A disclosure statement describing the revised reorganization plan for Scott Rothstein’s defunct law firm was approved today by a federal bankruptcy judge in Fort Lauderdale.
The statement is a necessary component for creditors to consider before a confirmation hearing planned for mid-July.
Many of the attorneys representing creditors lined up to tell U.S. Bankruptcy Judge Raymond Ray they supported the amended disclosure statement. Among them was Michael Goldberg of Akerman Senterfitt, who represents the creditors’ committee.
Others, however, persisted with objections.
The main objection was about language that would ban pending litigation against TD Bank under its proposed settlement with the trustee for Rothstein Rosenfeldt Adler. The bank has been a named co-conspirator and defendant in numerous lawsuits by victims of Rothstein’s $1.2 billion Ponzi scheme.
Rothstein, who is serving a 50-year prison sentence, ran money from his fraud through numerous law firm accounts at TD Bank. The bank denies wrongdoing in the 2009 collapse of the law firm.
Charles Throckmorton of Kozyak Tropin & Throckmorton in Coral Gables objected on behalf of investor groups he represents along with the Fort Lauderdale firm of Conrad & Scherer. Throckmorton argued for the removal of the proposed bar order banning his clients’ claims.
The revised statement changed the bar order language, providing some exceptions. But Throckmorton complained the revised language was so vague that it was “patently unconfirmable.” He noted TD Bank said all creditor claims are barred, but the trustee said they might not be.
“They seem to contemplate a process where we’re not going to talk about the bar order at all,” Throckmorton said. “They can’t tell you that you can just punt and kick it down the road.”
The creditors are entitled to know whether their lawsuits are barred or not, he insisted.
Throckmorton also wants the disclosure to an explanation of TD Bank’s worth, saying the creditors should know TD Bank is able to pay the claims in full.
He circulated a chart asserting the difference between the bankruptcy distribution and a potential recovery in state court would be an additional $131 million for the Beverly and Marlin investor groups.
Paul Singerman of Berger Singerman in Miami, attorney for Rothstein trustee Herbert Stettin, argued the language could not be any clearer. Creditors should assume their lawsuits are barred, he said. However, if Ray or a trial court judge ruled some claims are not barred, “They’re not barred. This is the best of both worlds,” Singerman continued. “There’s nothing up anybody’s sleeve.”
Eight pending lawsuits against TD Bank covering about 100 creditors would be shut down. But the proposal carves out an exception for Texas-based Coquina Investments LLC, which won a $67 million verdict against TD Bank in January 2012 that is currently on appeal.
Also protected is a motion for sanctions pending in Broward Circuit Court by Razorback Funding LLC, represented by Conrad & Scherer, over the failure to turn over key documents before settlement.