Catz' recap from Court on 8/24/11
[Yea, it's long. Sorry :) ]
Well, I'm back from Court -- a bit more rested and now reflecting on the experience and what I heard.
While I remain cognizant of how dicey this has all been, I walked away from court with a better feeling than I walked into court with.
I was reasonably sure that I would hear little from THJMW during the hearing. And I was, honestly, pleasantly surprised that I was wrong. And even more pleasantly surprised with my reads on her – both verbal and facial and non-verbal stylings.
Of course, it all began with Rosen stating why he prepared the sequence the way it was. That since the SNHs were effectively rebutting the charges by the EC and others that the SNHs were slated to go after the EC and others had said their piece. Folse argued that the “burden” on proposing a Plan and it’s confirmation falls on the Debtors and other plan proponents, and therefore they – collectively – should go first, and that includes the SNHs who want the plan confirmed.
The court agreed. And when Rosen suggested that he wasn’t going to re-hash the written arguments, she not-so-humorously jumped on that and basically said then he could sit down now. That, combined with the court stating that they were already far along with their decision and opinion, was telling. While a humorous exchange, it set the stage that the court had already read the written closings, and was re-telegraphing to the parties that they ought to be sticking to ‘new’ information and not a re-hash and re-presentation of their already-on-file written closing arguments.
Rosen presented a powerpoint with lots of details in long paragraph form. The key two slides were the “waterfall” – which had an actual waterfall background, and varying (and dropping) amounts of monies covering some and of course not reaching equity. Later on, he attacked the Marshall valuations as a “house of cards” – and used a really cheesy (and badly drawn) powerpoint sequence to slowly build up a house of cards (ya know, one card leaning on another, then topped of by a slab of cards, and then building up more) – and as he talked, one card after another was put up on the powerpoint and then when it was done, the entire house-of-cards were shown “collapsed” on the ground, scattered about.
It was cheesy. And the court, I feel, saw it as such. A demonstrative gone awry. Trying to use a visual to make up for an argument that was hard to make.
Of course, the SNHs got up and basically tried to make the case, over and over, that they didn’t Insider Trade. And why they didn’t. And how that even if they had done some questionable things, it didn’t rise to Insider Trading. And even if it looked like insider trading, that they hadn’t harmed the debtors and that somehow was the law to be applied. And even if they had accidentally done something, it was an accident and not with scienter (willful intent) and that was a requirement for them to have done anything bad. And even on top of all of that, if they even had IT’d, then the court couldn’t really do anything bad like disallow their claims. And plus, even if Fried Frank had shared information they shouldn’t have shared, that it wasn’t a case of “Misappropriation” for that particular instance. And of course, the whole logic of “it was a bad time in the marketplace” as somehow justifying what went on, well, the court didn’t seem to buy it.
And the whole “it’s so hard to set up an ethical wall for a long period of time” arguments fell like a lead balloon and the floor shook when it hit. It came across as “Ethical Walls are for Sissies” and we don’t have to build them since we are sophisticated. And the court clearly felt otherwise. If you get privileged information, you don’t trade. And if you trade, you don’t get privileged information. It was clear the court was quite upset with the concept of “ethical walls can’t be built when a case might go on for a year or more”. “We have a right to get the most out of our investment by both negotiating and trading”. Nope, the judge didn’t buy it.
Bull. The look on the courts face was one of “you have got to be kidding me” with your arguments. And when the arguments came that she didn’t have “disallowance” authority, I thought it was highly telling that she didn’t just let that go. She challenged them on “why do you think I don’t have that authority” --- telling that she actually had done the research, and read the written arguments against disallowance, and was challenging the SNHs to explain further why they thought she didn’t have that authority. Telling to me that she’d be actually considering it, otherwise “why bother” asking the questions. Now, the pessimist in me says, she may have just been irked at the attitude of the SNHs and wanting it to be a remedy available in cases “in general” and was making her point. But I did feel it was applicable to this case, and the challenge by the court was one specific to this case, and not a general challenge to the concept of disallowance.
The overriding feeling I got was there was very little “here’s why you should confirm the plan” discussions. And entirely too much (“methinks they doth protest too much”) about defending the Insider Trading charges. Somehow arguing the truth is an easy sell. Arguing vociferously, trying to sway the court against seeing that truth --- well, at some point, you realize that the arguments are getting so arcane that it’s just dozens of darts being randomly thrown – hoping that the court feels compelled to not rule on that IT occurred because just one of those darts “stuck” on the dart board.
I noticed that she tended to multitask and otherwise not give full attention during all of the SNHs presentations and other plan proponents. There’s two monitors in front of her, and with the ELMO setup and various presentations, etc – it was clear that she wasn’t really reading what they were putting up to show her – especially the long-winded slides, and the slides of quotations of law, etc. Her attitude was one of “move along, I know this, you’ve said this already in your written”, or worse, “move along, you’re quoting law that I am completely familiar with”, etc.
In short. The feeling was as if I had sat in on an “insider trading case” and would not have guessed that I was there for a “Bankruptcy Plan Confirmation” – eg, the proponents didn’t do a whole lot to further their arguments that the “plan should be confirmed” and “here’s why” – it was a lot more of defending on the serious IT charges, and the new-found “bad faith” evidence, etc.
I guess you’d expect a Plan Proponent to be offensive in presenting a plan. This was clearly, virtually all defensive on attacks that had been made (prior in written and in prior hearings) against the plan.
When the EC and the Plan Opponents got up. My feel was they were targeted. They did not re-hash the arguments in their prior written briefs. They brought up new case rulings, and really hammered home (IMHO) just how bad this whole bankruptcy case was played. And I think they did a very good job also appealing to the “this isn’t what bankruptcy of a company is supposed to be about. Turning the situation into a game of dollars by a powerful few.” And that seemed to resonate with the court. The court did not seem to be pleased with what has come out. And certainly not pleased with being asked to approve a plan under the revised circumstances disclosed.
Folse does quite well. And his arguments had rapt attention of the room. And, specifically of the court. As I was paying attention closely to the non-verbal clues, she watched and listened with intent the entire time Folse presented. Unlike her multitasking and occasional aloofness when the SNHs prated on, she was focused on Folse and the words and the arguments being made.
The TPS guy did well as well. Again, focused to why the court should not approve the plan. Of course the whole argument on how the TPS ruling (prior) should be “ring fenced” while it is on appeal went badly for them. Knowing what I think I understand of the argument, I think he failed to make a distinction on an “appeal of a bankruptcy confirmation” vs. an “appeal of a ruling within bankruptcy before confirmation.” Eg, I felt he was arguing one thing, and the court was hearing and arguing something else.
And of course Art. He’s just wonderful to listen to. As Ilene noted, he comes across “believable” – compared to him, many of the other lawyers come across as paid mouthpieces – willing to say anything at all, and find a case to justify the stench in the room coming from their mouths as being actually daises (and we all should, according to them, ignore that they are rotting and that’s what stinks).
I will need to go and listen to the Pro Se shareholders separately. And I have not done so yet. From where I was sitting, I really couldn’t hear them well. I’m sure it was picked up better on the microphones and the audio than I could hear. Of course, I was pleased with what I could hear.
And having Dorothea put in the closing punch – I think that caught all the pro se people off guard, we (certainly I) did not know she was going to speak. But the simple truth of “she was on the EC and couldn’t trade, and signed so – why can these sophisticated hedge funds get to trade” – rang a very loud bell. Well received by the judge.
All in all, yes, I feel better. What comes of it, is to be seen with the opinion from the judge.
And when she quipped that nothing today brought her closer to a ruling – that has been misinterpreted.
What she, to me, was saying – is related to what she started out with – that reading the written and the plan confirmation hearing, she was far along towards delivering an opinion – and that holding these closing arguments had done little to add to, or certainly change her mind, of where she was going.
What do I expect? I think given the arguments presented, and the non-verbal (and sometimes verbal) clues from the court… I don’t think this plan will be confirmed either. And she did have questions on whether the plan’s restrictive nature allowed for her to make modifications to it, or just give it an up or down approval. I don’t know where she’s leaning on that (modifications vs. outright denial of this plan). But if it’s up or down, I think she will rule down. Whether it’s another “here’s the changes required”, or out-and-out denial due to it being so tainted by IT – remains to be seen.
I also don’t think she will rule on the EC’s request to prosecute claims before she renders her opinion on the Plan. They tie so closely together, that I wouldn’t be surprised if both rulings (Opinion on the plan) and the EC’s motion for prosecution, come out at the same time.
…Catz
*** ALL IMHO *** Do your own DD, etc.
