The devil is in the details. We have New Information contained within Court Docket #0234
C. Brook Taube and Seth Taube
1. Breach of Fiduciary Duties
21. The First Day Declaration contains a brief reference to a failed tri-party merger in 2019 (the “Prepetition Transaction”) by and among certain affiliates of the Debtor: Medley Capital Corporation (“MCC”), SIC, and MDLY. Notably absent from this reference are any details as to why the merger failed.
22. In an 88-page Memorandum Opinion issued following a trial that included witness testimony and 800 trial exhibits,17 Vice Chancellor McCormick of the Delaware Court of Chancery held that the Brook Taube and Seth Taube (the “Taube Brothers”) and MCC’s special committee members breached their fiduciary duties to stockholders.
Vice Chancellor McCormick found that the Taube Brothers “dominated and controlled” the MCC board with respect to the proposed merger, and that “the timing, structure, initiation, and negotiation of the [Prepetition Transaction] were conceived for the purpose of — and did — advance the Taube Brothers’ interest at the expense of [MCC’s] other stockholders. In the events leading up to the [Prepetition Transaction], the Taube Brothers created an information vacuum, which they then exploited.”
Exhibit C at 67.
23. The Initial Plan proposed to keep the Taube Brothers at the helm of the Debtor and its parent MDLY after emergence. Vice Chancellor McCormick’s findings, and the Debtor’s failure to make any mention of them in the First Day Declaration or the disclosure statement filed with the Initial Plan (the “Initial Disclosure Statement”), are particularly troubling in the context of this chapter 11 case.
2. Prepetition Transfers
24. Additionally, both before and after the failed merger, the Debtor made significant distributions (the “Prepetition Transfers”) to the Taube Brothers and other insiders and holders of the Debtor’s membership interests.
During the period from 2017 to 2020, as the Debtor’s financial position was deteriorating, the aggregate distributions to such persons totaled over $44 million
25. The propriety of the Prepetition Transfers were not
addressed in the Initial Disclosure Statement. In fact, the Initial Disclosure Statement was devoid of any analysis regarding the Prepetition Transfers
Court Docket #0234 https://www.kccllc.net/medley/document/list/5510
*Can you spell fraudulent transfer to the tune of FOURTY FOUR MILLION SMACKERS...if true!! The OCUC just threw the gloves off. This will now go from just another business gone sour bankrupt story to possible criminal activity. This is why the disgorgment clause is crucial. $44 MILLION DOLLARS is alot of cash to track down as to who got what when, how and why!
Medley Management In (MDLY)
6.15 down -0.01 (-0.16%)
MDLX - currently @ $2.12
MDLQ - currently @ $1.92