...Bankruptcy Fraud By Robyn Carter Forensic Accounting Data Analysis Bill Makkkawi October 13, 2009 Bankruptcy Fraud What is Bankruptcy? Bankruptcy is a way for individuals or businesses to satisfy debts. There are four types of bankruptcy. There is Chapter 7 which is a complete liquidation for individuals. Chapter 7 bankruptcy liquidates assets that are not exempt and uses the proceeds to pay creditors. In this bankruptcy creditors may be paid in full or a percentage based on the assets that were available. There is Chapter 11 which is for a business. Chapter 11 allows a business to reorganize its operation and finances so that it can pay its creditors. Sometimes in Chapter 11 another entity may take over the original entity in the reorganization. Creditors are told to give the entity time to reorganize and pay the debts. Then, there is Chapter 13 which is reorganization for individuals. Chapter 13 gives individuals a chance to pay creditors over 3 to 5 years through a Bankruptcy Trustee. Most assets can be kept depending on what percentage of the debts will be paid. If the debtor is paying the creditors in full then they would be able to keep all of their assets. This is only available for debtors with verifiable disposable income. The last type is Chapter 12 which is for farmers and fishermen (LII / Legal Information Institute). After completion of whichever chapter used, the creditor gets a “fresh start”. White Collar...
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...When is it bankruptcy fraud? Bankruptcy serves a vital role in the economy. Without bankruptcy, some debtors would never be able to dig their way out of debt. With no ability to discharge debts, they would have to pay their debt by going to prison. At the very least, debtors with no way out could never recover and become contributing members of society. Bankruptcy should be viewed as a tool for those that intend to repay their debts but ultimately can’t. Unfortunately, there are a few that try to cheat the system. This is known as bankruptcy fraud. The bankruptcy process is complex, and there are many regulations in place to make sure it isn’t taken advantage of. While many who commit bankruptcy fraud do it on purpose, there are some who do it in ignorance. Here are a few things to keep in mind in order to avoid bankruptcy fraud. Types of bankruptcy fraud Bankruptcy is intended to be for those that cannot repay their debts on their own. Consequently, there is a limit to how much income a bankruptcy filer can make. There are many different types of income and all of them must be declared in the bankruptcy. Failing to report income, either on purpose or on accident could result in your case being thrown out. In order to prevent bankruptcy from being misused, there is a limit to how often a person may file for bankruptcy. Falsifying information in order to file bankruptcy before the minimum waiting period is another form of bankruptcy fraud. Yet another dishonest...
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...Adelphia Communications’ Bankruptcy Bankruptcy The case talks about the situation Adelphia went through after the governance problem and fraud they had that led them to bankruptcy. Adelphia being a family owned company; by April 2005 they decided to sell out the remaining assets of the company to the one of the other 3 big cable companies; Time Warner, Comcast and Cablevision; each one of them offered different amount in the bid, nevertheless the company had to analyze how certain each offers were, how probable was any of them to pull out the offers as well as what to do with the money they would get in case the judge let them do the sell. Family Control Adelphia was founded and managed by Rigas family, the case talks about how the company after 1985 decided to go public in order to acquire the capital investment to expand and become one of the biggest cable providers in the country. Nevertheless the Rigas family managed to keep almost full control of the company by keeping special type stocks with decision making power in the board. The company kept being managed by the funding family as well as the family keeping some of the cable assets for themselves in separate private partnerships and continuing to buy properties privately as well as for the company. The case explains how the privately owned assets of the family were managed by already-public Adelphia Corp by some management agreements and with this the expenses of such assets were consolidated with the expenses...
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...rights to assure the securities’ transferability and rapid judicial resolution of claims for nonpayment.2 To further attenuate risk, investors insisted on foreign laws to govern substantive terms of the securities. By the late 1990s, as various Argentine issuers began defaulting on their obligations, these bondholder rights and protections were tested. It soon became apparent that bondholders were far more vulnerable than originally thought. Highly-publicized reorganization proceedings undertaken by Argentine bond issuers, including In re Central Términal Güemes S.A.3 and In re Supercanal S.A.4, illustrated procedural difficulties encountered by bondholders. Investors found themselves hampered in having their claims admitted by Argentine bankruptcy courts and in being represented as a group by a bondholder trustee or fiscal agent. No case, however, better illustrates the great divide between the expectations of foreign creditors and the outcome of an Argentine insolvency proceeding than In re Sociedad Comercial del Plata S.A.5 Of Counsel, Negri & Tejeiro Abogados (Buenos Aires, Argentina). The author wishes to give special thanks to Dr. Alejandro Breit for his invaluable help and patience in reviewing this article and to Stephanie de Moerloose for her comments and help with the more tedious tasks. This publication has been prepared solely for educational purposes. It provides general information and should not be used or taken as specific legal advice. For further information...
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...Bankruptcy Examiner’s Report in Auditor Malpractice Suits A bankruptcy examiner’s report may provide a roadmap to auditors’ negligence, breach of contract, gross negligence, and / or cooperation to cover up fraud committed by the debtor management. A bankruptcy examiner is appointed by the court to investigate the debtor and the debtor’s estate for the purpose to determine if fraud, dishonesty, misconduct, incompetence, and irregularity by the debtor management has occurred before and during the filing of the bankruptcy. The judge call for an examiner based on a request from the trustee, the creditors, major shareholders, and / or his personal judgment. The parties who utilize the finding of the examiner’s report to sue the auditor for malpractice are the trustees, creditors, major shareholders of the debtor, and any other party that may find joining the lawsuit is in the best interest of the society. The examiner’s investigation- first- focuses on many aspects of the debtor’s assets, liabilities, equities, and how the operation is carried out in compliance with rules and regulations. The examiner gathers, verifies, tests, and interprets information from different sources (employees, customers, vendors, lenders, and other professionals who provide service to the entity under investigation). Second, through...
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...Do Bankruptcy Laws unjustly favor Lenders? Intro Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. Bankruptcy law provides for the development of a plan that allows a debtor to resolve his debts through the division of his assets among his creditors. Although the goal of the modern bankruptcy is to allow the debtor to have a “fresh start,” and to be granted relief of some liability, there haven’t been any regulators to protect consumers or debtors since the first Bankruptcy Law that the Congress passed in 1797 which lead to imprisonment of thousands of debtors. And it wasn’t till 1841 that the debtor could voluntarily go into bankruptcy and so avail himself of this privilege of discharge. The Federal Bankruptcy Act of 1898 had 3 principal objects in view: 1. To prevent preferences and ensure equality in payment as between the creditors of insolvent debtors; 2. To punish and discourage commercial fraud; and 3. To discharge honest debtors from their debts when overwhelmed by financial misfortune through no fault of their own. The act gave creditors collectively full power over the administration of insolvent estates and placed upon them the responsibility for enforcement of the act. New Legislation The new Legislation enacted by Congress called the Bankruptcy Abuse and Consumer Protection Act was intended to make it more difficult for debtors to file a Chapter 7 Bankruptcy under which most...
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...Chapter 25 Bankruptcy, Reorganization, and Liquidation ANSWERS TO BEGINNING-OF-CHAPTER QUESTIONS 25-1 Bankruptcies occur in firms of all sizes. Small firms, with fewer creditors, are often able to work out informal settlements and thus avoid the time and expense of formal bankruptcy. Ross Corporation, described in Question 3, is probably too large, and it has too many creditors, to work out an informal settlement. If Ross attempted to resolve its problems informally, the attempt would probably fail, and then it would have to resort to the federal bankruptcy court. Note that if there had been fewer creditors, and particularly if most of the debt were owed to a few banks, then the chances of an informal resolution would be better. But with many holders of the publicly traded bonds, 15 banks, and 250 unsecured creditors, there would probably be too many holdouts to reach an informal resolution. 25-2 The judge in a federal bankruptcy proceeding can abrogate all contracts, including labor contracts. If a contract requires payments greater than the company’s cash flows can support, then the judge can order that payments be scaled back to a level the company can afford. Labor contracts were abrogated for a number of firms that were hit with asbestos suits, notably Johns Manville, and currently several airlines are in bankruptcy proceedings under which labor contracts will likely be changed. 25-3 a. As noted above, is probably too large, and it has too many creditors...
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...Institut für Controlling und Consulting, Johannes Kepler Universität Linz, Austria Johannes Kepler Universität Linz Institut für Controlling und Consulting Altenberger Straße 69 4040 Linz Austria Stefan.mayr@jku.at Keywords: Corporate responsibility, corporate restructuring, enterprise crisis, bankruptcy 1238 Abstract Discourse regarding ethics and corporate responsibility arose in the last years linked with an increasing number of accounting fraud scandals. The recent financial crisis has had a lasting negative influence on corporate profits. Companies have had to satisfy the interests of several stakeholders, such as its employees, banks, customers and the community, and at the same time successfully manage the consequences of the crisis. An empirical qualitative study which was conducted in Austria in 2008 is presented in this paper aimed at investigating business ethics and crisis management. The stakeholder theory will be used as a reference framework. This paper concludes with lessons that can be learned and political recommendations and policies put forth to grant failed businesses a second chance. 1. Introduction In the past few years, an increasing number of fraud cases and accounting scandals is linked to fierce discourse with respect to ethics and corporate accountability. Business ethics has likewise become a current research subject in science (Homan/Lütge, 2005; VHB, 2008). Discussions concerning corporate responsibility can be examined from different...
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...Australian Bankruptcy Law Contents Executive Summary 2 History of Australian Bankruptcy Law 3 The Beginning 3 The English Root 3 The Adaption and the Bankruptcy Act of 1966 5 The Debate 6 The Reform 6 For the Change 6 Against the Change 6 Conclusions & Recommendations 7 Citations & References 8 Executive Summary The purpose of this report is to examine the history, and the development of the Australian Bankruptcy Law. Through reviewing historical information, the origins of the current Bankruptcy Law are explored. Furthermore, the development of Corporate Insolvency Laws in Australia from 1901 through to 2001 Corporations Act is studied. The last part of this report reviews the ongoing debate on the need to relax the Corporate Insolvency & Bankruptcy Laws, in order to encourage entrepreneurship. This is followed by a final conclusion on the topic of the Australian Bankruptcy Law, and recommendations on where it could head for the better. History of Australian Bankruptcy Law The Beginning Before examining the development of any laws in Australia, one must review and accept the irony that, Australia began as a nation of convicts. In the late 18th century, the British empire were being burdened by the increasing number of criminals, convicted of variety of crimes from petty theft, fraud, to even murder. Due to the limited landmass, King George III empowered Captain Arthur Phillip, commander of the First fleet, to sail out to Australia...
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...Learning Team B Summary/Reflection University of Phoenix Finance For Business FIN/370 XXX XXXXX Learning Team B Summary/Reflection Introduction In week four we covered various topics such as Capital structure, market capitalization, the effects of financing strategies on capital cost, and discussed differences of leasing vs. buying and how the there are requirements that financial companies are incompliance. We were also asked to calculate favorable and unfavorable financial leverage and interest. XXXX In week four of FIN/370, I learned many things related to financing and capital budgeting structure. We talked SOX and the requirements that the SEC sets forth for organizations to ensure financial compliance. This was a topic that I had quite a bit if firsthand knowledge with because when out SOX was first introduced our organization took it seriously and each employee of the company from the top down was responsible to attend the training and would be held accountable for their actions at every level of the organization. We also had good discuss about lease versus purchase and which option is better for individuals. It was interesting to see the different outlooks and opinions that other people had relating to whether they preferred leasing or purchasing. We had our week four calculation problems again which I struggled with several of them this week but not quite as many as the week before. I have watched the videos and utilized other sources to answer the financial...
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...Would you ever consider signing a lease with a “no bankruptcy clause?” Does it help for me to tell you that doing so will not put you in danger should you reach the point where you need to file? I do have to say that any lessor who includes this in their lease is somewhat “questionable”. Payday loan lenders, hard moneylenders, and other small business lenders will frequently include such a clause, but it has no actual legal implications. Dishonest debt collectors quite often try to collect through harassment a debt that has actually been discharged through bankruptcy. Criminal organizations buy bad debts including some that have been discharged through a bankruptcy. Almost all debts qualify to be discharged through bankruptcy. If there were...
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...The Quarterly Review of Economics and Finance 45 (2005) 48–64 Contagion effects of the world’s largest bankruptcy: the case of WorldCom Aigbe Akhigbea,∗ , Anna D. Martinb , Ann Marie Whytec a Department of Finance, College of Business Administration, University of Akron, Akron, OH 44325, USA b Department of Finance, Charles F. Dolan School of Business, Fairfield University, USA c Department of Finance, School of Business, University of Central Florida, USA Received 16 June 2003; received in revised form 23 December 2003; accepted 27 July 2004 Available online 26 November 2004 Abstract On July 19, 2002 WorldCom sought protection from its creditors when it filed for Chapter 11 bankruptcy, earning the distinction as the largest bankruptcy filing in U.S. history. The events surrounding this history-making occurrence provide an important opportunity to examine the repercussions for WorldCom’s stakeholders. We especially focus on the valuation effects of the WorldCom failure on exposed financial institutions for their important monitoring roles as institutional investors and creditors. Despite the heightened uncertainty facing investors during this period, we find that the market is remarkably efficient in distinguishing among the various types of stakeholders. In particular, institutional investors and creditors are largely unaffected by the events, which is expected based on the benefit of diversification. In contrast, large and key competitors are adversely affected by the events...
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...Filed 5/30/12 Viadro v. Titus CA1/5 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE |JULIANNE VIADRO AS LIQUIDATING TRUSTEE FOR HUMBOLDT CREAMERY, LLC, | | |Plaintiff and Respondent, | | |v. |A132331 | |RALPH A. TITUS et al., | | |Defendants and Respondents, |(Humboldt County | | |Super. Ct. No. DR091101) | |LINDA NICHOLSON et al., | | |Movants...
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...President and other fifty-percent shareholder of Allstate. c) While engaged as a consultant, Farley became aware of the Romanos' practice of writing checks for personal expenses out of the company account. d) Allstate was in financial difficulty and failed to pay substantial debt to its unsecured creditors, while at the same time the Romanos withdrew large sums of money from Allstate. e) Romano filed a Chapter 7 bankruptcy petition in the District of Massachusetts. f) Farley filed an Amended Complaint against Romano and his wife and individually and on behalf of Allstate, seeks to except a debt he asserted was owed by the Romanos from discharge. g) Farley also argued that the Romanos' withdrawal of substantial sums from Allstate's checking account for personal expenses amounts to embezzlement under 11 U.S.C. ß 523(a)(4). * Issue: The issue was, whether or not any debt owed by the Romanos to Farley or to Allstate was non-dischargeable pursuant to 11 U.S.C.S. ß 523(a)(2) and ß 523(a)(4). Rule: Section 523(a)(4) of the Bankruptcy Code provides that a debtor may not discharge debt for embezzlement or larceny. Also Section 11 U.S.C.S. ß 523(a)(2) sates that a debt shall be excepted from discharge, when it is the result of debtor’s false statement, made with knowledge of its falsify, with the intent to deceive the creditor, and where the creditor justifiably relies on the representation to its detriment. Analysis : The Court held that: a) No express...
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...Contents Abstract 2 Introduction 3 Body 4 Definition of directors 4 Definition of disqualified directors 4 Circumstances for disqualification of directors 5 i. Undischarged bankruptcy (section 125) 5 ii. Convicted of crimes (section 130) 5 ii. Disqualification in insolvent companies (section 130A) 6 Comparison of penalty or punishment of disqualified director under Malaysia’s Law and United Kingdom’s (UK) Law 6 Example of cases involve directors disqualification in UK and Malaysia 7 Case 1 7 Case 2 8 Conclusion 10 Abstract Director is one of the important people in the conducting of a company. Without them, the company cannot be operated and all matters concerning the company cannot be carried out. At present, when a company fall or declared bankruptcy, the director become a disqualified director and cannot be a director in other companies as they may cause a similar incident recurring. According to this matter, the punishment of the disqualified director in Malaysia is fixed to 5 years which in major or minor case and must pay a fine RM100, 000.00 or both. They can’t be a director of other company just because they fail to exercise their duties and caused they commit a major or minor cases in a long time period. This paper aim to examine whether the punishment of disqualified director can be implementing or change in Malaysia compare to other country. Introduction In Malaysia, the situation which the person who tend to be a disqualified...
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