I think at this stage I would not assume that they are following GAAP in any way, shape or form! Since when did these guys ever let rules stand in the way of any action they desired to take??
I think for tax purposes they are required to continue booking accrued interest and if it is uncollectible, their tax remedy is a bad debt deduction under Section 166 of the Code. IF (and that is a big word in this case) we are ever able to see tax returns, we will know what they have been doing. I think the better assumption is that all income has been fully expended paying defense costs for the convicted persons.
If that is the case, in light of the prohibition in the Advisory Agreement against indemnifying the Advisor and its affiliates from and against securities law violations, query (1) how could the action of the board to approve such indemnification be remotely considered reasonable, and (2) was the board even involved?
Still digging and searching for a solution to this mess. I just hope something is left!!
