The Justice Department yesterday announced the retirement of Clifford White, the Director of the Justice Department’s U.S. Trustee Program (USTP) effective March 31, 2022, according to a DOJ press release. “I want to express my appreciation to Cliff, not only for his 17 years of leadership of the U.S. Trustee Program, but also for 40 years of exceptional public service,” said Attorney General Merrick B. Garland. “During his long service as the head of USTP, Cliff oversaw the work of USTP’s 21 regions and 90 field offices to ensure the integrity and efficiency of the bankruptcy system. I wish him all the best in his future endeavors.” Under White’s leadership, the USTP successfully implemented many significant statutory changes; launched major enforcement initiatives to combat fraud and abuse; enforced compliance with bankruptcy laws; and, most recently, upheld the legal rights of victims of the opioid crisis in the Purdue Pharma case by challenging releases of liability that shield alleged wrong doers.
The Supreme Court granted certiorari to decide whether the 2018 increase in U.S. Trustee fees violated the Bankruptcy Clause because it was not immediately applicable in two states with Bankruptcy Administrators.
The U.S. Supreme Court agreed yesterday to decide the constitutionality of the higher bankruptcy fees charged temporarily in 2018 in 48 states, a legal issue that could affect hundreds of millions of dollars doled out by troubled companies to the Justice Department, WSJ Pro Bankruptcy reported. The justices will weigh a federal law that resulted in corporate debtors paying higher fees to the U.S. Trustee Program, a Justice Department unit monitoring the nation’s bankruptcy courts, for nine months during 2018. Companies that filed for chapter 11 in Alabama and North Carolina didn’t pay higher fees until later because those states opted out of the U.S. Trustee Program and instead have administrators who perform a similar watchdog function but are overseen by the federal judiciary. The legal issue was raised by the person who has worked as the liquidating trustee for Circuit City Stores Inc., the electronics retailer that went out of business more than a decade ago after filing for bankruptcy in Virginia. The chapter 11 fee hike resulted in a significant increase in administrative costs incurred as the bankruptcy continued to wind down, according to the liquidating trustee. Bankrupt companies affected by the federal law overall paid in excess of $100 million more than corporate debtors in Alabama and North Carolina during the monthslong gap in 2018, the Circuit City liquidating trustee said in a court filing. Circuit City’s bankruptcy estate paid about $632,000 in U.S. Trustee fees for the first three quarters of 2018, a substantial increase compared with the roughly $833,000 in total fees the estate paid in the seven years before the federal law took effect, court papers say. Companies in Alabama and North Carolina bankruptcy courts no longer pay lower fees. The Judicial Conference of the U.S., the governing body that sets policy for federal courts, agreed in September of 2018 to impose the same fee increase for bankruptcy courts in those two states. Last year, Congress amended the fee statute to streamline any future increases in every state, according to court papers. However, the latest change wasn’t retroactive, meaning the unequal cost bankrupt companies bore in states monitored by the U.S. Trustee was never addressed, according to court papers filed on behalf of Alfred Siegel, the Circuit City liquidating trustee.
The BAP decision on voluntary dismissal under Rule 41 adds credence to the idea that bankruptcy courts can attach conditions to a debtor’s voluntary dismissal under Section 1307(b).
A New Hampshire attorney who federal officials claim lied to obtain millions of dollars with five different loans has been convicted of bank fraud and other charges, the New Hampshire Union Leader reported. Joseph Foistner, 67, of Mont Vernon, N.H., was convicted Thursday of bank fraud, wire fraud, money laundering, and making misrepresentations during bankruptcy proceedings in U.S. District Court in Concord. The verdict was returned by Senior U.S. District Judge Paul Barbadoro, following a two-week bench trial. According to federal prosecutors, Foistner was a licensed attorney in Massachusetts when he used fraudulent means to apply for over $8 million in loans and laundered money between 2015 and 2018. Foistner didn’t have any paying clients and earned no income through his law firm, prosecutors said. He submitted misleading documents suggesting he was operating a lucrative law firm, the U.S. Attorney’s office said in a news release. Foistner also made other false statements to obtain bank loans, prosecutors claim, including lying about whether he was involved as a party to any lawsuits and denying that he had an interest in other companies, and falsely represented he earned a salary by mischaracterizing loan proceeds as a salary. Each of the loans made to Foistner were backed by either the Department of Veterans Affairs or the Small Business Administration. Prosecutors claim Foistner also committed several crimes during chapter 7 bankruptcy court proceedings in 2017 and 2018, falsely denying that he held or controlled property owned by others when he actually controlled funds held in the name of a business, and making false statements under oath by lying about what happened to the proceeds of one of the fraudulent loans. Foistner is scheduled to be sentenced on April 4, 2022.
