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Alabama representatives file for $1.6 billion in bankruptcy case

A lawsuit has been filed on behalf of 130,000 Jefferson County sewer system customers. The filing claims that rate payers of the sewer system have paid $1.6 billion unnecessarily because of Wall Street financing techniques and the corruption of more than 20 county office holders. The suit follows a November 9 municipal bankruptcy filing, a result of close to $3 billion of sewer system debt.

The suit placed on behalf of county sewer system customers was filed by state representatives and the Jefferson County tax assessor. They claim that there has been a "continuing pattern of misconduct and criminal activity by managerial personnel of the county acting in collusion with other wrongdoers, including many of the top 20 creditors."

One of the creditors named in the suit includes the county's largest, JP Morgan Chase. In 2009 the company agreed to a $722 million settlement with the U.S. Securities and Exchange Commission. That suit was filed over charges of illegal payments allegedly made to secure county financing work.

On behalf of the sewer system's customers, the most recent filing requests class-action status. Filers say any money recovered would go toward reducing $3 billion of sewer-system debt in order to prevent rate hikes. The county was already ordered to make 5.5 million in monthly payments to creditors on its sewer debt. For the first time, the county failed to pay a $15 million general obligation bond payment in April. Officials said the money needed to be used for basic government services.

Source: Reuters, "Alabama group wants $1.6 bln in bankruptcy case," Michael Connor, June 5, 2012

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