The Bankruptcy Buzzards
Tracking down some of the buzzards that
sit on bankruptcy court benches
Sightings from The Catbird Seat
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December 30, 2006
Is a Bankruptcy Bonanza on the Horizon?
As the saying goes, a rising tide lifts all boats. For the past few years, the relatively strong economy and low interest rate environment has been buoying companies that may not have survived in rougher waters. But as the tide turns on the economy, can these companies keep their heads above water?
According to Forbes, this country is facing a bankruptcy boom. It says many companies have used the current easy money environment not to repair fundamental problems in their businesses, but to simply pay creditors.
“A lot of people aren’t fixing the problems they have with their businesses,” Ingrid Bagby, a partner with law firm Cadwalader, Wickersham & Taft, tells Forbes. “They’re just fixing their liquidity problems.”
Lenders have not done their due diligence, says Forbes. They haven’t investigated how the money will be used, leading to a rising risk of bankruptcies and a lot of bad debt on their hands.
And it’s not chump change. Forbes points to a private equity investor who procured a $10 million investment for one of the companies in his portfolio. The hedge fund doling out the money never sent a representative to a due diligence meeting. When asked why, the hedge fund responded, “For a $10 million investment, it’s not worth sending someone.”
Forbes points to unsustainably low default rates. According to Moody’s the current default rate for speculative grade bonds is 1.8 percent, well below the historical average of 5 percent. But many experts say that statistic will reverse quickly, with estimates averaging in the 2.5 percent to 3 percent range. Some even say the default rate could explode to around 7 percent or 8 percent.
“The default rates seem unsustainably low, at the same time the volume of potential candidates has never been higher,” Mark Sunshine, CFO of financial services firm First Capital, tells Forbes.
“I think when [a correction] comes, and it is coming, it’s going to be a big one,” warns Jay Goffman, a partner in the corporate restructuring department at law firm Skadden Arps.
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Paulson: Hedge Funds Positive for Market
U.S. Treasury Secretary Henry Paulson said Friday it was important to make sure hedge fund liquidity and borrowing were closely monitored, but said they were making a helpful contribution to financial markets.
From the Wells of Justice website:
Can You Be A Victim?
Anyone filing or related to someone filing Chapter 7 bankruptcy is a potential victim. Several basic characteristics will tell you if you are a potential victim. They are:
> Lack of experience and knowledge with bankruptcy rules and the judicial system
> Respect for authority figures
> Respect for the law
That means any law abiding citizen not educated in bankruptcy law is a potential victim for the Chapter 7 trustees and attorneys colluding with them to perpetrate fraud, embezzlement and extortion under color and claim of official right.
What you own can also mark you as a potential victim.
> Ownership in any real estate located anywhere
> Having a co-owner in your home
> Beneficiary of a Trust, or being married to the Trustee of a Trust
> Filing individual bankruptcy and your spouse does not file
> Having an IRA or other exempt retirement account
> Being Plaintiff in a lawsuit
> Being a party in a pending divorce proceeding, or
> Being divorced with a disgruntled ex-spouse
> Anticipating an income tax return in excess of a thousand dollars
Some attorneys have intentionally misled their clients in these matters, setting them up for charges of fraud filed by the Chapter 7 trustees. In addition, some cases demonstrate that the non filing spouse is charged with false charges and coerced into agreeing to a “settlement.”
Who you are can also mark you as a victim.
> Working class: Fraud restricts victims by robbing them of their money. Since victims are already in desperate financial straits when counseling with an attorney on bankruptcy, they automatically qualify as someone that cannot afford legal fees to challenge false charges, neither filing fees nor legal fees to appeal unlawful decisions.
> Pro Se, that is, filing your bankruptcy without using an attorney, or representing yourself after your attorney abandons you. Bankruptcy trustees and bankruptcy judges appear to take pleasure in denigrating and humiliating their victims by suggesting they are too stupid to understand the law.
> Self-employed. As long as you are able to make money, the trustees will find a way of making you agree to give them monthly payments for significant periods of time, although there is no guarantee that business will support the payments to the trustee in addition to living and business expenses.
Perpetrators of financial confidence crimes committed under color of official right operate to convince their victims that:
> There is something of benefit for the victim to receive in exchange for submitting to the extortion scheme. (Such as, giving the trustee $5,000 to drop false charges is less than having to pay $25,000 of debts declared in the bankruptcy.)
> There is reason for the victim to fear not being able to recover from the acts they are threatened with unless they submit to the extortion scheme, (such as imprisonment on false charges; not having their bankruptcy discharge granted; being slandered and humiliated in court by a hostile witness).
> The perpetrators have influence and control over the Judge and justice personnel so that they will win the case, regardless of the law and evidence. (…Therefore, victims cannot, and will not receive justice.)
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MORE TO COME
Meanwhile, you can peruse more bankruptcy buzzard poop by flying over to….
The Boyd Group
The Bankruptcy Buzzards of Orange County
Conseco: Birds in the Trailer Park
The Great Nest Egg Robberies
The Indonesian Connection
The Story of Enron
The Strange Saga of BCCI
Office of the U.S. Trustee vs. Harmon
Pan Am Airlines
The Rise & Fall of Summit Communications
The Puna Connection
Tinkering with eToys
The Catbird Recommends: Sidney Skolnick’s excellent series entitled The Bankruptcy Bordello…
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Last Update December 30, 2006, by The Catbird