Law and legal issues

Storied brokerage firm Lehman Brothers filed for Chapter 11 bankruptcy protection Monday, the latest casualty of a credit crisis that has rocked Wall Street firms to their core. It is one of the nation's largest corporate bankruptcies ever and is Wall Street's most dramatic failure since Drexel Burnham Lambert in the late 1980s.

CHICAGO - The news of Lehman Brothers's bankruptcy and Merrill Lynch & Co.'s sale to Bank of America Corp. stunned the municipal market and its participants yesterday, sparking immediate worries over the status of pending deals and unease over how the absence of two venerable Wall Street brokerages stands to reshape the muni landscape.

At least three of the five Jefferson County, Ala., commissioners have rejected a counteroffer proposed by creditors in negotiations attempting to avert the nation’s largest municipal bankruptcy, according to the Birmingham News on Friday.

WASHINGTON - Fidelity Investments reached agreements with New York and Massachusetts officials to buy back at par $300 million of auction-rate securities from its customers by the end of the year, becoming the first retail brokerage firm to settle alleged fraudulent sales practices in the ARS market.

WASHINGTON - Market participants made passionate, if opposite, arguments last week in response to Securities and Exchange Commission chairman Christopher Cox's remarks that he will renew his push to urge Congress to boost municipal disclosure and accounting standards, with issuers taking a strong stand against Cox and analysts supporting him.

VALLEJO, Calif. - Vallejo and its public employee unions say they're willing to negotiate a settlement to end the city's three-and-a-half-month old Chapter 9 bankruptcy case.

Fitch Ratings downgraded the Aromas-San Juan Unified School District’s general obligation bonds to BB-plus from BBB-minus.

WASHINGTON - The Municipal Securities Rulemaking Board issued a reminder to broker-dealers yesterday about the application of its Rule G-37 on political contributions to the federal election campaigns of issuer officials, two weeks after presidential hopeful Arizona Sen. John McCain tapped Alaska Gov. Sarah Palin as his vice presidential running mate.

BRADENTON, Fla. - Officials representing Jefferson County, Ala., resumed negotiations with creditors yesterday, as a Birmingham councilor suggested the city buy the county's troubled sewer system and public finance professionals met to discuss the implications should the county file for bankruptcy protection.

The Securities Industry and Financial Markets Association has told a federal court in Alabama that the Securities and Exchange Commission made irrelevant and baseless arguments in urging the court to disregard its friend-of-the-court brief in a case involving Jefferson County interest rate swaps.

BRADENTON, Fla. - The Jefferson County, Ala., Commission yesterday unanimously approved new forbearance agreements delaying swap and debt payments to creditors, while trying to negotiate an agreement to restructure the county's $3.2 billion of sewer debt, which is mostly in troubled auction- and variable-rate securities.

WASHINGTON - The Securities and Exchange Commission plans to propose as early as the end of the month rules that would enhance municipal disclosure, SEC chairman Christopher Cox said in an interview Friday.

SACRAMENTO - A U.S. federal court ruled late Friday that Vallejo, Calif., is bankrupt, ending a battle over its solvency and forcing the city and its creditors to begin negotiating a plan to adjust the city's debts.

BRADENTON, Fla. - As Jefferson County's creditors consider a $3.2 billion sewer debt restructuring plan offered by Alabama Gov. Bob Riley, county commissioners today are expected to extend forbearance agreements that delay swap and debt payments.

BRADENTON, Fla. - Two Birmingham, Ala., residents and a nonprofit group have filed a lawsuit asking that a judge invalidate $2.2 billion of sewer auction-rate securities issued by Jefferson County and $4.2 billion of related swaps, saying the transactions were tainted by corruption.

Pennsylvania's Erie School District last week filed a lawsuit in U.S. federal court against JPMorgan, one of the bank's former brokers, and Investment Management Advisory Group Inc., alleging that collusion by the defendants cost the district more than $1 million on an interest-rate swap transaction.

Vallejo, which filed for Chapter 9 bankruptcy protection in May, filed a list of its 20 largest unsecured retiree health-care benefit claims this week.

WASHINGTON - More than a year after Securities and Exchange Commission chairman Christopher Cox proposed a series of initiatives to boost municipal disclosure and accounting standards, no one in Congress or the municipal market appears to be interested in championing them.

CHICAGO - The imminent departure of Mayor Kwame Kilpatrick may signal the end of the legal and political saga that has consumed Detroit for nearly nine months, but the city's fiscal woes are far from over.

SAN FRANCISCO — A U.S. bankruptcy court has ruled that Vallejo, Calif., is insolvent.