In re Gordon

484 B.R. 811, 2013 WL 66258, 2013 Bankr. LEXIS 29
CourtUnited States Bankruptcy Court, N.D. Oklahoma
DecidedJanuary 4, 2013
DocketNo. 11-10045-M
StatusPublished

This text of 484 B.R. 811 (In re Gordon) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Gordon, 484 B.R. 811, 2013 WL 66258, 2013 Bankr. LEXIS 29 (Okla. 2013).

Opinion

MEMORANDUM OPINION

TERRENCE L. MICHAEL, Chief Judge.

Most litigation deals with past events. Bankruptcy cases often focus on the future. It may be the future of a reorganized business, or the collection and distribution of a debtor’s assets. Just as disputes arise out of past events, they can also be foreseen. The question before the Court is whether potential disputes may be the proper subject of compromise, and, if so, whether the compromise presented in this case should be approved. The following findings of fact and conclusions of law are made pursuant to Federal Rule of Bankruptcy Procedure 7052 and Federal Rule of Civil Procedure 52, which are made applicable to this contested matter by Federal Rule of Bankruptcy Procedure 9014.

Jurisdiction

The Court has jurisdiction over this bankruptcy case pursuant to 28 U.S.C. § 1334(b).1 Reference to the Court of the bankruptcy case is proper pursuant to 28 U.S.C. § 157(a). The approval of a compromise constitutes a core proceeding as defined by 28 U.S.C. § 157(b)(2)(A).

Findings of Fact

George David Gordon, Jr. (“Debtor” or “Gordon”) filed a petition for Chapter 7 relief on January 7, 2011. Patrick J. Mal-loy III (“Malloy” or “Trustee”) has been appointed to serve as Trustee. Malloy has filed a preliminary report indicating that assets may be available for distribution to creditors in this case.2 A deadline for filing claims has been established.3 Commerce Bank (“Commerce” or “Bank”) filed a proof of claim in the amount of $470,200, based upon a guaranty of indebtedness executed by Gordon.4 The United States of America (“USA”) filed a claim against Gordon in the amount of $43,609,877.44.5

[814]*814Debtor is incarcerated in a Federal Correctional Facility in Texarkana, Texas. He was convicted of conspiracy to commit securities fraud, wire fraud, and money laundering by the United States District Court for the Northern District of Oklahoma (the “District Court”). His crime has been described as a “pump and dump” stock scheme (or series of schemes).6 There are somewhere between 17,000 and 19,000 possible investors in the Debtor’s schemes that have or may have lost money (the “Investors”). The Investors have never been given formal notice of Gordon’s bankruptcy case. As part of the criminal proceedings, the USA has commenced forfeiture proceedings against Gordon and obtained judgments against him. These judgments comprise the basis for the USA claim in this case. Prior to the filing of the bankruptcy case, the USA recovered approximately $8 million from Gordon.

On March 28, 2012, Malloy filed a motion to compel Debtor to amend his schedules to list the Investors as creditors.7 The motion questioned whether the Investors received proper notice of this bankruptcy case, and sought to require the Debtor to bear the cost of providing such notice. Four days later, without explanation, Malloy attempted to withdraw this motion.8 Concerned by Malloy’s allegations regarding lack of proper notice to the Investors, the Court scheduled a status hearing regarding the motion for April 10, 2012. The hearing was continued twice at Malloy’s request and was ultimately held on May 23, 2012. At the hearing, Malloy informed the Court that he was nearing a settlement with the USA that would provide a means of allowing the Investors to participate in any distribution from the bankruptcy estate.

On May 25, 2012, Malloy and the USA filed a pleading entitled “Amended Trustee’s Notice and Motion to Settle Disputed Matter” (the “Motion to Settle”).9 In the Motion to Settle, Malloy advised the Court that he had entered into a “Coordination Agreement” (the “CA”) with the USA.10 Under the terms of the CA:

1. Malloy shall not contest the forfeiture of certain properties once owned by the Debtor to the USA;
2. The USA shall not seek a prior interest in any assets recovered by Malloy for the benefit of the estate;
3. The USA shall assign to Malloy any claims it has against third parties for aiding, abetting, and/or conspiring with Debtor;
4. The USA shall provide notice to the Investors of their right to participate in recoveries in either the bankruptcy and/or the forfeiture proceedings at no cost to Malloy or the Gordon estate;
5. All of the Investors are to be provided an opportunity to assign all claims they may have against third parties for aiding and abetting Debt- or in his “pump and dump” scheme.

Malloy and the USA jointly seek court approval of the CA.

[815]*815The CA has been properly noticed to all creditors, but not to the Investors. Originally, three objections were Sled: one by Debtor, one by Amy Gordon, Debtor’s spouse; and one by Commerce. The objection by the Debtor was denied for lack of standing. The objection of Amy Gordon has been settled. Only the Commerce objection remains.11 Commerce objects to the CA on various bases, including: (1) the CA does not adequately describe the nature of the dispute being settled; (2) it “does not promote the integrity of the judicial system” because it provides for the assignment of claims held by the Investors and the USA to Malloy; and (3) the assignments of claims contemplated in the CA are prohibited as a matter of law. The United States Trustee supports approval of the CA.

Commerce is not merely a creditor in this case. Malloy alleges that Commerce is the beneficiary of a $1.7 million fraudulent transfer from Gordon. He also contends that Commerce aided and abetted Debtor in his pump and dump scheme. Malloy claims that Commerce’s liability for this misconduct is in the millions of dollars. Commerce and its attorneys are aware of Malloy’s allegations, and furiously contest them. Malloy intends to commence litigation against Commerce on or before January 7, 2013.12

A hearing on the Motion to Settle was held on October 25, 2012. Malloy was the only witness. He testified that the CA provides the following benefits to the bankruptcy estate:

1.The recognition of parallel proceedings between the USA and the bankruptcy estate, both with the common goal of maximizing return to creditors of Gordon, including the Investors;
2. The elimination of future litigation between the USA and Malloy regarding assets to be collected by the bankruptcy estate;
3. The assignment of additional claims to the bankruptcy estate that could result in additional distribution to its creditors;
4.

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Cite This Page — Counsel Stack

Bluebook (online)
484 B.R. 811, 2013 WL 66258, 2013 Bankr. LEXIS 29, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-gordon-oknb-2013.