonzales, and other high-profile political figures have been dismissed, but Willacy County, Tex., district attorney Juan Guerra said he doesn't regret bringing charges against them in connection with inmate abuse in private prisons.

Washington - The Securities and Exchange Commission yesterday named Donald Hoerl as the director of its regional office in Denver, about six months after the 26-year commission veteran became the office's acting director.

SAN FRANCISCO - Copia: The American Center for Wine, Food and the Arts, a Napa, Calif., nonprofit with about $77 million of outstanding tax-exempt bonds, sought Chapter 11 bankruptcy protection Monday evening.