Posted by
LASER Haas on Tuesday, July 15, 2008 2:58:04 PM
It Begins
eToys went public in 1999 for nearly $8bn and was bankrupt March 2001.
Like Refco, this classic pump n dump issue should have been thoroughly investigated by the FBI, DOJ, SEC etc.
Instead the Court approved destruction of the books n records as the Executives had many hidden issues and abandoned the estate.
This left the most unusual fresh baked batch of cookies ever seen by attorneys. There it was the cookie jar of estate assets all alone, with no one to protect. So the counsels made a conscious decision to make the bankruptcy entity their very own vault. The only thing they needed to do was supply the Court and parties of interest an affidavit stating they had no undisclosed conflicts of interest. Then they could have their cookies, get some milk and eat until the burbed in full.
They are still continuously engaging in fraud, obstruction of justice and perjury at will, where the MNAT law firm represents Goldman Sachs in Delaware and has become partner of sorts with Barry Gold, the new CEO of eToys who just so happens to be the paid associate of the TBF law firm that is handling the NY Supreme Court case of eToys v Goldman Sachs worth $500 million or more.
Officers of the Court must supply an oath "under penalty of perjury" to act in good faith.
The court-approved counsels for eToys, both Debtor and Creditor; have confessed to supplying false affidavits and deceiving the Court in the eToys bankruptcy case. When any professional person is court approved to work in a Federal estate they become “officers of the court”.
Congress has designed the statutes of the Bankruptcy Code to level the playing field and assure equitable justice to everyone, every entity, large or small. The Code has safeguards that protect debtor and creditors rights equally. Finality transpires by fair treatment of all creditors, shareholders and all other parties of interest, who are forced, by Federal statutes to yield their rights to the Bankruptcy Code. When a bankruptcy occurs, only those of documented prowess who agree to supervision of the Court and affirm an oath of propriety are permitted to engage in working upon a bankruptcy matter. As such the work can be lucrative, but it also comes with the price of compliance to higher ethical standards.
Upon receiving the cryptic approval of the Bankruptcy Court for destruction of books n records, the Executives abandoned the estate and the attorneys for both Creditor’s and Debtor in eToys collaborated in deceiving the Court by supplying false affidavits.
The Code is specifically designed to keep the attorney’s hands out of the cookie jar of estate assets. Congress has long been aware that an unchecked bankruptcy system tends to work more for the benefit of wayward counsels than for creditors. There are many statutes to assure propriety. Including the definition of Disinterested Persons §101(14) where the parties have to affirm they are not connected to the case, to the owners of the entity and that they are “arms length” in their transactions with any other court approved functionary. This is to assure that hidden power centers may develop outside of the courts or Congressional authority.
The Congressional statutes also require that all persons or entities that desire to be engaged as a Professional Person (entity or person) must supply an application of Professional Person per Section 327(a) that states they are disinterested and defines the scope of their duties. There can be no duplication of duties, so that the remaining, distressed assets of the estate are not swallowed up by the expense of the professionals in any arbitrary or duplicitous manner.
Upon supplying the application, defining ones intended work area, the Code also requires a Rule 2014 affidavit where the party must state, “under penalty of perjury” that they are “arms length” in their transactions to assure good faith dealings. They also affirm they are “disinterested” persons and that they have “disclosed” all relevant issues to the Court so that it can make an informed decision. To put it succinctly an attorney must promise to keep their hands out of the cookie jar and that they are not ganging up to find a way to sneak around the judge’s auspice.
The Court approved Law firm for the eToys bankruptcy 01-706 (the “Debtor”) (DE Bankr 2001), that being Morris Nichols Arsht & Tunnel (“MNAT”), along with the Court approved counsel for the Creditors, Traub Bonacquist & Fox (“TBF”) supplied their required affidavits stating that there was no “undisclosed” items and that they had no “conflicts of interest”.
The Code, in and of itself, is mitigating in nature. An attorney does not have to comply with the “I will not lie” statute. Instead, the counsel complies with the statutes and Rule 2014 Affidavit as a Professional Person (by Section 327(a)) stating they are a Disinterest Person (§ 101(14)). The first premise is that an attorney already knows, by his oath to the BAR, to act in a higher ethical manner and the Code assumes counsels can be self policing, especially when they are mandated to give the additional Rule 2014 Affidavit reminding them of their obligation.
The MNAT and TBF law firms confessed to submitting 34 false affidavits say it is not Perjury!
Both TBF and MNAT lied as “officers of the court”! The confessed that they submitted more than 34 false affidavits and yet the Delaware Dept of Justice and Courts state it is no big deal.
They did so intentionally, because they believed that they had nefariously seized control of the entire bankrupt estate of eToys. To any honorable person or jury, the fact that criminal acts have occurred would not be in dispute, for the parties confessed to supplying false affidavits. It is only in the Delaware corporate dominance realm that anyone would be so arrogant as to infer that lying under oath is no big deal. One has to wonder what Martha Stewart or Barry Bonds would say about such a premise?
The only real issue, in Haas’s opinion, is whether or not this whole scheme was contrived in the Fa;; of 2000 or Spring of 2001.
The Law firms perpetrated Collusion to defraud the eToys estate!
The MNAT law firm continues to this day, under the cloak of the Dept of Justice implied, blanket, immunity, to hide the fact that MNAT had an ongoing relationship with Bain associated parties. At the same time the TBF law firm and the new President/ CEO of eToys, Mr. Barry Gold both worked for the Stage Stores S Texas bankruptcy (S TX Bankr 00-35078), where Bain affiliated owners and the CEO of KB Toys was involved. The germane issue of that being that MNAT, TBF and Barry Gold negotiated the sale of their client eToys to their other “undisclosed” client Bain/ KB for tens of millions of discounts. This is collusion to defraud!
The Collusion framework of the bankruptcy Code is so strict about such issues, it does not matter if you received a million dollars for an item you can argue was worth only merely a penny. The failure to disclose a connection to a buyer of estate assets is Collusion to Defraud an estate. Whether it is a personal debtor refusing to disclose a hidden lottery ticket or attorney’s buying a foreclosed house through secret auction, the crime is still the same. Collusion is “the” most heinous act that the Code and Bankruptcy Fraud statutes seek to assure cannot occur.
Barry Gold accepted a bribe to secretly become President & CEO
Barry Gold was “planted” within eToys secretly and by bribery. The parties drafted a clandestine Hiring Letter in 2001 and did not reveal the Hiring Letter to the Court until January 25, 2005. Doing so then only in defensive response to the Emergency motions to address the fact that the TBF law firm and Barry Gold had both supplied oaths to the Court that they were not connected. Even the Hiring Letter itself is deceptive. It does not say Barry Gold, the paid party of the TBF law firm is now offered as President and CEO. Instead, every act the parties engaged upon, including the plan confirmation hearings, where the shareholders questioned Barry Gold on the stand in 2002, about possible connections of Mr. Gold to the TBF law firm. Every single instance the parties denied and inferred that they were not connected.
That is, of course, until Haas provided proof to the contrary. Then the parties’ simply switched gears, stating that they should have but didn’t and they were sorry.
The DOJ will punish bankruptcy fraud for $1000 of persons yet gives TBF immunity for $ millions in fraud.
If you go to the US Trustee website you will see the US Trustee program engaged in Fraud Task Forces such as Operation Silver Screen or Operation Truth or Consequences. At the Silver Screen report you will see the cases of a person who did not declare a snow mobile, another person had a bad check issue for $6,490.00, etc, etc.
So this case begs the question, are the systems designed to punish only mom and pop petitioners while the perpetrators of massive fraud that steal a public entity merely get a slap on the wrist fine?
US Trustee testified he warned the parties not to commit the crimes
Making this case extensively more heinous, believe it or not such is possible, the Asst US Trustee testified in the Motion to Disgorge the TBF law firm for $1.6 million that the parties’ had engaged in discussions with the United States Trustee’s office about replacing key executives of the Debtor with persons the law firms desired to choose. The US Trustee stated, within the Motion to Disgorge, twice, the US Trustee’s concerns about replacing key personnel with parties connected to the retained professionals. They were warned, in advance, not to do so!
All any honorable person need do is read the US Trustee Motion to Disgorge the TBF law firm for $1.6 million. It only addresses a few of the one hundred crimes no known to have transpired. Yet it stated that the violations were deliberate, rather than inadvertent. That the planting of Barry Gold was not accidental, as it was done by direct request of the TBF law firm and it concluded the Fraud upon the Court had occurred.
The Disgorge Motion did effort leniency for the well-established colleagues. It stated erroneously, in the first footnote, that Barry Gold did not have to apply. This was a snow job upon Haas and the eToys shareholders for being layman. The Disgorge Motion also failed to seek the mandatory disqualification of the parties for failing to disclose; under the pretense that it was to long ago. Again, another effort to take advantage of the lack of legal knowledge of the parties by the Dept of Justice.
At the barest of minimums the Dept of Justice personnel were overwhelming demonstrating that they were incompetent and unable to fulfill their duties. However, when you combine those errant legal premises with the fact that the US Trustee is specifically provided as the policing agent of such issues and is deeply instructed on the requisites, statutes by the United States Trustee Manual; as well as their Handbook & Guidelines also contain extensive case precedents to clarify how to monitor professional applications.
The DOJ Attorney gives Illegal immunity to perpetrators of Fraud & Perjury
Less than ten (10) days after the Disgorge Motion was supplied to the Court, Mark Kenney, the Dept of Justice Trial Attorney signed a Stipulation to Settle that gave ILLEGAL, implied, blanket, immunity to the TBF law firm with the following unlawful clause;
"WHEREAS the United States Trustee shall not seek to compel TBF to make additional disclosures"
One can easily see that the Dept of Justice personnel were not telling the truth as well. Especially when the Handbook states with particularity that any person with “any” autonomy in bankruptcy matters must be considered a professional. The very case of Kraft v Aetna was provided to us by the US Trustee websites. In re Kraft v Aetna Casualty & Security Co., 43 B.R. 119 (Bankr. M.D. Tenn. 1984) (appraiser cannot bypass 327(a) by stating mechanical services.)
The Delaware Dept of Justice goes out of its way not to mention the MNAT law firms name
When you add in the fact that in the Dept of Justice Disgorge Motion, the Dept of Justice Stipulation to Settle and the recent Third Circuit appellee brief by the Justice Dept where the Dept of Justice is an appellee with MNAT, TBF and Barry Gold; that they all do not state anything about the MNAT failures to disclose and false affidavits violations. Then you have proof positive undeniable that the parties are being granted “above the law” status for the expressed benefit of issues connected to the MNAT law firm.
The Third Circuit appeal brief by the Dept of Justice even contains a footnote
that the US Trustee will not address the MNAT issues.
The morose issue germane is the fact that the 3rd Circuit appeal is by the eToys shareholders (3rd Cir 07-2360) where the shareholder Robert Alber objected to the fact that the Court approved the illegal Stipulation to Settle that gave unlawful permission for the TBF law firm not to disclose. When the shareholders appealled the MNAT law firm cross appealled because the Order and Opinion approving the Stipulation to Settle stated that MNAT acts were deliberate. The DE Dist Ct combined the Alber and MNAT appeals. So if the US Trustee refuses to address the MNAT issues, in essence, they are letting the issue stand that the MNAT acts were deliberate being contradictory to their own premise and breaching their fiduciary duties.
MNAT is so powerfully connected no one will dare touch them
The final nail in the coffin of that premise is the recent discovery of the previously undisclosed issue that the Senior Justice of the Circuit Court was a former partner of the MNAT law firm, where the Circuit Court picked the Chief Justice of the Bankruptcy Court and the United States Attorney for Delaware, now nominated to be the District Court Justice was also a partner with the MNAT law firm in 2001. When the fraud and perjury began in the eToys saga.
It is obvious that extensively egregious crimes were committed. It is also clearly evident that they were intentional. Compounding the criminality is the corruption and cronyism of the refusal to prosecute and remedy. The parties that were caught red-handed are being let off with no more than a paltry slap on the wrist. And, if all that severally heinous activity was not enough the Delaware system of justice is punishing the whistle blower for pointing out the felony violations and rewarding the conflicted attorneys with the right to devour the $45 million in cash of the estate and letting the perpetrators control the outcome of the $500 million dollar NY Supreme Court case.
Need we say anything else?