Saturday, March 11, 2017

Foreign companies filing for bankruptcy in the United States are not exempt from enforcement of American sanctions regulations by the Office of Foreign Asset Control.

Foreign companies have sought bankruptcy protection in the United States for decades.  Their hope often is to restructure under the laws of the United States their obligations, including their obligations to pay creditors and investors based overseas. And sometimes obligations are extinguished and principals of foreign companies are given releases as a matter of U.S. law.

Bankruptcy protection does not preclude regulatory action.  Some regulators come forward via the United States Trustee Program, a component of the United States Department of Justice responsible under federal law for the administration of bankruptcy cases and private trustees.  Regulators can also raise concerns to the Bankruptcy Courts directly.

Recently, the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a Finding of Violation against the B Whale Corporation - a company based in Taipei, Taiwan.  B Whale Corporation was a member of the TMT Group of shipping companies that had sought bankruptcy protection in Texas.

OFAC determined that, from on or about August 30, 2013 to on or about September 2, 2013, B Whale Corporation received over two million barrels of condensate crude oil from a ship-to-ship transfer off the coast of Iran made by an Iranian vessel that was, at the time, listed on OFAC's list of Specially Designated Nationals and Blocked Persons.

OFAC determined that B Whale Corporation was a U.S. person within the scope of the Iranian Transactions and Sanctions Regulations at the time that the oil transfer occurred because the company was present in the United States within the scope of the Regulations due to its bankruptcy filing made in the United States Bankruptcy Court for the Southern District of Texas on June 20, 2013.  OFAC further concluded that the vessel M/V B Whale was subject to U.S. sanctions regulations because it was under the jurisdiction of a U.S. bankruptcy court, and therefore the oil transferred to the vessel was an importation from Iran to the United States as defined in the Iranian Transactions and Sanctions Regulations.

A news article reported that the matter may have come to OFAC's attention through allegations made by a creditor in filings in the bankruptcy.  We have located the filings and can share copies.  In the United States bankruptcy filings are generally a matter of public record.

OFAC's regulatory action should be viewed as a positive sign by foreign creditors and investors.  Concerns over violations of U.S. regulations can be raised in bankruptcy court, and addressed by regulators.

Saturday, November 19, 2016

Hanjin Shipping Update - Changes to the Time Table

Yesterday I made the post immediately below this one, discussing transparency issues in the bankruptcy proceedings of Hanjin Shipping.  It was read by thousands of people around the World in a matter of hours.  I subsequently invited those following the case closely in the shipping industry to post court filings to a website that can be made publicly available.  I am happy to help, and await a positive response.

Meanwhile, I was pleased to read that with Hanjin Shipping's extension of time to file a plan - from 23 December 2016 to 3 February 2017 - there has also been an extension of time for creditors to act.  As the Korean court orders are not yet readily accessible to me or other people who would like to see them, the information below is based on what Hellenic Shipping News reported:

"1. The claim investigation/adjudication period has been extended from 15 November 2016 to 5 December 2016;

2. Correspondingly, the one month deadline for creditors whose claims have been rejected in the investigation period to appeal that decision will now be 5 January 2016;

3. The first meeting of interested parties has been moved from 9 December 2016 to 1400 hours on 13 January 2017; and

4. The deadline for submission of the draft rehabilitation plan has been extended from 23 December 2016 to 3 February 2017."

For more information, see:

It is my hope that Hanjin Shipping bankruptcy proceedings ancillary to the rehabilitation procedure in Korea, including the United States chapter 15 bankruptcy proceedings, reflect the revised time table.

Further it is my hope that Judges presiding over the various ancillary bankruptcy proceedings and known creditors are advised of the changes to the time table via actual notice provided by Hanjin Shipping counsel on a timely basis.  Also it would be good, given the scope of the case, for Hanjin Shipping to provide publication notice Worldwide, certainly updating on an ongoing basis would be a good start.

But not everyone has internet access.  Actually, most people in the World do not.  Notice must be designed to reach as many people affected by the bankruptcy as possible, as soon as possible.  And there is no good reason for notice to not be provided on an ongoing basis.

Your rights may be affected.  The good news is now there is more time to take action that there was before.

Careful before you buy Hanjin Shipping stock.  Why the Hanjin Shipping stock is still trading is beyond me.  The stock of this deeply insolvent company that has sold off key assets seems to be worthless, at least as of today. 

All best to the Hanjin Shipping workers.  The last few months have been brutal - especially for the mariners stranded at sea and on arrested ships and their families.  May they enjoy good health and prosperity.

Friday, November 18, 2016

Reportedly, the Deadline for Hanjin Shipping to Submit a Plan to the Seoul Central District Court in which its Rehabilitation Procedure is Pending has Been Pushed Back to February 3, 2017

Hanjin Shipping Co., Ltd. was widely considered to be Korea's largest shipping company and the World's seventh largest shipping company when it filed for protection in Korea on August 31, 2016 under the Debtor Rehabilitation and Bankruptcy Act.  Hanjin Shipping also sought bankruptcy protection in other countries.  For example, just a few days after seeking protection in Korea, Hanjin Shipping filed for protection under chapter 15 of the Bankruptcy Code in the United States in Newark, New Jersey.  With bankruptcy protection in place in multiple countries, Hanjin Shipping reportedly went on to unload most customer cargo valued at $14 Billion that was at sea, return ships it had chartered, and sell off most of its fleet.

The Hanjin Shipping bankruptcy cases have been hard to follow because only limited information has been made publicly available.  This is unfortunate.  In most Chapter 11 bankruptcy cases of a similar magnitude in the United States court filings are made available by debtors to their creditors and other interested parties on websites that readily searchable - at no cost.  While Hanjin Shipping's bankruptcy proceedings are at advanced stages, hopefully the courts presiding over the proceedings will order the creation of such websites, so customers and other interested parties have ready access to court filings.

By Customer Advisory dated 2016-10/10 the Hanjin Shipping website,, provided information to customers concerning the filing of claims.  Hanjin Shipping Customer Advisory

This was helpful because customers whose claims had been listed in amounts consistent with customer records were instructed there was no need to file a claim.  Hanjin Shipping customers with actual notice or knowledge of this information before the claims filing deadline in late October had an opportunity to review their files, assess whether there were discrepancies between their books and records and Hanjin Shipping's and decide whether to file a claim.

The bankruptcy cases proceeded on the basis that Hanjin Shipping was to file a rehabilitation plan in Korea by December 23, 2016.

On November 17, 2016, Yonhap News Agency reported that the deadline for filing a rehabilitation plan had been pushed back to February 3, 2017 and that Samil PricewaterhouseCoopers was ordered to file an assessment of Hanjin Shipping's status by December 12, 2016.  For the English language news see: Hanjin Shipping's fate to be decided in February

This blog is dedicated to fostering transparency in cross border bankruptcies and so sends a shout-out to Yonhap News Agency for taking the initiative to report on Hanjin Shipping's extension of the time for filing a rehabilitation plan.   It is my hope, especially in light of the political situation in Korea, that Korean news agencies continue to provide information so that customers of Hanjin Shipping and other interested parties coping with Hanjin Shipping's collapse can keep up with developments.

Friday, May 6, 2016

New Rule Would Make It Easier For Consumers To Sue Banks

May 5, 2016:

Many credit card and loan agreements these days have in the small type what's called a "mandatory arbitration clause." Most people don't even know what that means. But by signing, customers agree not to sue the financial firm in a class action lawsuit. Instead, they agree to work out any problem with an arbitrator hired by the bank.
"The company can sidestep the legal system, avoid accountability, and continue to pursue profitable practices even if they may violate the law and harm thousands or even millions of consumers," says Richard Cordray, the director of the Consumer Financial Protection Bureau.
The CFPB on Thursday proposed a rule that would ban a range of financial firms from using this tactic to avoid lawsuits.
Restoring The Power Of The Class Action
Suppose you notice that your credit card company charged you a $50 fee you think is unfair. And it turns out the company is doing this to a million people. A class action lawsuit can band you together with them and make it worth some lawyers' time to go after the company for $50 million....
The CFPB is now seeking public comment on the proposed rule. One point of contention between consumer and industry groups is likely to be whether the rule would grandfather in existing arbitration clauses. If a final rule is issued, it will likely go into effect next year.
For more, see:

Thursday, May 5, 2016

'Excessive' PACER Fees Prompt Class Action Complaint

Per Bloomberg BNA:

April 25 — The government agency running the PACER system, which provides online access to federal court records, charges more fees than necessary to recoup its costs in providing its services, a complaint filed in the U.S. District Court for the District of Columbia April 21 alleges.
“The judiciary has taken no steps to change the fee structure or the way it has administered the system and so that means, unfortunately, that a lawsuit is necessary,” Deepak Gupta, an attorney representing the plaintiffs, told Bloomberg BNA April 25. Gupta is with Gupta Wessler PLLC in Washington.
The increase in PACER fees creates “substantial barriers to accessing public records—for litigants, journalists, researchers, and others,” the complaint says.
Further, the complaint says the Administrative Office of the U.S. Courts, which runs the PACER system, discourages fee waivers for journalists, pro se litigants and nonprofits and hires private collection lawyers to sue individuals who can't pay the fees.
$145 Million in Fees
In the class action complaint, the plaintiffs—three non-profit organizations, the National Veterans Legal Services Program, the National Consumer Law Center and the Alliance for Justice—allege that the AO collected more than $145 million in fees in 2014, “much of which was earmarked for other purposes such as courtroom technology, websites for jurors and bankruptcy notification systems.” PACER stands for Public Access to Court Electronic Records.
Charles Hall, a spokesperson for the AO, had no comment on the case, citing its policy not to comment on pending litigation.
E-Government Act
Under the E-Government Act of 2002, the AO is authorized to charge PACER fees “as a charge for services rendered,” but only enough to reimburse expenses relating to providing the services.
Agencies have to get Congress to appropriate money for them, Gupta said.
“They are allowed to charge people fees for services but can't transform those fees into all-purpose, revenue-raising means,” Gupta said.
The judiciary has raised costs twice since 2005, despite accumulating surpluses in the millions of dollars, the complaint alleges.
“The basic idea here is that a government agency can't make up its own taxes,” Gupta said.
The complaint alleges that almost one decade ago, PACER fees had already generated at least $32 million in surplus funds.
First Challenge
The case is the first challenge to the PACER fee schedule by parties represented by counsel, the complaint says.
A pro se plaintiff challenged the fees in 2014 but the case “went the way so many cases do where there are not lawyers involved—it was dismissed,” Gupta said. That case was Greenspan v. Admin. Office, 2014 BL 341599 (N.D. Cal. 2014).
Two PACER-related complaints were filed in December 2015, alleging the system overcharges due to a billing error, Fisher v. United States, Fed. Cl., No. 15-1575C, filed 12/28/15 and Fisher v. Duff, W.D. Wash., No. 15-5944, filed 12/29/15.
Legal Strategy
One reason there haven't been more successful lawsuits is that people aren't sure what legal pathway they can use, Gupta said.
The E-Government Act doesn't create a cause of action, Gupta said, and the court system is exempt from the Administrative Procedures Act, which is the normal method you would use to challenge a government action, he said.
The theory used here is based on a little-known statute from 1887, the Little Tucker Act, he said.
The act waives the government's sovereign immunity and provides jurisdiction for damages claims to recover for an illegal exaction, Gupta said.
The illegal exaction theory provides a cause of action that money has been taken from someone in violation of a statute, he said.
“If such a cause of action didn't exist, the government could just take money from you in a lawless way and you'd have no way of seeking recovery,” Gupta said.
To contact the reporter on this story: Melissa Heelan Stanzione in Washington at
To contact the editor responsible for this story: Jessie Kokrda Kamens

For More Information

Complaint at

Class action lawsuit filed against 'owners' of TransCare


, mcdonofrio@lohud.com8:41 p.m. EST March 3, 2016

The suit also mentions a tweet posted by Patriarch Partners CEO Lynn Tilton about the February bankruptcy.

Former employees for a regional ambulance service that suddenly shut down last week filed class-action federal lawsuits seeking two months’ wages and benefits for 1,200 employees who lost their jobs.
Warren Eisenstadt, 52, was one of hundreds of employees fired in a mass layoff on Feb. 25 by TransCare Corporation, a for-profit ambulance company that serviced Westchester County, New York City, Long Island and other states. Eisenstadt worked at TransCare as a transport emergency medical technician in Brooklyn since 2002.
On Monday, Eisenstadt filed a class-action lawsuit in Brooklyn federal court against Patriarch Partners LLC, a private equity fund. The lawsuit alleges Patriarch, whose portfolio includes TransCare,  owns TransCare. The suit also mentions a tweet posted by Patriarch CEO Lynn Tilton about the February bankruptcy.
In addition, the lawsuit names “XYZ Entities 1-10,” which are “unknown entities which Patriarch lent to, acquired, or otherwise controlled TransCare.”
Eisenstadt's lawsuit seeks 60 days’ wages and benefits for at least 1,200 employees who were laid off. The lawsuit claims employees were fired without cause or notice in violation of federal employment law and the state WARN Act.
Are you a former TransCare worker and want to share your story? Contact Michael D'Onofrio at
Eisenstadt's lawsuit also alleges employees have not been paid for the work they performed shortly before they were fired, and some employees’ paychecks have bounced.
Patriarch said in a statement that the lawsuit was “meritless.”
“The plaintiffs’ claims of violation of the WARN Act are meritless since neither Patriarch Partners nor Lynn Tilton were the employer here,” Patriarch said in a released statement. “We will vigorously defend ourselves against these lawsuits.”
TransCare did not immediately respond to requests for comment.
A similar class-action lawsuit was filed against Patriarch on Wednesday on behalf of Dalibel Garcia, who was also an employee at TransCare fired on Feb. 25.
On TransCare's website, Patriarch and Tilton are mentioned multiple times. OnTransCare's homepage, there is a link that reads, "About Patriarch Partners," that leads to an information page about Patriarch accompanied by a picture of Tilton. In addition, there is a link that reads, "A Lynn Tilton Company," which leads to Tilton's life story on Patriarch's own website.
When Eisenstadt found out he was going to lose his job, he said, "“I thought it wasn’t real. It was surreal, like it wasn’t happening.”
Eisenstadt, who lives in Brooklyn, said he went to the TransCare office on Hamilton Avenue around 1 a.m. on Feb. 26 to try to get his final paycheck, which he managed to get. Eisenstadt said he and other employees immediately went to cash their checks "because we thought the banks were bouncing them."
Eisenstadt's lawsuit alleges TransCare attempted to convince employees that the company was solvent, even as red flags continued to be raised. TransCare hired numerous employees about a month before the shutdown, who were only to be laid off weeks later.

When TransCare filed for Chapter 7 bankruptcy protection on Feb. 24, the company notified employees that the restructuring would take place during the next “several months,” the lawsuit says.
For more, see:

Colt Defense LLC Announces Resignation of Chief Financial Officer; Appoints Interim Chief Financial Officer

April 07, 2016 04:50 PM Eastern Daylight Time
HARTFORD, Conn.--()--Scott Flaherty, Senior Vice President and Chief Financial Officer of Colt’s Manufacturing Company, LLC, has resigned his positions with the company in order to pursue other opportunities. Richard Harris has been named Interim Chief Financial Officer.
About Colt
Colt is one of the world’s leading designers, developers and manufacturers of firearms. The company has supplied civilian, military and law enforcement customers in the United States and throughout the world for more than 175 years. Our subsidiary, Colt Canada Corporation, is the Canadian government’s Center of Excellence for small arms and is the Canadian military’s sole supplier of the C7 rifle and C8 carbine. Colt operates its manufacturing facilities in West Hartford, Connecticut and Kitchener, Ontario. For more information on Colt and its subsidiaries, please visit

Thursday, April 21, 2016

Creditor Sale Brings Dubai's Limitless To Brink Of Debt Plan Deal


Thu., April 21, 2016
Dubai-based property developer Limitless is set to complete a drawn-out debt restructuring after the final dissenting creditor sold its share of the company's 4.45 billion dirhams ($1.2 billion) debt, sources with knowledge of the matter said on Wednesday, Reuters reported. New York-based Stonehill Capital Management sold its debt in the state-controlled company, worth around $15 million at face value, to Dubai Islamic Bank, an existing creditor and one of the members of the creditor committee, the sources said. The sale means Limitless can now move ahead with its second debt restructuring since Dubai's property crash around seven years ago and begin to try to turn around its fortunes when the emirate's real estate sector is once again going through a softer period. Limitless needed all 18 creditor banks to agree to the plan, which involves extending its debt by two years to December 2018. In return, Limitless will make an advance repayment of 2.07 billion dirhams to creditors, including 1.9 billion dirhams in bank debt and a further 176 million dirhams to trade creditors, using cash from the sale of land in Saudi Arabia. 

Pending Changes in Bankruptcy Forms Effective April 2016

According to the website for the United States Bankruptcy Court for the Southern District of New York:

Pending Changes in Bankruptcy Forms Effective April 2016

Release Date: 
March 15, 2016
Pending Changes in Bankruptcy Forms Effective April 2016
Automatic adjustments will be made on April 1, 2016, to dollar amounts stated in various provisions of the Bankruptcy Code, one provision in Title 28, seven Official Bankruptcy Forms which contain adjusted dollar amounts, the Instructions for Individual and Non-Individual Debtors, two Director’s Forms which include dollar amounts, and one set of instructions for a Director’s Form which includes a dollar amount. The adjustments will apply to cases filed on or after April 1, 2016.
Section 104 of the Code provides that the Judicial Conference make the adjustments, which are calculated at three-year intervals on the basis of the change in the Consumer Price Index for the most recent three-year period ending immediately before the year in which the adjustment is made and rounded to the nearest $25. The Conference has delegated that authority to the Administrative Office. The revised dollar amounts were published on February 22, 2016, volume 81, number 34, of the Federal Register, at page 8,748.
The Official Forms, Director’s Forms, and instructions impacted include:
• Official Form 106C, The Property You Claim as Exempt, Line 3
• Official Form 107, Your Statement of Financial Affairs for Individuals Filing for Bankruptcy, Line 6
• Official Form 122A-2, Chapter 7 Means Test Calculation, Lines 29 and 40
• Official Form 122C-2, Chapter 13 Calculation of Your Disposable Income, Line 29
• Official Form 201, Voluntary Petition for Non-Individuals, Line 8
• Official Form 207, Statement of Your Financial Affairs, Lines 3 and 4
• Official Form 410, Proof of Claim, Line 12
• Director’s Form 2000, Required Lists, Schedules, Statements, and Fees, Pages 2, 3, and 4
• Director’s Form 2830, Chapter 13 Debtor's Certifications Regarding Domestic Support Obligations and Section 522(q), Part III
• Instructions for Individual Debtors, Pages 8 and 22
• Instructions for Non-Individual Debtors, Page 12
• Director’s Form 2500E, Instructions, Page 1

For more, see

Wednesday, February 24, 2016

Emerging Market Bonds Hit As Foreign Investors Dump Debt


Wed., February 24, 2016

Twenty years ago, a dangerous cocktail of debt accumulated in foreign money and deteriorating exchange rates led emerging markets into financial meltdown, the Financial Times reported. In the aftermath, countries vowed to repent of the “original sin” of borrowing huge sums in non-domestic currencies. Major emerging markets went from having more than three-quarters of their debt in foreign currencies to around half. Finance ministers were applauded for better protecting economies from swings in global market sentiment. Yet as the world recoils from risky assets amid a slowdown in China and collapsing oil prices, emerging market bonds are once again being dragged into the fray. Unable to resist strengthening currencies and double-digit yields at a time when returns in developed markets were falling, the share of local-market government debt owned by foreigners more than doubled between 2009 and 2015. Now they want out.