Madoff, Ener1, Dynegy, Hostess, PMI, Syms, Shaw: Bankruptcy
(This report contains items about companies both in bankruptcy and not in bankruptcy. Adds Dynegy, Hostess, AES Eastern and Cornhusker Marriott in Updates; Seaarland in Watch List; and section on Statistics.)
Jan. 27 (Bloomberg) -- The trustee liquidating Bernard L. Madoff Investment Securities Inc. filed his brief this week opposing dismissal of lawsuits against more than 80 customers who took more out of the Ponzi scheme than they invested. The dispute will be decided by U.S. District Judge Jed Rakoff in a test case called Picard v. Hein.
In late November, Rakoff removed the suits from bankruptcy court. The customers, all represented by New York lawyer Carole Neville, filed papers early this month arguing for dismissal. Trustee Irving Picard filed his answering brief on Jan. 25.
In the trustee's theory, cash taken out in excess of a customer's investment represents fictitious profits that can be recovered as fraudulent transfers, even if the customer was unaware of fraud. The customers contend their profits were bona fide because they were shown on account statements.
Picard argued in his papers this week that customers can't rely on New York state law contained in the Uniform Commercial Code, because the federal Securities Investor Protection Act overrides state law. The customers contend they have a right to profits even if they didn't exist in realty because state law precludes a broker from repudiating an account statement.
The trustee countered the customers' argument that funds in Madoff accounts representing individual retirement accounts are immune from lawsuits. Provisions in New York state law make those funds exempt assets that can't be attached in suits, the customers claim.
Picard pointed to provisions in New York law saying that money received fraudulently isn't protected as an exempt asset.
He also debunked the customers' theory that federal tax laws protect withdrawals from individual retirement accounts made by individuals over age 70 who are required to make annual withdrawals or pay tax penalties.
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In the trustee's theory, cash taken out in excess of a customer's investment represents fictitious profits that can be recovered as fraudulent transfers, even if the customer was unaware of fraud. The customers contend their profits were bona fide
Meanwhile, Amy Daniel, manager of the Tobacco Warehouse, noted that her store and Advance America Cash Advance have remained open since the fire. "We didn't have a whole lot of damage," Daniel said. "It really, really, really stunk.
Updates Kodak as first item; adds Jefferson County in Updates; AMR and Lehman in Briefly Noted; Evergreen Energy in New Filing; section on Daily Podcast.) Jan. 24 (Bloomberg) -- Eastman Kodak Co. projected a $363.7 million cash loss over 13 weeks
22, in advance of a trial to begin March 5. Hostess isn't required to file motions to terminate contracts with other unions until March 28. Hostess said it was compelled to undergo bankruptcy reorganization a second time as a result of “uncompetitive
Coach America Holdings Inc., the largest US charter bus operator, filed a Chapter 11 reorganization petition yesterday in Delaware after failing to negotiate a restructuring with first-lien lenders. Based in Dallas, Coach said assets are $274 million,
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