SAN FRANCISCO, June 21 Bond insurer National
Public Finance Guarantee has hired a new law firm to represent
it in the California municipal bankruptcy cases of San
Bernardino and Stockton after a judge found its original firm
had created a conflict for itself.
National spokesman Kevin Brown said on Friday that
Weil, Gotshal & Manges will replace Winston & Strawn in the
The unusual switch in law firms follows a decision last week
by U.S. Bankruptcy Judge Meredith Jury in the San Bernardino
case to disqualify Winston & Strawn at the behest of the
California Public Employees' Retirement System.
The pension fund, known as Calpers, had complained that
Winston & Strawn had recently hired attorneys away from K&L
Gates, the law firm for Calpers in both bankruptcy cases.
The pension fund also demanded Winston & Strawn's
disqualification from the Stockton case. A response to that was
due this week but will not be filed with the bankruptcy court
hearing the city's case as Winston & Strawn is stepping aside,
"We're not objecting," Brown said.
U.S. Bankruptcy Judge Christopher Klein in April approved
Stockton's eligibility for bankruptcy, allowing the city to
draft a plan for adjusting its debts. Stockton aims to file that
plan with Klein in September.
Hearings next month and in August could determine San
Bernardino's eligibility for bankruptcy.
The U.S. municipal debt market is closely watching both
cases as they may test who absorbs most of the financial pain
when local governments go broke: bondholders or current and
retired city employees.
Calpers manages the pension plans of the two cities and has
fiercely resisted any cuts in pension payments.