57. As discussed in detail above, during the course of settlement and plan negotiations, the Debtors provided information to Aurelius pursuant to Confidentiality Agreements covering certain confidentiality periods that required the Debtors, at the conclusion of those periods, to publicly disclose any and all material non-public information provided by the Debtors thereunder.
58. During those periods, Aurelius either restricted itself from trading in the Debtors’ securities or erected an ethical wall between the employee given access to information from the Debtors and employees trading in the Debtors’ securities. At the conclusion of those periods all potentially material, non-public information provided by the Debtors to Aurelius during those periods was publicly disclosed by the Debtors through the filing of monthly operating reports. Following those disclosures, Aurelius resumed unrestricted trading in the Debtors’ securities.
59. While Aurelius believes that the Debtors did in fact comply with their disclosure obligations and therefore no claims should arise, the Equity Committee has contended to the contrary. If the Equity Committee were correct, the Debtors would have breached their post-petition obligations to Aurelius under the Confidentiality Agreements to publicly disclose all material non-public information provided to Aurelius thereunder. In that circumstance, Aurelius would hold (and would assert) administrative expense claims against the Debtors. See Collier on Bankruptcy ¶ 503.06[6][a] (Alan N. Resnick & Henry J. Sommer eds., 16th ed.) (“If the trustee enters into a contract or lease after entry of the order for relief and subsequently breaches the contract or lease, the other party will have a claim for damages. The amount of those damages will be determined under the contract or lease, and the full amount of the damages arising from the trustee’s breach will constitute an administrative expense.”). In order to comply with Section 1129(a)(9)(A) of the Bankruptcy Code, the Modified Sixth Amended Plan must not release and must reserve for Aurelius’s administrative claims against the Debtors
in cash.
Page 21. http://www.kccllc.net/documents/0812229/0812229110622000000000003.pdf
WOW.
Aurelius admits that they did trade after receiving non-public information, but only because the Debtors were supposed to release that information to the public before Aurelius traded. And because the Debtors did not release that information publicly in time, Aurelius may have claims against the Debtors for any damages they may incur due to their unintended "insider trading".
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