By Jonathan Stempel

(Reuters) – The trustee liquidating Lehman Brothers Holdings Inc’s brokerage unit asked a bankruptcy judge for permission to set aside $18.3 billion of assets to be returned to customers beginning early next year.

That payout would represent more than three-fourths of the $23.7 billion of assets that James Giddens, the trustee for the Lehman Brothers Inc unit, said he has under his control.

Of the $23.7 billion, $12.7 billion are securities and $11 billion is cash. Lehman was the fourth-largest U.S. investment bank prior to its September 15, 2008 bankruptcy, the largest Chapter 11 filing in U.S. history.

“The great bulk of the assets that will be available for distribution … are now in hand,” Giddens said in a late Thursday filing with the U.S. Bankruptcy Court in Manhattan. “The trustee would like to be in a position to proceed with interim distributions to customers in early 2012.”

Soon after Lehman’s bankruptcy, Giddens distributed $92.3 billion to benefit customers holding 110,000 accounts. Many accounts were absorbed by Barclays Plc and asset manager Neuberger Berman.

Giddens is also liquidating the broker-dealer unit of MF Global Holdings Ltd, a futures brokerage once run by former New Jersey governor and Goldman Sachs chief Jon Corzine. Customer distributions in that case are a small fraction of those in Lehman’s bankruptcy.

By Jonathan Stempel

(Reuters) – The trustee seeking money for Bernard Madoff’s victims won the right to immediately appeal a ruling that took away more than $19 billion of his claims against JPMorgan Chase & Co, Madoff’s main bank for two decades.

U.S. District Judge Colleen McMahon in Manhattan last month took away all but $425 million of trustee Irving Picard’s $19.9 billion lawsuit against the largest U.S. bank.

McMahon found that Picard, as trustee for the estate of Bernard L. Madoff Investment Securities LLC, lacked power to bring a variety of claims against the bank for harm caused to former Madoff customers.

Instead, the judge said, those claims belonged to the customers themselves. At least two lawsuits on behalf of some of those customers have since been filed.

Rather than pursue what remained of his case in a federal bankruptcy court, Picard reached an agreement with JPMorgan this week to allow an appeal of McMahon’s ruling to the 2nd U.S. Circuit Court of Appeals in New York.

“Counsel for all parties agreed to seek expedited treatment for any appeal,” McMahon wrote by hand in an order made public on Thursday.

Dec 1 (Reuters) – Pfizer Inc and Teva Pharmceutical Industries Ltd were sued by Walgreen Co and four other large retailers, accused of violating U.S. antitrust law by conspiring to keep generic versions of a popular antidepressant off the shelves.

Walgreen, Kroger Co , Safeway Inc , Supervalu Inc and HEB Grocery Co accused Pfizer’s Wyeth unit of conducting an “overarching anticompetitive scheme” to prevent and delay the approval and marketing of generic versions of the prescription drug Effexor XR, causing them to overpay.

In a complaint made public on Thursday by the U.S. District Court in Trenton, New Jersey, the retailers said Wyeth kept generic equivalents off the market for at least two years after its marketing exclusivity for the original Effexor compound patent lapsed in June 2008.

They said Wyeth did this by obtaining fraudulent patents, engaging in sham litigation, and entering a price-fixing agreement with Teva to delay cheaper generic equivalents from reaching the market.

“As a result of defendants’ exclusionary conduct, generic versions of Effexor XR were illegally blocked from the marketplace from June 2008 through at least June 2010,” when U.S. sales of the drug topped $2.5 billion, the 78-page complaint said. Pfizer bought Wyeth in 2009.

Some of the retailers’ claims had been assigned to them by three large drug wholesalers: AmerisourceBergen Corp , Cardinal Health Inc and McKesson Corp . A sixth plaintiff is American Sales Co, another wholesaler.

Effexor XR is used to treat depression and three anxiety disorders. Its chemical name is venlafaxine hydrochloride.

By Jonathan Stempel

(Reuters) – Raj Rajaratnam, the Galleon Group hedge fund founder, lost his bid on Thursday to stay out of prison while he appeals his conviction in the biggest insider trading case in a generation.

The 2nd U.S. Circuit Court of Appeals in New York issued a brief order rejecting Rajaratnam’s bid to remain free on bail, one day after hearing arguments from his lawyers.

He has been under house arrest at his Manhattan apartment since his May 11 conviction.

Rajaratnam, who did not attend Wednesday’s hearing, is scheduled on Monday to begin serving an 11-year prison term, the longest on record for insider trading.

He would report to the Federal Medical Center Devens in Ayer, Massachusetts, about 40 miles west of Boston, people familiar with the matter said. The people declined to be named because the location has not been made public.

Rajaratnam is challenging his conviction, saying wiretap evidence should not have been admitted at his two-month trial.

Nov 30 (Reuters) – Assured Guaranty Ltd saw its credit rating downgraded two notches on Wednesday by Standard & Poor’s, but the cut was smaller than had been threatened and should let the last remaining U.S. municipal bond insurer keep guaranteeing public finance debt.

S&P lowered its ratings for Assured operating units, including Assured Guaranty Municipal Corp and Assured Guaranty Corp, to “AA-minus,” its fourth-highest grade, from “AA-plus.” It also downgraded the parent company two notches to “A-minus” from “A-plus.” The rating outlook is stable.

The cuts follow changes in S&P’s bond insurance rating criteria, after the once “triple-A” rated MBIA Inc and Ambac Financial Group Inc fell to junk status from incurring big losses by insuring risky mortgage debt.

Both of those companies stopped insuring municipal bonds, and Ambac filed for bankruptcy protection last year. A unit of Warren Buffett’s Berkshire Hathaway Inc briefly filled some of the void, but stopped after Buffett concluded the risks were too high for his company.

S&P said Assured has a “solid market presence and consistent track record of profitability” from underwriting municipal bonds. It said the stable outlook assumes Assured will keep insuring predominantly investment-grade municipal bonds and maintain strong financial flexibility.

An Assured spokeswoman declined to comment on how the downgrade might affect the Bermuda-based company’s business.

Assured in a statement said its ratings were left in the “double-A” category because the insurer has been able to “execute its capital enhancement strategies.”

By Jonathan Stempel

(Reuters) – A U.S. appeals court on Wednesday sped up the review of a ruling that moved consideration of Bank of America Corp’s (BAC.N: Quote, Profile, Research, Stock Buzz) $8.5 billion settlement over mortgage debt to federal court from a New York state court.

The decision by the 2nd U.S. Circuit Court of Appeals in New York could help Bank of America, which intended the accord to address much of its remaining legal liability from its 2008 purchase of the mortgage lender Countrywide Financial Corp.

Bank of New York Mellon Corp (BK.N: Quote, Profile, Research, Stock Buzz), which as trustee negotiated the accord, and investors such as BlackRock Inc (BLK.N: Quote, Profile, Research, Stock Buzz) and MetLife Inc (MET.N: Quote, Profile, Research, Stock Buzz) are hoping to reverse an October 19 ruling by U.S. District Judge William Pauley in Manhattan moving the case to his court from a New York state court.

Pauley said he took the case because it implicated “paramount federal interests” such as the integrity of nationally chartered banks and the vitality of financial markets.

The settlement applied to 530 mortgage securitization trusts with $174 billion of unpaid principal. It was intended to address claims by investors who said the seemingly safe securities that they bought proved toxic because they were backed by risky home loans that were underwritten poorly.

Bank of New York Mellon had negotiated the accord with 22 institutional investors including BlackRock and MetLife.

By Jonathan Stempel

(Reuters) – It wasn’t just billions of dollars that were lost when Bernard Madoff proved to be a crook.

A federal judge rejected a California couple’s request to recover a sculpture of three African masks that they gave the now-imprisoned Ponzi schemer in 2006, court papers show.

Robert Baird and Randy Morrison Baird gave the sculpture as a “thank you” gift for Madoff’s having seemingly given them a “financial security blanket” during their more than six years as clients of Bernard L. Madoff Investment Securities LLC.

The Bairds said their 13-year-old daughter gave Madoff the sculpture at his Manhattan office. They said the sculpture was worth several hundred dollars, and acquired by Robert Baird’s father in Liberia in the 1970s.

“Madoff appeared quite pleased with the gift,” Randy Morrison Baird said in court papers. “He looked her (the daughter) in the eye and smiled at her, and then looked at my husband and me and thanked us.” Madoff later followed up with a handwritten thank-you note, the Bairds said.

The Bairds demanded the return of the sculpture after Madoff’s December 11, 2008 arrest.

By Jonathan Stempel and Terry Baynes

(Reuters) – Infomercial pitchman Kevin Trudeau lost his bid to throw out a $37.6 million fine for violating a 2004 Federal Trade Commission settlement over his advertising and a federal appeals court said the amount might even be too low.

Trudeau argued that U.S. District Judge Robert Gettleman in Chicago wrongly based the fine on consumer losses rather than his unjust gain. He also challenged Gettleman’s imposition of a $2 million bond to ensure his compliance with the settlement, saying it violated the First Amendment.

But the 7th U.S. Circuit Court of Appeals in Chicago found that the penalty was fair, saying Trudeau aired infomercials more than 32,000 times, a violation of the FTC settlement.

“The figure is conservative — it only considers sales from the 800-number, not sales in bookstores carrying his ‘As Seen on TV’ titles,” Judge John Tinder wrote for a three-judge panel.

Trudeau “should not now be surprised that he must pay for the loss he caused. The government is not impotent to protect consumers — nor is the court powerless to enforce its orders — by imposing narrowly tailored restrictions on commercial speech.”

The 7th Circuit in 2009 had thrown out the same fine, saying Gettleman did not explain his calculations sufficiently. The appeals court at that time also jettisoned a three-year infomercial ban that Gettleman imposed on Trudeau.

By Jonathan Stempel and Tom Polansek

(Reuters) – The trustee liquidating MF Global Holdings Ltd’s broker-dealer unit asked a federal bankruptcy judge to authorize the distribution of as much as $2.1 billion to about 36,000 former commodities customers, roughly doubling the total payout to $4.1 billion.

James Giddens, the trustee for MF Global Inc, said the increased payout should restore at least two-thirds of U.S.-based property to former customers of that unit, where funds were frozen because of the parent’s October 31 bankruptcy. That’s up from an earlier estimate of a 60 percent payout.

In a court filing, Giddens said the increased payout is “as full and as prompt a distribution” as circumstances and the law allow, and will leave him a sufficient reserve as he assesses customer claims.

The payout could provide further relief for customers whose money has been in limbo for one month. It requires approval by U.S. Bankruptcy Judge Martin Glenn in Manhattan, who has authorized two transfers this month. A hearing is set for December 9, court records show.

Once run by former New Jersey Governor Jon Corzine, MF Global filed for Chapter 11 protection after the New York-based company revealed a $6.3 billion bet on European sovereign debt. That worried investors, credit rating agencies and trading partners, and spurred a liquidity shortfall.

Federal investigators are still looking for missing customer funds estimated to total in the hundreds of millions of dollars. Giddens has estimated that the shortfall could total $1.2 billion.

Nov 28 (Reuters) – Anglo Irish Bank Corp, a nationalized lender being wound down by Ireland’s government after huge losses, on Monday won the dismissal of a lawsuit by a New York investment firm concerned it may lose its $200 million investment in the bank’s debt.

U.S. District Judge Paul Gardephe in Manhattan said the January 2009 nationalization made the bank a “foreign state” for purposes of a U.S. law, the Foreign Sovereign Immunities Act of 1976, and that Ireland did not waive the bank’s immunity from lawsuits.

The plaintiffs, two affiliates of Fir Tree Partners Inc, had sought a court order to block Anglo Irish from reducing their rights, and to force Anglo Irish to set aside at least $200 million to cover its obligations. They also sought the appointment of a receiver to insure payment.

Lawyers for Anglo Irish and Fir Tree had no immediate comment or were not immediately available for comment.

Anglo Irish merged this year with the Irish Nationwide Building Society (INBS) and is now called the Irish Bank Resolution Corp.

The decision could made it harder for investors to make cases against non-U.S. entities that have become wards of the state, in part as a result of the 2008 financial crisis.

Argentina invoked the 1976 law to shield its central bank and other entities it considers under state control against lawsuits stemming from its 2002 debt default.