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Lehman Brothers files for Chapter 11 protection
Bankruptcy | 2008/09/15 07:17
Lehman Brothers, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for Chapter 11 bankruptcy protection from its creditors on Monday and said it was trying to sell off key business units.

The filing was made in the U.S. Bankruptcy Court in the Southern District of New York by Lehman Brothers Holdings Inc., the bank's holding company. The case had not yet been assigned to a judge.

Lehman's last hope of surviving outside of court protection faded Sunday after British bank Barclays PLC withdrew its bid to buy the investment bank.

Lehman learned at a last-minute meeting on Friday with federal officials that it would not be getting any emergency funding to give it the liquidity it needed, Chief Financial Officer Ian Lowitt said in an affidavit.

Lehman fell under the weight of $60 billion in soured real estate holdings and tighter a credit market that forced it to seek court protection.

As the company's financial health deteriorated over recent months, Lowitt said Lehman had "explored various options to restructure operations, reduce overall cost structure, and improve performance." He said executives took a two-pronged approach to saving the company: selling its investment management division and separating troubled real estate assets from the rest of the company.

"Management believed that divorcing the real estate assets from the rest of the company would relieve the pressure on the company," he said in the affidavit.

In an effort to calm the markets, Lehman announced its third-quarter results on Wednesday — a week earlier than planned — but Lowitt said that "did little to quell the rumors in the markets and the concerns about the viability of the company."

He said the uncertainty made it impossible for Lehman to continue outside of court protection.

The filing had been made so hastily that the company had not yet filed motions by Monday morning that are typically made on the first day, such as asking the court for permission to continue paying employees.

Many Lehman employees seen entering its headquarters in Midtown Manhattan tucked their chins down to avoid talking to the media and others who had lined up behind metal barriers in front of the building.

Some carried empty shopping, tote bags or gym bags in to the office. Some walked in with ties undone or wore more casual polo shirts than they may have otherwise.

Filing for Chapter 11 protection allows a company to restructure while creditor claims are held at bay. The company most likely chose to file under Chapter 11, rather than a Chapter 7 liquidation, so that it could retain more control over the selling off of assets, said Stephen Lubben, the Daniel J. Moore professor of law at Seton Hall Law School. In a Chapter 7 filing, the court would immediately appoint a trustee to take over the case.

"I'm sure they think they could conduct a better liquidation themselves, and that's probably true," Lubben said.

The investment bank had said earlier that none of its broker-dealer subsidiaries or other units would be included in the Chapter 11 filing. It says it is exploring the sale of its broker-dealer operations and is in "advanced discussions" to sell its investment management unit. That means customers of its broker-dealers will not be subject to claims by creditors in the bankruptcy case.

In its bankruptcy petition, Lehman listed Citigroup among its biggest unsecured creditors, with about $138 billion in bonds as of July 2. The Bank of New York Mellon Corp. was listed as holding about $17 billion in debt.

Lehman said that as of May 31, it had assets of $639 billion and debt of $613 billion.



US court reviews ruling in teen's terrorism death
Politics | 2008/09/13 08:48
David Boim was standing at a bus stop in a West Bank town near Jerusalem 12 years ago when terrorists opened fire, fatally shooting the 17-year-old American teenager.

A lawsuit filed by his parents has been dragging through the courts for eight years as attorneys argue the central issue: who must pay damages.

A federal appeals court is still trying to come up with the answer.

Last December, the 7th U.S. Circuit Court of Appeals threw out a lower court's order requiring several U.S.-based Islamic groups to pay $156 million to Boim's family — who claim money the groups gave to Palestinian charities ultimately helped fund terrorism.

But now the appeals court is second-guessing itself and revisiting the emotionally charged case, the first filed under a 1991 law allowing American victims of international terrorism to recover triple damages.

During an extraordinary "en banc" hearing before all 10 sitting judges last week, the case came in for a fresh airing. How much longer the case will go on is anyone's guess.



Va. court strikes down anti-spam law
Law Center | 2008/09/13 08:47
The Virginia Supreme Court declared the state's anti-spam law unconstitutional Friday and reversed the conviction of a man once considered one of the world's most prolific spammers.

The court unanimously agreed with Jeremy Jaynes' argument that the law violates the free-speech protections of the First Amendment because it does not just restrict commercial e-mails — it restricts other unsolicited messages as well. Most other states also have anti-spam laws, and there is a federal CAN-SPAM Act as well, but those laws apply only to commercial e-mail pitches.

The Virginia law "is unconstitutionally overbroad on its face because it prohibits the anonymous transmission of all unsolicited bulk e-mails, including those containing political, religious or other speech protected by the First Amendment to the U.S. Constitution," Justice G. Steven Agee wrote.

Agee wrote that "were the Federalist Papers just being published today via e-mail, that transmission by Publius would violate the statute." Publius was the pseudonym used by Alexander Hamilton, James Madison and John Jay in essays urging ratification of the Constitution.



Judge rejects anti-Obama group's request
Law Center | 2008/09/12 08:39
A federal judge dealt a blow Thursday to the advertising plans of a conservative group that purports to tell "the real truth" about Barack Obama's abortion views.

U.S. District Judge James Spencer denied a preliminary injunction sought by The Real Truth About Obama Inc. against the Federal Election Commission. The injunction would have barred the FEC from enforcing its fundraising and advertising regulations against the Richmond-based group, which was formed by anti-abortion activists.

The organization claimed in court papers that its "issue advocacy" amounts to constitutionally protected free speech that does not expressly advocate the election or defeat of a candidate.

In a brief order, Spencer said the constitutional claim lacked merit and that an injunction would harm the public. He did not elaborate but said a written explanation of his ruling will be issued later.

James Bopp Jr. of Terre Haute, Ind., attorney for The Real Truth About Obama, said he likely will ask the 4th U.S. Circuit Court of Appeals for an expedited appeal of Spencer's ruling.

"The purpose of the First Amendment is to protect our ability to speak about issues and candidates and do so in a timely way," said Bopp.



4 Calif. Tree-sitters plead not guilty in court
Court Watch | 2008/09/12 08:37
Four tree-sitters who ended their occupation of a University of California at Berkeley oak grove this week have pleaded not guilty to misdemeanor charges.

The four face charges of trespassing and illegal lodging for taking part in the 21-month protest. The group had aimed to stop the campus from cutting down trees to make way for a new athletic training facility.

But after the campus got a court order allowing the construction, workers cut down most of the trees scheduled for removal.

The protesters climbed down Tuesday after authorities surrounded the remaining tree with scaffolding.

One of the tree-sitters is set to be released after posting bail. The other three remain in custody. The four return to court for a pretrial hearing Monday.



Va. court strikes down anti-spam law
Venture Business News | 2008/09/12 05:38
The Virginia Supreme Court has declared the state's anti-spam law unconstitutional.

The unanimous ruling Friday reversed the conviction of a man once considered one of the world's most prolific spammers. The court agreed with Jeremy Jaynes' claim that the anti-spam law violates free speech protections under the First Amendment.

In 2004, Jaynes became the first person in the country to be convicted of a felony for sending unsolicited bulk e-mail. Authorities claimed Jaynes sent up to 10 million e-mails a day from his home in Raleigh, N.C. He was sentenced to nine years in prison.

Jaynes was charged in Virginia because the e-mails went through an AOL server there.



Wis. court: Cops illegally taped nursing home sex
Criminal Law | 2008/09/12 03:37
Police who videotaped a man having sex with his comatose wife in her nursing home room violated his constitutional rights, an appeals court ruled Thursday.

David W. Johnson, 59, had an expectation to privacy when he visited his wife, a stroke victim, at Divine Savior Nursing Home in Portage, the District 4 Court of Appeals ruled. Therefore, police violated his Fourth Amendment rights against unreasonable searches when they installed a hidden video camera in the room, the court said.

"We are satisfied that Johnson's expectation of privacy while visiting his wife in her nursing home room is one that society would recognize as reasonable," the unanimous three-judge panel wrote.

The ruling means prosecutors cannot introduce the videotapes as evidence in their case against Johnson, who is charged with felony sexual assault for having intercourse with his wife without her consent at least three times in 2005.

Johnson's attorney, Christopher Kelly, said his client would visit his now 54-year-old wife every day, reading her the Bible and moving her arms and legs so her muscles wouldn't atrophy.

The woman's sister is upset that prosecutors brought charges against him, Kelly said. "She believes her sister's husband was merely expressing his love for his wife and was trying everything he could to bring her back to consciousness," Kelly said.

The couple married in 1988 and had no children, Kelly said.

Kelly said he believed prosecutors would be forced to drop the charges without the evidence on the tapes and thought the appeals court made "a pretty obvious call."

Johnson's wife was admitted to the nursing home after suffering a stroke. Court records say she was unable to speak or sit up, and nursing home staff members fed, cleaned and turned her. Prosecutors say she was comatose.

Johnson visited her frequently and sometimes would close the door to her room so they could have privacy as allowed by the nursing home. But staff members tipped off police, fearing she was in danger because, they suspected, he was having sex with her.

Police obtained a search warrant to videotape the room and installed the camera, which ran for three weeks. Johnson, who is free on bail, was charged based on that evidence.



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