By Jonathan Stempel

(Reuters) – SP Newsprint Co, owned by newsprint magnate and art collector Peter Brant, filed for bankruptcy protection, citing rising raw material costs and too much debt.

Tuesday’s filing by the Greenwich, Connecticut-based company, which has called itself the fourth-largest North American newsprint manufacturer, followed a September 7 bankruptcy filing by NewPage Corp, North America’s largest maker of magazine paper. New Page is owed by private equity firm Cerberus Capital Management LP.

Paper makers have struggled in recent years with rising costs, increased competition from Asia and Europe, and falling demand as more advertisers and readers move online.

Ed Sherrick, SP Newsprint’s chief financial officer, in a statement said weak economic conditions and record prices for key raw materials shrank profit margins, leaving the company unable to continue paying its debts.

“The company is seeking court protection to maximize going concern value in an orderly manner,” he said.

SP Newsprint said it is in talks to obtain financing to help it operate in bankruptcy. Three affiliates also sought court protection from creditors.

Nov 15 (Reuters) – A federal judge rejected BP Plc’s bid to use insurance coverage from Transocean Ltd to cover costs stemming from last year’s record oil spill in the Gulf of Mexico.

Tuesday’s decision by U.S. District Judge Carl Barbier in New Orleans rejected BP’s bid to win access to $750 million of insurance coverage under nine policies.

It was the second legal setback that Barbier dealt BP in two days. On Monday, the judge said Alabama and Louisiana may seek punitive damages from BP and other companies for spill damages, though he dismissed some of the states’ other claims.

The Deepwater Horizon drilling rig’s April 20, 2010 explosion caused 11 deaths and led to the largest offshore oil spill in U.S. history.

Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill. Barbier oversees hundreds of lawsuits arising from the spill.

“BP, under the drilling contract, assumed responsibility for Macondo well oil release pollution liabilities,” Barbier wrote. “The Deepwater Horizon incident entailed a subsurface release; thus, Transocean did not assume pollution liabilities arising from the incident.”

A spokesman for London-based BP did not immediately respond to a request for comment. Transocean spokesman Lou Colasuonno had no immediate comment.

By Matthew Goldstein and Jonathan Stempel

(Reuters) – Fallout from MF Global Holdings Ltd’s bankruptcy intensified as a U.S. regulator subpoenaed a bank that held some of its customers’ money, while some of the 1,066 workers fired from the futures brokerage last week filed three lawsuits over their sudden dismissals.

The U.S. Commodity Futures Trading Commission within the last week issued a subpoena to Bank of Montreal’s Harris Bank unit, seeking information about customer accounts at MF Global, two people familiar with the situation said.

Prior to MF Global’s October 31 bankruptcy, Harris had been the main custodian for customer money deposited with the futures brokerage and kept in segregated accounts.

A spokesman for Chicago-based Harris declined to comment. The CFTC also declined to comment. The people familiar were not authorized to discuss the subpoena publicly.

The subpoena signals that U.S. regulators are stepping up their investigation into the $600 million still missing from MF Global’s accounts.

MF Global filed for bankruptcy after its bets on European sovereign debt unnerved investors, credit agencies, customers and counterparties, causing liquidity to disappear.

Nov 14 (Reuters) – Futures brokerage MF Global Holdings Ltd was sued by former employees who said they were not given required notice before last Friday’s firing of all 1,066 workers at its broker-dealer unit.

The lawsuit was filed in U.S. Bankruptcy Court in Manhattan on Monday, two weeks after MF Global filed for Chapter 11 protection.

It comes as James Giddens, the court-appointed trustee liquidating the MF Global Inc broker-dealer unit, tries to locate about $600 million missing from customer accounts.

On Friday, he issued a subpoena to examine employees of the parent company, without publicly naming them.

The lawsuit, which does not name the broker-dealer unit as a defendant, said workers did not receive 60 days notice, as required under federal and New York state labor law.

Kent Jarrell, a spokesman for Giddens, said the trustee “acted appropriately” in connection with the job losses.

The lawsuit seeks class-action status, and to ensure payment of unpaid wages and bonuses, commissions and other benefits as MF Global works through the bankruptcy process.

Nov 14 (Reuters) – A federal appeals court refused to allow investors to sue Merrill Lynch & Co over allegations the bank manipulated the $330 billion auction-rate securities market.

Monday’s decision by the 2nd U.S. Circuit Court of Appeals upheld a lower court ruling absolving Merrill of claims that its prospectuses and website failed to adequately disclose liquidity risks, including how the bank might refuse to use its capital to prevent the failures of auctions it led.

The lawsuit sought class-action status and was brought on behalf of investors who bought auction-rate debt that Merrill helped sell between March 25, 2003 and Feb. 13, 2008. Bank of America Corp bought Merrill on Jan. 1, 2009.

Merrill and other banks and brokerages for many years marketed auction-rate securities as a safe, liquid alternative to cash, with slightly higher returns.

But the market froze in February 2008 when dealers stopped supporting the auctions. This left many investors unable to sell their securities, or able to do so only at a significant loss.

Writing for the 2nd Circuit, Judge Robert Katzmann said Merrill sufficiently disclosed that liquidity depended on its own intervention in auctions, rather than “the natural interplay of supply and demand.”

The U.S. Securities and Exchange Commission had filed a brief in support of the investors. The regulator reached its own settlement on the issue with Merrill in August 2008.

Nov 11 (Reuters) – A bond trustee requested on Friday the appointment of an examiner for the bankruptcy of Dynegy Inc’s holding company, saying an investigation is needed to determine whether the proceedings are fair to bondholders.

US Bank NA made the request four days after Dynegy Holdings LLC sought Chapter 11 protection and two months after the holding company transferred assets related to coal-powered plants to its Houston-based parent, which did not file for bankruptcy.

It is a significant challenge to an unusual bankruptcy. Dynegy proposes to restructure several billion dollars of debt in a manner that would protect shareholders that include billionaire financier Carl Icahn and the Seneca Capital hedge fund, while causing losses for bondholders.

US Bank, a unit of US Bancorp , also on Friday sued on behalf of bondholders to stop Dynegy Holdings from rejecting some personal property leases, as part of its alleged effort to avoid repaying “hundreds of millions of dollars.”

Both filings were made with the U.S. bankruptcy court in Poughkeepsie, New York, which is handling the proceedings.

Dynegy spokeswoman Katy Sullivan said the company is reviewing the filings.

Under federal bankruptcy law, a judge may appoint an examiner to investigate a debtor for the benefit of creditors, equity investors and the bankruptcy estate.

NEW YORK (Reuters) – A federal judge ordered Raj Rajaratnam, the Galleon Group hedge fund founder sentenced to 11 years in prison for insider trading, to pay a record $92.8 million penalty in a related U.S. Securities and Exchange Commission civil case.

The penalty imposed by U.S. District Judge Jed Rakoff in Manhattan is in addition to the $63.8 million that Rajaratnam’s lawyers said their client has already paid in his criminal case, including $53.8 million that was forfeited and a $10 million fine.

A federal jury in May convicted Rajaratnam of 14 counts of securities fraud and conspiracy in the criminal case.

Rakoff’s colleague, U.S. District Judge Richard Holwell, last month imposed the 11-year prison term, the longest recorded U.S. sentence for insider trading. Rajaratnam is scheduled to begin his term on December 5.

The SEC said Rajaratnam’s civil penalty is the largest against an individual in an insider trading case brought by the regulator, including in its 1980s cases against stock trader Ivan Boesky and junk bond financier Michael Milken.

Rakoff said a severe civil penalty for Rajaratnam was needed to make clear that insider trading should be “a money-losing proposition” for all who consider it.

He also said such a penalty was appropriate because the net worth of Rajaratnam, a former billionaire, “considerably exceeds” the penalties in the criminal case.

NEW YORK, Nov 8 (Reuters) – A federal judge ordered Raj Rajaratnam, the Galleon Group hedge fund founder sentenced to 11 years in prison for insider trading, to pay a record $92.8 million penalty in a related U.S. Securities and Exchange Commission civil case.

The penalty imposed by U.S. District Judge Jed Rakoff in Manhattan is in addition to the $63.8 million that Rajaratnam’s lawyers said their client has already paid in his criminal case, including $53.8 million that was forfeited and a $10 million fine.

A federal jury in May convicted Rajaratnam of 14 counts of securities fraud and conspiracy in the criminal case.

Rakoff’s colleague, U.S. District Judge Richard Holwell, last month imposed the 11-year prison term, the longest recorded U.S. sentence for insider trading. Rajaratnam is scheduled to begin his term on Dec. 5.

The SEC said Rajaratnam’s civil penalty is the largest against an individual in an insider trading case brought by the regulator, including in its 1980s cases against stock trader Ivan Boesky and junk bond financier Michael Milken.

Rakoff said a severe civil penalty for Rajaratnam was needed to make clear that insider trading should be “a money-losing proposition” for all who consider it.

He also said such a penalty was appropriate because the net worth of Rajaratnam, a former billionaire, “considerably exceeds” the penalties in the criminal case.

Nov 11 (Reuters) – Serta Inc sued Oleg Cassini Inc to stop threatened litigation by the fashion designer related to the sale of mattresses bearing the Cassini name at J.C. Penney Co stores.

In a complaint filed in Chicago federal court, Serta said it stopped selling its Perfect Day Cassini mattress model in J.C. Penney stores after Oleg Cassini in September accused it of infringing a trademark dating to the early 1950s.

But Serta said Oleg Cassini has still threatened to sue both it and J.C. Penney, having maintained that the mattresses may still be sold as floor samples or in close-outs, and that links on Google and other search engines still reference them.

“Oleg Cassini Inc does not consider this matter closed,” and unless Serta provides a full accounting “will proceed to file suit,” the company’s lawyer Vincent Reppert wrote in a Nov. 1 letter attached to Serta’s complaint. The designer is seeking “reasonable damages,” the letter added.

Based in Hoffman Estates, Illinois, privately-held Serta calls itself the second-largest mattress manufacturer. It asked the court to declare it has not infringed any trademark, and to bar Oleg Cassini from pursuing related trademark litigation.

“These claims are absolutely ridiculous,” said J. Vincent Reppert, a partner at Reppert Kelly representing Oleg Cassini. “Oleg Cassini has had incontestable trademarks since 1951. We will vigorously prosecute this action.”

Serta said the mattress name “was inspired by numerous space-related entities including Giovanni Domenico Cassini, a famous Italian/French astronomer who lived from 1625-1712, and the famous NASA Cassini spacecraft and solstice mission.”

Nov 10 (Reuters) – UBS AG was charged by the U.S. Securities and Exchange Commission with faulty recordkeeping related to short-sale orders, and settled by agreeing to pay an $8 million fine and to retain an independent consultant.

Thursday’s settlement follows the Swiss bank’s agreement last month to pay a $12 million fine, the largest of its type, to settle charges related to short sales by the Financial Industry Regulatory Authority.

Both regulators charges UBS with violating Regulation SHO, a 2005 SEC rule designed to thwart abusive “naked” short selling, and ensure that brokerages can deliver shares on short-sale transactions they process.

Short sales occur when investors sell securities they do not own, hoping the prices will fall so they can repurchase the securities later at a lower price, replenish their lenders and pocket the difference as profit.

Naked short sales occur when investors do not first borrow the underlying shares or make sure they can be borrowed. The practice is not always illegal in the United States.

In an order settling administrative proceedings, the SEC said that since at least 2007, UBS employees routinely recorded having confirmed with lenders when shares were available for short sales — known as “locates” — when no one had done so.

As a result of these “pervasive” violations, UBS sourced “thousands of locates” to lender employees who were out of the office and could not have confirmed that shares were available for shorting, the order said.