A New York bankruptcy court, on Dec. 12, 2013, issued a 166-page decision after a 34-day trial, concluding that the spin-off of a highly profitable energy business constituted a fraudulent transfer intended to shield the business from massive environmental liabilities, and awarding damages of up to approximately $14.5 billion.[1]Tronox Inc. et al. v. Kerr McGee et al. (In re Tronox et al.) (Bankruptcy S.D.N.Y. Dec. 12, 2013) (J.
Criminal defendants facing onerous restitution obligations as part of their sentence might contemplate a bankruptcy filing, in the hope of staving off the restitution obligation. In a case of first impression, the Second Circuit recently considered whether the Bankruptcy Code’s automatic stay provision halts a defendant’s obligation to pay restitution and firmly closed the door on that potential gambit.
Despite having more than its fair share of failed banks, Florida has not been a hotbed of D&O litigation. On November 9th, the FDIC filed only its second lawsuit against former directors of a failed banking institution. The defendants here are former directors of Century Bank, FSB (Sarasota, FL), which was placed into receivership in mid-November 2009. A copy of the FDIC’s complaint is available here.
The United States Court of Appeals for the Fifth Circuit, on Oct. 22, 2012, held that $1.6 million in political contributions made to five different political committees by Ponzi scheme defendants between 2000 and 2008 were fraudulent transfers made “with actual intent to hinder, delay, or defraud creditors” under the Texas version of the Uniform Fraudulent Transfer Act. Janvey v. Democratic Senatorial Campaign Committee, Inc., et al., 2012 WL 5207460 ___ F.3d ___ (5th Cir. 2012).
A federal court jury in Manhattan returned verdicts on Monday, November 12, largely exonerating the two most senior Reserve Management Company executives in a Securities and Exchange Commission enforcement action accusing them of fraud.
On August 10, the FDIC in its capacity as receiver for Colonial Bank filed five lawsuits – three in Alabama state court, one in New York federal court, and one in California federal court – seeking $741 million in damages from a number of investment banks, including Bank of America Corp., JPMorgan Chase & Co., Citigroup, Inc., and others, for making allegedly false and misleading statements that induced Colonial Bank into buying mortgage-backed securities.
In a perfect world, a debtor's bankruptcy would involve timely reporting, good faith filings, and full disclosures. Unfortunately, some debtors either enter the process under a cloud of suspicion or make decisions during the process that suggest the estate has been compromised by fraudulent activity. Whether the alleged fraud is a complex bust-out scheme or a simple unreported asset transfer, the debtor may face a serious investigation. Depending on the extent of the allegations, the investigation could be referred as a criminal matter to federal prosecutors. As the
The Supreme Court has cleared the way for Irving Picard, the Trustee overseeing the Madoff liquidation proceeding, to distribute billions of dollars to victims of Madoff’s Ponzi scheme. On Monday, the Court declined to hear appeals in two cases from the Second Circuit challenging Picard’s formula for repaying victims.
In a recent decision, Senior Transeastern Lenders v. Official Comm. of Unsecured Creditors (In re TOUSA, Inc.), 2012 US App. LEXIS 9796 (11th Cir. May 15, 2012), the 11th Circuit Court of Appeals overturned a district court decision which had forcefully quashed a bankruptcy court decision to avoid, as a fraudulent transfer, a $400 million settlement and loan repayment by a parent company to a group of lenders (the “Transeastern lenders”).