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Friday, 10/15/2010 7:36:33 PM

Friday, October 15, 2010 7:36:33 PM

Post# of 699290
Interesting post by BOPFAN from Y Board

Posted on GB:

People might want to learn more about the requirements for approval of a disclosure statement. At the barest minimum it is intended to provide information necessary for "a hypothetical investor typical of the holders of claims or interests in the case, that would enable such a hypothetical investor of the relevant class to make an informed judgment about the plan...."

As to what information is adequate, the legal standard is that assessment of adequacy is within the discretion of the court and to be determined on a case by case basis. For an excellent discussion of standards Judge Walrath might apply, check out: at p. 8. This case cites In re Scioto Valley Mortgage Co., 88 B.R. 168, 170-71 (Bankr. S.D. Ohio 1988) (cited in In re Source Enters. Inc., Ch. 11 Case No. 06-11707 (AJG), 2007 Bankr. LEXIS 4770, at *7-8 (Bankr. S.D.N.Y. 2007) (using similar list). Scioto is cited by Weil Gotshal in its motion for approval of the GM Disclosure Statement (see the hearing on which is scheduled for October 21, 2010. While Scioto is Sixth Circuit law and Judge Walrath sits in the Third Circuit, as Scioto appears to be the prototype for the standard enunciated by the Southern District of New York, the nation's premier bankruptcy forum, and as it is cited by Weil itself the case should carry weight with Judge Walrath.

It would behoove board posters to apply the 19 criteria of Scioto against the facts in WMI for themselves. The examiner will certainly do this, and I do not believe WMI's disclosure statement satisfies Scioto.

Finally, everyone should be aware that civil antifraud laws are only preempted if the plan proponent acts in good faith and in compliance with Chapter 11. See 11 U.S.C. 1125(e). We've discussed sanctions for Weil such as disgorgement of fees and professional discipline, but prosecution under the securities antifraud laws would also apply.

Finally, in addition to disgorgement of fees, Weil may be held personally liable for fees and costs (i.e., reimbursement to other parties and to the estate) based on a finding that the DS is grossly misleading. See In re Ligon (Bankr. M.D. Tenn. 1985).

As I've said before, I have not the least concern about Oct. 18. The court did not appoint the examiner so that she could undercut his work by approving the debtors' DS and then having the examiner make her look a fool by brilliantly discrediting the DS and Plan.

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