Yesterday really rattled me.
… but I’ve since found my bearings, as well as my former optimism that a highly favorable settlement, for all classes, will be announced on November 1st.
I really felt DISPIRITED - both during and after – the hearing of yesterday; so much so that I terminated the call 10 minutes before the audio was reported to have been lost. Although I had stated, in two, long-winded previous postings, that nothing of significance would take place at yesterday’s hearing, the highly-amicable picture painted by the examiner was not one that I had assumed he and his enormous billing of $1.5+million thus far would reveal (i.e., that all the parties were ‘fully cooperating’ with his many and varied discovery requests). I didn’t anticipate such a ‘cozy-kind-of-Cumbayá-moment’ this late in the game. Had the spiders stopped being spiders, I wondered? Or was the ‘fix’ now on? Had Hochberg been compromised by JPM’s wealth and power? I was also sadly surprised that he had not as yet found the need to issue subpoenas for any of the spiders’ documents or testimony. I had assumed that wherever there are veiled allegations of criminal fraud and possible jail sentences floating about, then the documents and testimony of evil-doers could only be pried away from them by using the drastic measures embodied in the federal subpoena power. In short, it unnerved me that things were going so ‘swimmingly-well’ for the examiner and his 13 attorneys and their army of financial professionals. His lighthearted and seemingly unopposed experiences (with the spiders) to date have certainly not mirrored those of the embattled EC’s counsel, or the embattled TPS’s counsel … or even the embattled judge! So why him? And why now? Why is everyone ‘making-nice’ to the examiner so soon into his investigation?
Another thing that bothered me; and I mean REALLY bothered me (and I think that this really bothered the PPS as well yesterday). I couldn’t detect the SLIGHTEST sense of passion or direction or support or wonderment or bedevilment or suspicion or vindication in the examiner’s voice. NOTHING AT ALL! He was as cold and indifferent as Chicago. No inflection whatsoever in the words he used. No dark verbal ‘cues’ were contained in his voice pattern that might prove worthwhile to reflect upon. It was like listening to a machine summarize (from a prepared statement, I bet) a set of tasks it had just completed. Mildly interesting to hear perhaps … but in a way, not really interesting at all … except for two simple aspects:
THE FIRST ASPECT: All that talk about ‘REDACTING’.
Why was so much of the examiner’s time spent talking about his intention to redact all meaningful references to work product and such from the report that will be publicly filed on November 1st? He’s even going to confer with the parties, 3 days prior to that hearing, just in order to make certain that they are all in agreement with the redactions that might have to be made (and in this regard, “they” only means: WGM, JPM, FDIC, and A&M). Why such a big deal about taking a black Magic-Marker to documents involved in a case that’s now almost 2 years old? Are we finally approaching some line-in-the-sand-moment? And why the need to do so ESPECIALLY in this case, where the FDIC has made a mockery of redaction, and JPM hasn’t even bothered to redact … it just says “we can’t locate the documents”? Is the examiner really ready to unleash this same stupidity at the end of his investigation? Perhaps, unless, of course, the examiner ALREADY knows that he’s uncovered material that will need to be redacted. But why undergo the effort, now, to set up the administrative process, now, unless you know, NOW, that it is coming to pass.
Why?
Let’s do what we’ve done for all these many and terrible months. Let’s assume the worst. Let’s assume that the examiner’s final report utterly fails to find any hidden assets nor any fraudulent behavior whatsoever on the part of JPM, FDIC, A&M and WGM. In short, let’s assume a rendering of the examiner’s finding that is fully supportive of Rosen’s DS/POR, and creates a golden archway to confirmation. But if that were to be the case, who then would CARE about their work product being exposed to public view? If, say, there was a work product memorandum from Quinn in Rosen’s files that urged him (Rosen) to settle the matter for whatever they could get, why would Rosen not want that memorandum to be part of the public record (i.e., “disclosed”); so as to trumpet his legally wise and wholly reasonable achievements on behalf of the debtor? Who wouldn’t jump at the opportunity to finally wag a finger in the EC’s face and say ‘see, I told you so’? Who would want such precious moments of self-righteousness to be ‘redacted’? And if you were Walrath, whose suspicions bought about the appointment of the examiner and the enormous financial costs associated with that appointment, wouldn’t you insist that all work product tending to support approval of the DS be placed into the public record? If only to give you cover and support?
Because:
1. No redaction in the examiner’s public report = a very positive outcome for Rosen and Quinn. Their due diligence and work product speak for themselves. Let what they did (or didn’t do) be known to all. In short, there is nothing to hide, mask, or redact from the public purview; as theirs was the correct legal decision to make; and Walrath will rule that the minimum requirements of disclosure have been met.
2. Redaction (any) = a very negative outcome for Rosen and Quinn. Their work product (or the lack thereof) is going to be used against them with respect to the rejection of the DOS. The public need not know the extent of their failures; but only that the DOS is toast because of it.
And that’s why (AIMHO, of course):
there was so much time spent at yesterday’s hearing about the arcane subject of “redaction”. In his straight-forward, machine-like manner, the examiner was ‘setting-up’ WGM and Quinn - like bowling pins - to be knocked down by his final report. And WGM and Quinn know this to be true; so much so that we will hear a statement of settlement read into the record at the November 1st hearing. They have now entered the final box canyon.
THE SECOND ASPECT: Why the sudden decision to wrap things up by October 27th?
It was obvious yesterday that the examiner has already decided – only 30 days into this case – to wrap things up by October 27th. Nothing in what he said implied that he would request more time, beyond the 3 additional weeks that he received yesterday. At $1.5million per month, why the big hurry? Surely this BK has as many moving parts as Lehman’s did; and the examiner there got 2 years (and $100million) to conduct his investigation. So why the rush? Walrath favors him. Why not play on that for more time, and more hourly billables? Clearly, his decision to terminate the investigation on October 27th was/is dependent on only one of two outcomes:
1. His 5-team investigation (which covered everything from potential antitrust violations to tax refund allocation matters) turned up absolutely nothing of importance, and as a result thereof, he’s given our enemies a clean bill of health. But in doing so, he immediately and forever aligns himself, and his firm, with all the corrupt practices of Rosen, WGM, A&M, JPM, and the FDIC. To announce such a posture would be to tell the entire legal world that he’s become a Sith Lord of sorts … co-opted by the dark side. How likely is it, I ask you, that a former DOJ prosecutor would do that; just 52 days into this gigantic BK? No, it just doesn’t make sense that he would do such a thing.
2. The other outcome – and the far more likely one – is that the investigation struck pay-dirt early-on, and so much of it that it’s now time to cease that investigation and simply set down and create a wide-ranging and highly damning report that will be presented to Walrath; a report that will burnish the reputation of Hochberg’s firm, and make it the undisputed ‘go-to-guys’ whenever similar issues arise in future BKs.
But if you still don’t believe the logic of all of the foregoing …
then ponder this: Hochberg is the sole gatekeeper to the pathway that leads to confirmation and the epic theft of billions. In this regard, he is even more important than Walrath (as Walrath is relying on him and what he uncovers; or fails to uncover). It would therefore be the unwisest of strategies on Rosen’s, A&M’s, JMP’s and FDIC’s part to piss-off, in any way whatsoever, someone so powerful (isn’t it the least bit odd to you that ALL 4 OF THEM are now “cooperating fully”, and that NOT ONE OF THEM is sticking by its previous position to ‘hang-tough’? Why the sudden U-turn; on cue?) Thus, every effort must be made, at this crucial time, to show Hochberg that his demands are being acceded to. That’s why Rosen, A&M, FDIC and JPM are suddenly “cooperating fully”. If former DOJ-fraud-prosecutor-Hochberg and his five “teams” of lawyer-specialists are so naïve as to be effectively duped by these condescending, 11th-hour antics, then he was never the right guy to be tapped to play such a pivotal role in this saga. But if WE can see through their ‘game’ … then certainly HE can. At this particular point in time, he is well on his way to bill the estate over $3,000,000.00 in little less than 11 weeks! Will such a staggering sum have been spent only to rubber-stamp Rosen’s worn-out DOS; or will it be used to set the stinking thing on fire; and in the process make a fearsome reputation for himself and his firm? What would you do if given a similar opportunity, eh?
Lots of talk, but nothing’s changed. We settle on November 1st. And if we do not, then I'll fully acknowledge my error and cease all further prognostications to this and any other board.
GO WAMU!
