Law and legal issues

CHICAGO - Investors holding $38 million of bonds issued on behalf of a Michigan hospital will likely end up receiving just $3.2 million under a deal announced last week allowing the cash-strapped facility to enter bankruptcy before being purchased by a for-profit group of physicians.

BRADENTON, Fla. - A proposed restructuring plan reportedly being offered by Alabama Gov. Bob Riley to Jefferson County's sewer system creditors would require bondholders to accept a lower interest rate, banks to buy back some or all of the county's auction-rate securities, and swap counterparties to seek reimbursement for termination payments from bond insurers.

CHICAGO - Detroit Mayor Kwame Kilpatrick was expected to plead guilty to felony charges this morning as part of a deal that likely will result in the once-popular young mayor resigning from office and possibly serving jail time.

WASHINGTON - More than half the municipal bonds sold between 1996 and 2005 have been delinquent in filing financial disclosures, showing the secondary market disclosure system for the municipal market is flawed, mostly because there are "no consequences for not filing," Peter J. Schmitt, president of DPC Data Inc., said yesterday about a new study released by his firm.

CHICAGO - Michigan Gov. Jennifer Granholm was poised to begin a historic removal hearing today on indicted Detroit Mayor Kwame Kilpatrick amid a flurry of last-minute appeals and back-room plea deal negotiations that continued through late yesterday.

A federal judge in Pennsylvania has scheduled a criminal trial to begin Dec. 8 for Robert Bradbury, the former head of the defunct underwriter Dolphin & Bradbury Inc., who has been charged by U.S. attorneys with allegedly defrauding four Pennsylvania school districts by selling them unsuitably risky notes between 1998 and 2004.

SAN FRANCISCO - Oakland has filed suit against several bond insurers, with charges that include fraud and breach of contract, for the sale of bond insurance policies that the city says turned out to be worthless.

SAN FRANCISCO - The judge in Vallejo, Calif.'s bankruptcy case may rule on its eligibility for protection from creditors as soon as today.

BRADENTON, Fla. - Alabama Gov. Bob Riley on Friday afternoon said he struck a deal with investors in Jefferson County's troubled sewer debt and bond insurers to extend debt forbearance agreements until Sept. 30 at no cost to the county.

Former of global head of the UBS Securities LLC municipal securities group David Shulman has officially left the company, after being on administrative leave since July, the company confirmed yesterday.

DALLAS - A prominent El Paso contractor that has built numerous bond-financed schools and public facilities may be forced to liquidate after its top executive was indicted in an alleged bribery scheme.

BRADENTON, Fla. - Jefferson County, Ala., this week moved closer to what would be the largest municipal bankruptcy filing since Orange County, Calif., sought protection from creditors in the 1990s.

CHICAGO - Michigan regulators said they are in early talks with Comerica Securities over investors' losses in the auction-rate securities market, part of the ongoing multi-state probe into broker-dealers' ARS sales practices.

WASHINGTON - The Securities and Exchange Commission's proposed rule changes that would limit the influence of credit rating agencies and boost the role of analysts at investment firms are being strongly criticized by the four firms that have commented on them so far.

BRADENTON, Fla. - Jefferson County commissioners yesterday said Alabama Gov. Bob Riley and the law firm Bradley, Arant, Rose & White LLP would step in and take over negotiations with creditors in a last-ditch effort to restructure the county's $3.2 billion of troubled sewer debt and avoid a bankruptcy filing.

CHICAGO - Five southeastern Wisconsin school districts are weighing litigation against financial firms they believe misrepresented the safety of a complex investment transaction that involved collateralized debt obligations and a credit default swap to help fund a portion of their other post-employment benefit liabilities.

WASHINGTON - Nonprofit student loan lenders in Kentucky and New Mexico have each privately placed $50 million of short-term debt with their respective states as part of efforts to find short-term liquidity that will allow them to participate in a program run by the Department of Education to assist non-bank lenders in financing student loans.

WASHINGTON - Merrill Lynch & Co. on Friday agreed to a preliminary settlement-in-principle over auction-rate securities with the Securities and Exchange Commission that would enable investors who purchased ARS from the firm to receive a total of up to $7 billion to restore their losses and liquidity.

BRADENTON, Fla. -Alabama Gov. Bob Riley began meeting in person with Jefferson County commissioners last week, urging them to find a solution they can unite behind to resolve the county's $3.2 billion sewer debt crisis that has been the focus of negotiations with creditors for nearly seven months.

SACRAMENTO - Vallejo, Calif., has made its case for filing Chapter 9 bankruptcy, and U.S. District Bankruptcy Court Chief Judge Michael McManus wants to hear more.