George L. Miller, Trustee
Eight Penn Center, Suite 950
1628 John F. Kennedy Boulevard
Philadelphia, PA 19103
Phone: (215) 561-0950
Fax: (215) 561-0330
Email: [email protected]
November 5, 2009
STATUS UPDATE # 25
NOTE: The Status Updates are cumulative. Please read all twenty-five updates.
Over the past several years, the Trustee has posted information concerning several lawsuits brought by the Trustee in an effort to bring in money to this otherwise insolvent bankruptcy estate. As the Trustee has advised, the litigation was the only hope of bringing in money to distribute to creditors.
In July, 2006, the Trustee sued in state court a number of former officers and directors of ABFS as well as former ABFS lenders and underwriters, JPMorgan, Bear Stearns, Credit Suisse and Morgan Stanley (collectively, the “FIDs”). Since the bankruptcy estate did not have the money to pay the attorneys for their time or to advance the substantial out-of-pocket costs of litigation (such as expert fees and court reporter fees), the Trustee, with the approval of the Bankruptcy Court, hired Special Counsel under a contingent fee arrangement whereby the attorneys would advance the costs and be paid a contingent fee equal to thirty percent of any monies recovered on behalf of the bankruptcy estate. Over a period of more than three years, the Trustee’s Special Counsel has represented the Trustee in a number of complex and protracted law suits, and has expended substantial effort representing the Trustee and the bankruptcy estate. Special Counsel has also incurred millions of dollars of out-of-pocket expenses. Since Special Counsel was hired on a contingent fee basis, they took the risk that they would not be paid for their many hours of service or reimbursed for millions of dollars of out-of-pocket expenses advanced by them unless they were successful in bringing substantial sums into the bankruptcy estate.
On October 7, 2009, the Trustee entered into a settlement agreement with the FIDs which provides that the FIDs will pay $100 million to the ABFS bankruptcy estate. On November 4, 2009, the Bankruptcy Court approved the $100 million dollar settlement. This was the third settlement reached in litigation prosecuted by the Trustee’s Special Counsel. The Trustee has previously reported on the settlements reached with former ABFS officers and directors ($16.5 million), and ABFS’s former attorneys ($20 million).
The Trustee’s Special Counsel has requested payment of their thirty percent contingent fee on the $100 million settlement obtained by them from the FIDs on behalf of the Trustee and the ABFS bankruptcy estate (a fee request of $30 million), plus reimbursement of expenses of approximately $585,000. The Bankruptcy Court has scheduled a hearing on the Trustee’s Special Counsel’s fee and expense application for November 18, 2009, at 2 p.m. A Notice of Special Counsel’s request and of your right to receive additional information and to object to the fee/expense application is attached to this update (PDF file here). The objection deadline is November 11, 2009 at 4:00 p.m.