ABI's Annual Spring Meeting: Committee Educational Session
ABI's 26th Annual Spring Meeting, the networking and CLE event of 2008, will be held April 3-6 at Washington, D.C.'s Renaissance Hotel in the Nation's Capital! Join us during cherry blossom season for exciting and informative sessions, including a luncheon keynote by Supreme Court Justice Samuel A. Alito, Jr.
The committee will meet jointly with the Business Reorganization committee on Friday, April 4, from 4:00 to 5:30 p.m. to discuss, “363 Sales - How Free is Free & Clear? Does new case law, fraud in the process or Loan to Own (or Loan to Buy) Deals, and other recent trends Negate the Ability to Get a 363(m) Order and/or impact successor liability exposure?”
Speakers include: Lawrence A. Katz, Venable LLP; Vienna, Va.; Jo Ann J. Brighton, Kennedy Covington Lobdell & Hickman, LLP; Charlotte, N.C.; Hon. Judith K. Fitzgerald, U.S. Bankruptcy Court; Pittsburgh; and Kenneth A. Rosen, Lowenstein Sandler PC; Roseland, N.J.
Fraudulent Conveyances: S.D.N.Y. Bankruptcy Court Adopts Third Circuit’s “Public Markets” Test
by: Jason S. Brookner
Andrews Kurth LLP; Dallas
On Aug. 31, 2007, the U.S. Bankruptcy Court for the Southern District of New York (Hon. James M. Peck, presiding) issued its “Opinion Regarding Insolvency and Unreasonably Small Capital” in the Iridium case. Statutory Committee of Unsecured Creditors v. Motorola Inc. (In re Iridium Operating LLC), 373 B.R. 283 (Bankr. S.D.N.Y. 2007). Therein, the court adopts the public market valuation principles set forth by the Third Circuit in VFB LLC v. Campbell Soup Co., 482 F.3d 624 (3d Cir. 2007). For publicly-traded companies that file for bankruptcy within the Third Circuit or in the Southern District of New York, it will be much harder to prove insolvency or unreasonably small capital if, at the time of the transfers in question, the debtor had a positive market cap.
Collusion in Bankruptcy Sales
by: Jason Binford
Haynes and Boone, LLP;
Dallas
This article is the first in a series of articles discussing 363(n) and collusion in bankruptcy sales. Subsequent articles will discuss the fine line between collusion and collaboration, and will explore the application of the specific elements of a 363(n) action.
Please note that this article was created as a joint effort with the Asset Sales Committee.
Fraudulent Financial Reporting on the Rise
by: Daniel F. Dooley
MorrisAnderson & Associates, Ltd.; Chicago
The last few years have been marked by unprecedented high levels of liquidity in the U.S. economy. Despite the recent tightening of credit markets in the wake of the sub-prime crisis, many capital sources seeking to deploy capital still remain.
It has been my experience that in times of high liquidity and easy money, especially in the credit markets, that management fraud in terms of financial reporting is more likely to occur. The reasons are simple. First, the capital sources are focusing heavily on expanding portfolio size at the expense of preserving asset quality. Second, management feels everyone seems to be making so much money that they may convince themselves that their big pay day is just around the corner and they can buy a little time to also get the big payday by fudging the numbers.
It is my belief that there are a significant number of frauds brewing in many private middle-market companies in this high-liquidity market right now. This article represents a consultant’s view of seven examples of fraudulent financial reporting that I have seen in the last few years.
Former Counsel for Pearlman Ordered to Produce Computer, Cell Phone and PDA for Reconstruction of Data
by: Elizabeth Bohn
JordenBurt LLP; Miami
After Rica Chamberlain, former counsel for bankrupt boy-band promoter Lou Pearlman, failed to respond to his requests for turnover of records and computer files relating to one of Pearlman’s companies and answer questions posed at 2004 examination, the trustee filed an emergency motion for contempt against her, alleging that she had failed to comply with a court order directing her to produce responsive documents, provided an incomplete privilege log, and failed to answer questions during her 2004 examination based on improper assertion of the attorney-client privilege.
The emergency motion requested the court to compel Chamberlain to answer deposition questions and produce documents, conduct an in camera inspection of documents which she claimed were privileged, appoint a computer expert to conduct a forensic examination of her computers, and impose sanctions against her for contempt. It also set forth spoliation concerns because she claimed a laptop computer containing responsive documents was lost or stolen shortly after the original date set for her deposition and she had refused to turnover backup discs to the court for inspection.