Wednesday, December 08, 2010 4:49:28 PM
Courtesy of Marymbobh
The bankruptcy court could agree that ending the litigation against JPM and the FDIC is reasonable and that dividing the assets among the creditors, JPM, and the FDIC as POR v6 proposes is appropriate. However, there is a fatal flaw in POR v6 that the bankruptcy court will not be able to circumvent. The "Worker, Homeownership, and Business Assistance Act of 2009" provided for additional recovery of NOLs but included an important exception:
"Exception for TARP Recipients- The amendments made by this section shall not apply to--
(1) any taxpayer if--
(B) the Federal Government acquired before such date of enactment any warrant (or other right) to acquire any equity interest with respect to the taxpayer pursuant to the Emergency Economic Stabilization Act of 2008"
JPM took $25 billion in TARP money in 2008 for which it issued warrants while the 5-year NOL bill was enacted in November, 2009. Therefore, JPM is not allowed to receive the NOL tax refund money. The refund due to WMI has been placed by the IRS into an escrow account controlled by WMI, JPM, and the FDIC. If the money had become a direct estate asset, WMI could have turned around and gifted it to JPM...in effect laundering the money to turn it into estate money rather than IRS refund money. However, JPM was too clever and insisted that it be placed into the Wells Fargo Escrow account (with JPM, WMI, and the FDIC on the account) where it would reside until IT'S OWNERSHIP WAS DETERMINED BY THE COURT. The bankruptcy court therefore is prevented by law from determining that a portion of the tax refund money is the property of JPM. As a result, other arguments notwithstanding, the POR v6 is not confirmable as that would require the court to determine that a portion of the money in the tax escrow account was the property of JPM.
The escrow account contains $5.2 billion that was refunded by the IRS as a part of the tax settlement with the IRS as referenced here:
http://www.kccllc.net/documents/0812229/...
There is nothing there that breaks down the $5.2 billion into a 'first' refund and a 'second' refund. The court decides the issues based on the facts before it. If the court cannot determine WITH CERTAINTY that JPM is not receiving refund money barred by law, based solely on the information available to the court in the record, then it cannot approve the disbursement from that account and the plan cannot be confirmed. Neither the GSA nor the POR v6 standing alone provide sufficient information for the court to reliably determine the amount of the refund that JPM would be barred from receiving.
See Section 13
http://frwebgate.access.gpo.gov/cgi-bin/...
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