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]



January 15, 2010




NOTE: The Status Updates are cumulative.  Please read all twenty-seven updates.


            This Status Update #27 is intended to be a comprehensive response to the most frequently asked questions in the hundreds of phone calls and e-mails which the Bankruptcy Trustee has been receiving. 


            Below are frequently asked questions and the Bankruptcy Trustee’s responses:


            1.         What was the outcome of the hearing on December 16, 2009 regarding the Motion of Law Debenture and Wells Fargo as Indenture Trustees of Senior Collateralized Notes (the “IT’s”) to authorize the Trustee to make distribution?


The Motion of the IT’s was granted despite the objection of the Bankruptcy Trustee.  The Bankruptcy Trustee objected to making a distribution to the IT’s until the fees and costs which the IT’s will deduct from the distribution could be reviewed for reasonableness by the Bankruptcy Court.  The Bankruptcy Court determined that the Bankruptcy Trustee was not the proper party to challenge the reasonableness of the fees and expenses being charged by the IT’s. 


Accordingly, the Trustee was responsible to make distribution to the IT’s and the IT’s in turn shall be responsible for making distributions to the Senior Collateralized Noteholders.



2.         What happened to the collateral of the Senior Collateralized Noteholders?


In March 2005, Greenwich Capital Financial Products, Inc. (“Greenwich”) obtained a lien superior to the interest of the Senior Collateralized Noteholders in the collateral.  The Bankruptcy Trustee was not a party to the Bankruptcy proceeding in March, 2005 and has sued numerous parties involved with the transaction which allowed Greenwich to prime the Senior Collateralized Noteholders Liens.  Please inquire of the IT’s who are Wells Fargo Bank, N.A. and Law Debenture Trust Company of New York concerning any additional questions about the disposition of the collateral for the Senior Collateralized Notes.


            3.         How much is the Senior Collateralized Noteholders Claim?


                        Indenture                                                        IT


            June 30, 2004:                         $41,130,505 Wells Fargo N.A.            

            December 31, 2003:                $57,019,180 Law Debenture Trust Company of New York        

                                    Total:               $98,149,685 Total Senior Collateralized Noteholders’



Pursuant to the IT’s settlement agreement with the Bankruptcy Trustee, the Senior Collateralized Noteholder Claim is unsecured and consist of an Allowed IT’s Chapter 11 Superpriority Claim of $40,000,000 and an Allowed IT’s General Unsecured Claim of $58,149,685.


            4.         How much has the Bankruptcy Trustee paid the IT’s on the Collateralized Noteholders Claim?


 The Bankruptcy Trustee as of January 6, 2010 has paid the IT’s $33,179,020.20 or 33.8% of the total claim.


5.         How much has Greenwich received in payments on the collateral of the Senior Collateralized Noteholders?


Since the Greenwich senior lien was given in March, 2005, Greenwich has collected in excess of $60 million on the original collateral of the Senior Collateralized Noteholders.


            6.         The IT’s have told certain noteholders that a 2 ½ % distribution will be made in 2010.  How much will be distributed?


The Bankruptcy Trustee is unable to answer because the Bankruptcy Trustee does not know how the calculation is performed by the IT’s and does not know of what balance the 2 ½ % represents. However using the Total Senior Collateral Noteholders Claim of $98,149,685, the 2 ½ % would represent a distribution of $2,453,742.13 from the $33,179,020.20 the Bankruptcy Trustee paid the IT’s.


            7.         Did the Bankruptcy Trustee appeal the Court Order of December 16, 2009?




            8.         How can noteholders appeal the Court Order of December 16, 2009?


The Court has stated that the noteholder’s rights to pursue their state law remedies under the Indentures continue to exist.  The noteholders can seek remedies in their respective state courts or through their respective Attorney Generals.  The Bankruptcy Trustee cannot pursue remedies against the IT’s regarding distributions on behalf of the individual noteholders.


            9.         What is the current status of the litigation?


The State Court Actions have all been settled with the Bankruptcy Trustee receiving the following settlements:


                        Directors & Officers           $ 16,597,500

                        Law Firm                                  20,000,000

                        FID’s     100,000,000

$  136,597,500


The Arbitration with the Debtors’ former accountants is pending.  The Bankruptcy Trustee estimates that the arbitration could occur in the fall of 2010.  The arbitrators have been selected.


The Bankruptcy Court Action against Greenwich, et al, has completed discovery.  All Motions of Summary Judgment and Responses have been filed with the Bankruptcy Court and briefing will be completed during the second week of 2010.  The Bankruptcy Court must decide these Motions before the trial can begin.  Because of the case complexities, the Bankruptcy Trustee believes it will be months before the Motions are decided by the Court.  Trial could be as early as the fall of 2010, but this is just a guess.


            10.       What does FID stand for?


            Financial Institution Defendants.


            11.       What was the result of the November 4th hearing?


The contingent fees and expenses of the Bankruptcy Trustee’s special counsel were approved.


12.       What was the amount of preferential transfers recovered?


To date, the recovery has totaled approximately $3,910,000.  There are many matters still pending.  There have been no depositions or any form of testimony at this time.


            13.       How does the Bankruptcy Code treat matured noteholders for 2004 and early 2005?


The treatment of noteholders claims is between the individual noteholders and the applicable Indenture Trustee. Please contact the appropriate Indenture Trustee for how your individual claim will be treated.


14.       Who is the Indenture Trustee for noteholders who are not Senior Collateralized Noteholders?


            U.S Bank N.A.


15.       What will happen to the Proofs of Claims that have been filed?


A process to resolve these proofs of claims has not been finalized as of this date.  However, the Bankruptcy Trustee will allow the proofs of claims of Wells Fargo and Law Debenture in the amount of $98,149,685.00, and U.S. Bank in the amount of $521,648,268.21.


            These claims represent all noteholders.


Accordingly, the proofs of claims filed by individual noteholders are duplicative of the claims filed by the IT’s and U.S. Bank on behalf of all Noteholders.  The individual proofs of claims of Noteholders will be disallowed and in their stead the master claim of the IT’s and U.S. Bank will be allowed. 


The Bankruptcy Court has determined that the Bankruptcy Trustee will distribute in accordance with the priority of the claim to the appropriate Indenture Trustee.  The Indenture Trustee’s will determine the eligibility and amount of the noteholder’s claim and distribute to the noteholder.


The Bankruptcy Trustee will not determine the eligibility and amount of a noteholder’s claim.  The Indenture Trustees will make this determination.  The noteholders should direct ALL questions to the appropriate Indenture Trustees for their Note (Wells Fargo Bank, N.A., Law Debenture Trust Company of New York, or U.S. Bank N.A.) , not the Bankruptcy Trustee, with respect to their claims, distributions and the trust indentures.


            16.       Whom should I, as a noteholder, request an explanation as to the vesting of claims, investments in notes, etc.? 


The noteholders should direct such questions to their personal lawyers, the IT’s or U.S. Bank.


            17.       Will the Bankruptcy Trustee file any further objections to the IT’s fees and expenses?


No.  The Bankruptcy Court has determined that any disputes with respect to IT’s fees and expenses are between the IT and their respective noteholder constituency.  The dispute on the IT’s fees and expenses is not a bankruptcy court matter.


18.       How much has the Bankruptcy Trustee, George L. Miller, been paid?


The Bankruptcy Trustee was appointed on May 17, 2005 and has not received any fees, commissions or any other form of compensation nor has the Bankruptcy Trustee received any reimbursement of expenses.


The Bankruptcy Trustee will be paid what the Court allows as part of the Trustee’s Final Report which will be filed at the conclusion of the Bankruptcy case.


            19.       Will unsecured creditors receive interim payments before the Trustee’s Final Report?


Yes, so far $33,179,020.30 has been distributed on the unsecured Senior Collateralized Noteholders Claim.  The IT’s for the Senior Collateralized Notes are now responsible for disbursing these funds to their constituents pursuant to the applicable Indentures.  Additional interim payments to Senior Collateralized Noteholders, Unsecured Noteholders, and other unsecured Creditors may occur based on the outcome of the Arbitration or Greenwich litigation.