by Gary W. Marsh[1]
McKenna Long & Aldridge LLP; Atlanta
When the Federal Deposit Insurance Corporation (FDIC) determines that a bank is insolvent, the FDIC will sometimes take it over to ensure that the bank’s deposits are secure. One way the FDIC protects these deposits is by selling off the loans that the bank owns, often at a discount. This leads to the following question: If a debtor defaults on one of these loans, can the purchaser of the loan recover its full value, or is the purchaser’s recovery limited to the amount it paid?
The Question
Consider the following hypothetical: A bank lends $1.5 million to a debtor. Subsequently, the bank becomes insolvent and is taken over by the FDIC. Suppose that even though the debtor still owes $1 million on the loan, the FDIC assigns it to a purchaser at the discount price of $600,000. If the debtor then defaults on the loan and declares bankruptcy, what amount can the purchaser try to claim?
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The ABI and the University of Missouri-Kansas City School of Law team up once again to present the 29th Annual Midwestern Bankruptcy Institute on October 2 at the Kansas City Marriott Downtown. This day-long program will feature top national and regional speakers who will discuss and debate timely issues. The format allows attendees to follow either a business or consumer-oriented track, so there is something for everyone! Two sessions will be of particular interest to the committee.
The session "Business: The Baptist Foundation of Arizona - A Chapter 11 Case Where the Ponzi Scheme Was in the Church" will offer insight into the handling and liquidation of the Baptist Foundation of Arizona, Inc. Clifton R. Jessup, Jr. of Greenberg Traurig LLP in Dallas was the liquidating trustee and will present his paper about the dramatic scheme that spanned three decades. Please click the link below to view Mr. Jessup's paper.
A Case Where the Ponzi Scheme Was in the Church
Panelists in the great debate session "Resolved: Section 548(c)'s Good-faith Defense Should Be Unavailable in Ponzi Scheme Cases" will discuss whether courts should bar the good-faith defense to investors and creditors who are affected by Ponzi schemes. Paul D. Sinclair of Polsinelli Shughart PS in Kansas City, Mo. will moderate. Brian L. Shaw of Shaw Gussis Fishman Glantz Wolfson & Towbin LLC in Chicago will argue that the defense should be unavailable, and Keith M. Aurzada of Bryan Cave LLP in Dallas will argue in favor of the defense. Please click the link below to view Mr. Aurzada's paper.
Con: Section 548(c)'s Good Faith Defense Should be Unavailable in Ponzi Scheme Cases
ABI's 21st Annual Winter Leadership Conference will take place Dec. 3-5 at the gorgeous La Quinta Resort & Club in La Quinta, Calif. This year's conference will offer insights from some of the top insolvency and restructuring experts on issues confronting the profession in 2010.
The Business Reorganization Committee will partner with the Young & New Members Committee to present a session entitled "Fixing Broken Not-For-Profit Entities: Just Because You Don't Have to Pay Taxes Doesn't Mean You Don't Have to Make Money" on Friday, Dec. 4 at 3:45 p.m. Panelists will include Robert J. Feinstein of Pachulski Stang Ziehl & Jones LLP in New York, Matthew W. Levin of Alston & Bird LLP in Atlanta and Andrew M. Troop of Cadwalader, Wickersham & Taft LLP in New York. Register today!
