Bankruptcy Homestead Limits Set

Congress aimed a long-stalled bankruptcy-reform bill directly at EnronCorp. executives Tuesday by deciding to block wealthy debtors from using luxury homes to shield assets. A compromise on the homestead exemption portion of the bankruptcy bill cleared one of the last few stumbling blocks on the bill between House and Senate negotiators, who have been working almost four years to come to a deal on the reform bill. Lawmakers say they want to stop wealthy debtors from using bankruptcy laws to hide their money. Texas, Florida, Iowa, Kansas and South Dakota have unlimited homestead exemptions. Some famous and wealthy people, including actor Burt Reynolds, have written off millions in debt in Bankruptcy Court but kept mansions.Lawmakers frequently used former Enron executive Kenneth L. Lay as an example of why they think the homestead exemption portion of the bill is needed, even though Lay has not filed for bankruptcy and has not been charged with wrongdoing. Lay was the politically connected chairman of Enron. Under the House-Senate compromise, wealthy debtors trying to hide their money by putting it in property will have capped at $125,000 the amount of home equity they can keep out of the reach of creditors in court proceedings if they have committed a crime, caused serious injuries or death or owe a debt because of a crime such as securities fraud. The most home equity debtors could shield by relocating would be $125,000 until they have owned homes in those states for at least 40 months, lawmakers said.

Wynn to Offer Public Shares in New Project

Casino developer Steve Wynn has changed his mind and now plans to sell public shares in his redevelopment of the Desert Inn. Wynn is completing financing for the $1.63-billion resort on the Las Vegas Strip. He had said after buying the landmark Desert Inn site that he wanted to retain private ownership of the 218-acre project called Le Reve because of his dislike for short-term, profit-driven equity markets. He had vowed when he sold Mirage Resorts to MGM Grand two years ago to never again operate a publicly traded company. Wynn initially said he would turn to banks, private investors and the bond market to finance the Le Reve (“the dream”) resort on the Desert Inn site. He explained his change of mind on Monday: “One, normalcy has returned to the stock market and gaming stocks have regained their value,” Wynn told the Las Vegas Review-Journal. “Two, you really have to be able to offer a stake in the business to attract top-quality staff,” he said. “This will allow us to offer stock options.”

--Associated Press

Briefly

H&R; Block Inc.’s $25-million settlement of a lawsuit over the world’s largest tax preparer’s refund program was not properly examined by a trial judge, a federal appeals court ruled Tuesday in overturning the settlement. The U.S. 7th Circuit Court of Appeals said the trial judge didn’t examine with “the care that it deserved” the fairness of the settlement concerning loans the company arranged for customers who anticipated tax refunds, wrote Judge Richard Posner. The proposed settlement concerned allegations that Block and its banking partner Household International Inc. gouged low-income customers by providing “refund anticipation loans” at interest rates that exceeded 100%.

--Bloomberg News