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Chapter 13 Panel Trustee Reinstated after Racial Slur
Incident
An Idaho federal court judge on Wednesday issued a preliminary
injunction against the Executive
Office for U.S.Trustees (EOUST), reinstating a standing chapter 13 panel
trustee to his case
rotation. The EOUST had terminated Bernie Rakozy on Feb. 25, days after
Rakozy uttered a racial
slur during a public hearing before an Idaho Senate Committee that was
considering Rakozy's
reappointment to a state commission. During the hearing in early
February, Rakozy attempted to
explain his reasons for moving to Idaho from his native Detroit 48 years
earlier, as a means to
escape what he considered endemic racial prejudice in his white,
blue-collar community. In
illustrating these conditions, Rakozy repeated an incident where his
father uttered a racial slur
offensive to African-Americans. Rakozy has been a trustee in Boise,
Idaho, since 1984. During his
tenure, no disciplinary actions were taken against him nor was there any
evidence of complaints
lodged concerning the performance of his duties. Rakozy, 66, had planned
to leave his position as
trustee on June 1 and finish out his assigned cases. The EOUST
terminated Rakozy for 'gross
misconduct unbefitting his position as a trustee,' rejecting Rakozy's
contention that he was trying
to demonstrate his opposition to bigotry and intolerance. After
exhausting his administrative
remedy with the EOUST, Rakozy filed suit alleging, among other claims,
denial of his First
Amendment rights. Judge Edward Lodge found Rakozy's speech to be
constitutionally protected
and held that the government had failed to demonstrate any evidence of
personal bias that would
justify Rakozy's termination.
Web Investors Cutting Off Cash for Struggling Dot.Coms
As recently as a few months ago, dot.com companies found they could
count on additional funding
from investors when their money dried up, but today many Web investors
are cutting off funding
for losing dot.com enterprises, The Wall Street Journal reported.
Companies such as Violet.com, Toysmart Inc. and Boo.com have seen their
funding cut off, and many others are postponing their initial pulic
offerings (IPOs) until they are doing better financially. Some venture
capitalists see the current online turmoil as a nautral shakeout of
Internet companies only marginally performing -
companies, they say, that would never have been funded without an IPO
market that made cashing
out early investments too easy. 'As those companies are locked out of
money, they're faced with a
challenge - they either shut their doors, find a buyer or take cash at
any price,' said Michael
Linnert, a general partner at Technology Crossover Ventures in Palo
Alto, Calif. In addition, the
companies are faced with the challenge of finding a buyer once the
venture capital has dried up.
While many start-ups have few assets beyond their domain name, some will
possess technology
licenses or real estate that other firms will want, 'and the best way to
do that is through
bankruptcy,' said Ken Klee, a Los Angeles bankruptcy attorney.
Klee also said that bankruptcy
law firms are gearing up to handle the expected increase in filings,
although part of that fear stems
from the latest rise in interest rates and the fear of an economic
slowdown, Klee said.
The Washington Post reported that one new high-tech industry
now makes money from advising
new companies. The site is called
HREF='http://www.startupfailures.com'
TARGET='window2'>Startupfailures.com, 'the place for bouncing back,'
and was
launched in Silicon Valley earlier this month. The site includes advice
for start-up companies such
as dot.coms.
Charges Fly at Credit Card Antitrust Trial
The House Committee on Banking and Financial Services held a hearing on
antitrust violations in
the credit card industry yesterday, The Wall Street Journal
reported. Led by Chairman Bob Bennett
(R-Utah), two panels discussed competition in the credit card industry,
focusing on alleged
antitrust violations by Visa USA and MasterCard International. American
Express Co. is not part
of the suit, which goes on trial in federal court in New York next
month, but it stands to gain if the
government wins. 'Visa and MasterCard hold a 75 percent share of the
general-purpose credit- and
charge-card-network market, and based on their actions, do not compete
with each other,' said
Harvey Golub, chairman and CEO if American Express. 'They effectively
act as a single entity and
have conspired to limit competition in the U.S. card industry.' However,
Noah Hanft, U.S.
counsel for MasterCard of Purchase, N.Y., contends, 'MasterCard's
Competitive Programs
Policy does not prevent banks from issuing on the American Express
system. If banks want to
dedicate themselves to that system, they can. But they cannot have it
both ways.' Visa and
MasterCard executives said a negative outcome to their antitrust
lawsuits would result in higher
prices for the consumer. You can read the full text of the testimonies
TARGET='window2'>here.
FCC Wins in NextWave Case
Yesterday, a federal appeals court ruled that a bankruptcy court did
not have the authority to block
the Federal Communication Commission (FCC) from re-auctioning licenses
held by NextWave
Telecom Inc., according to Reuters. The Second Circuit Court of Appeals
ruled that the bankruptcy
court had overstepped its bounds because FCC licensing decisions are
subject only to rulings by
appeals courts, saying that licensing decisions were 'outside the
limited jurisdiction of the
bankruptcy court.' It also said the bankruptcy court violated an earlier
mandate issued by the
appeals court that 'repeatedly emphasizes that the bankruptcy court is
without power to review the
FCC's regulatory actions. Our mandate required the bankruptcy court to
refrain from impeding the
regulatory actions of the FCC, in particular, the FCC's enforcement of
the payment schedule
established by its regulations, orders and decisions,' the court said.
'Today's decision puts us one
step closer to bringing this spectrum to the marketplace so consumers
can enjoy next generation
wireless services,' said FCC Chairman William Kennard. The Hawthorne,
N.Y.-based NextWave
won the 90 licenses, which include rights to offer telephone service in
New York, Chicago and
Los Angeles, at two 1996 government auctions for more than $4.8 billion.
But the company was
unable to raise the money and declared bankruptcy in 1998. Subsequently,
the FCC moved to
cancel the licenses, but the bankruptcy court ruled that NextWave could
keep them. Last year, the
Second Circuit overturned the decision and the FCC said it planned to
re-auction the licenses.
When the bankruptcy court issued an order prohibiting the FCC from
re-auctioning the licenses on
Feb. 7, the FCC then petitioned the Second Circuit to force the
bankruptcy court to follow its
earlier ruling.
SEC Begins Inquiry into AmeriServe's Chapter 11 Filing
According to The Wall Street Journal, the Securities and
Exchange Commission (SEC) has begun
an informal inquiry into events surrounding AmeriServe Food Distribution
Inc.'s chapter 11 filing,
including a September 1999 bond offering underwritten by Donaldson
Lufkin & Jenrette, Reuters
reported. If the SEC decides a case is worth pursuing, however, DLJ
would be legally protected
because the securities at issue were unregistered, and such bonds are
not subject to all the securities
laws designed to protect investors in public securities. The SEC is
reportedly gathering a wide
range of documents about events of the year prior to AmeriServe's
January filing, the newspaper
said, and the SEC has asked parties involved for information about the
$200 million bond offering
for AmeriServe, AmeriServe's communications with DLJ; AmeriServe's
relationship with Burger
King Corp., and about financial transactions in the year prior to the
filing. According to the
Journal, AmeriServe and DLJ have been accused by bondholders of
failing to fully disclose
AmeriServe's problems at the time of the $200 million bond issue led by
DLJ. DLJ and
AmeriServe founder and former Chief Executive John Holten both insist
that they provided the
proper level of disclosure, and said that money they put into AmeriServe
several weeks prior to the
reorganization filing shows they had confidence in the company's ability
to survive. 'The SEC has
communicated with AmeriServe regarding an informal request for
information, on a voluntary
basis, concerning pre-bankruptcy activities involving the company,' the
company said in a
prepared statement to the Journal. 'We intend to fully cooperate
with their request.'
Geotele.com Files Reorganization Plan
Geotele.com Inc. announced today that it has filed a proposed
reorganization plan to take the
company out of bankruptcy, according to a newswire report. The plan
calls for a one-time cash
payment to creditors that will be funded by the private sale of stock,
and the company anticipates
that it will be presented to the bankruptcy judge for final approval in
the near future.
Court Amends Last Day to File Proofs of Claim Against Complete
Management
The bankruptcy court has ordered that June 22 will be the last date
by which all entities are
permitted to file proofs of claim, including all individuals,
partnerships, corporations, estates,
trusts and governmental units that hold claims against the Complete
Management Inc., which filed
for chapter 11 in the Southern District of New York on Oct. 12,
according to a newswire report.
Proofs of claim must be filed so as to be received on or before the June
22 date at 5:00 p.m. For
more information, contact Alec P. Ostrow or Gary Selinger,
Salomon Green & Ostrow P.C.,
919 Third Avenue, 15th Floor, New York, N.Y., 10022, (212) 319-8500.
Charter Behavioral Health Systems Announces Auction Results
Charter Behavioral Health Systems LLC announced yesterday that the
Delaware bankruptcy court
approved an agreement to sell 24 facilities in addition to two
additional facilities that were approved
by the court earlier this month, according to a newswire report. Charter
will continue to seek
buyers for the remaining seven facilities. The auction took place on May
10, and agreements to sell
two facilities were approved following the auction. Negotiations on the
remaining facilities
continued through yesterday, when agreements were reached concerning the
24 additional facilities
to be sold.While the facility operations make the transition, the
company said that patient care will
continue as usual. Charter filed for chapter 11 on Feb. 16.
Boots & Coots Supplier Files for Bankruptcy
Boots & Coots International Well Control Inc., a Houston
oil-field-services company, announced
yesterday that its ITS Supply Corp. unit filed for chapter 11 in Corpus
Christi, Texas, on May 18,
according to a Dow Jones newswire report. The company said that the
filing doesn't affect the
operations of Boots & Coots or any other subsidiaries, and said it has
issued a $1.5 million
guaranty for an ITS Supply debt, subordinated to the full payment of all
senior debt. Boots &
Coots said it doesn't expect to pay any part of the guaranty. Boots &
Coots, a provider of
prevention and emergency-response well-control programs to the oil and
natural-gas industry, said
ITS Supply will file a reorganization plan, but that ITS Supply's
operating subsidiaries are not
included in the chapter 11 filing and shouldn't be affected by it. Last
year, Boots & Coots said ITS
Supply lost roughly $1.8 million on revenue of $11.3 million as a
consequence of the sharp drop
in oil and gas prices and significantly fewer new international projects
in the third quarter of 1999.
Boots & Coots is in the process of completing the documentation
necessary for the acquisition by
Foothill Capital Corp. of existing senior credit debt currently led by
Comerica Bank-Texas.
Frontline Announces Acquisition of Golden Ocean
Norwegian shipping company Frontline announced last Friday that it had
signed an agreement to
take over U.S.-based Golden Ocean Group, which filed for chapter 11 in
the District of Delaware
on Jan. 14, according to Reuters. Frontline said it has signed a term
sheet with Golden Ocean,
under which the parties agreed to propose a joint plan for a financial
restructuring of Golden
Ocean, which holds interests in 14 very large crude carriers (VLCC),
three VLCC newbuilding
contracts and 10 bulk carriers. Frontline said the joint plan included a
payment to all unsecured
creditors in Golden Ocean, including the bondholders, and that it has
committed to pay up to $33
million in cash, or to issue up to 4.1 million shares and 1.9 million
warrants in Frontline valued to
$48 million, to take over all unsecured debt.
Xethos Group Announces It Is Not Affiliated with GST
Telecommunications
The European-based Xethos Group Inc., which specializes in products
and services for use in e
commerce and Internet applications, announced yesterday that it is not
affiliated in any manner with
GST Telecommunications Inc., which last week filed for chapter 11
protection in the United
States, according to a newswire report. In addition, Xethos said it is
not affiliated with GST
Telecom Inc. or any other name-related companies. 'Because our former
corporate name was
similar to other non-associated companies, it is important to clarify
and dispel any misconceptions
that this may cause to our shareholders, clients and the investment
community,' said Colin
Gervaise-Brazier, Xethos Group's chief executive officer.
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