Lawsuits target Irwin Jacobs and Genmar payouts

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Genmar’s boat lines were sold off more than two years ago, but the battle to recoup cash from Irwin Jacobs and others is ongoing.

The bankruptcy trustee for Genmar Holdings Inc. has filed dozens of “clawback” lawsuits seeking millions of dollars that were paid to insiders and Genmar subsidiaries before the company’s 2009 bankruptcy filing.

The targets include Jacobs, the former head of Genmar, who is being asked to return $2.7 million.

The bankruptcy trustee, Charles Ries, and a lawyer working for him, Phillip Bohl, argue that the transfers amounted to unjust enrichments to insiders who knew or should have known the company was insolvent, according to court documents, the Pioneer Press newspaper reported.

“We plan to vigorously defend all of them,” said Amy Swedberg, a lawyer with the Minneapolis-based Maslon, Edelman, Borman and Brand law firm, which is representing Jacobs and 34 other people and corporate entities that were sued in the clawback actions.

In total, Maslon’s clients are being asked to return $33.6 million, the newspaper said.

One of the insiders being sued is Daniel Lindsay, a business associate of Jacobs, who is asked to return $1.8 million. Two Jacobs-controlled companies, Jacobs Management Corp. and Jacobs Trading Co., were asked to return $7.2 million and $4 million, respectively.

Genmar filed for Chapter 11 bankruptcy reorganization in June 2009, but the case was later converted to a Chapter 7 liquidation and the assets were auctioned.

The clawback case against Jacobs, filed in November, says Genmar “began its descent into insolvency in the early 2000s” and that the company had “nearly perpetual annual operating losses on a consolidated basis from and after 2003,” according to the newspaper.

But court documents filed on behalf of Jacobs said Genmar and its subsidiaries recorded a $122 million profit in 2004. Jacobs’ response also denies that the insolvency of Genmar and its subsidiaries deepened in 2008 and 2009 and asserts that the company “remained solvent at all material times prior to its bankruptcy filing,” according to court documents.

In June, Ries told Soundings Trade Only that he also was asking for money to be returned from creditors who received payments within 90 days of Genmar’s 2009 bankruptcy filing.

“There’s a provision under the code that if some people have been paid prior to filing and received more proportionately than other people have that then the trustee’s duty is to go after those people who received a disproportionate payment to get the money back so [it] can be redistributed proportionately to everybody,” Ries said.

“It doesn’t mean that people that I’m making claims against weren’t owed the money or anything like that,” he added.

In January 2010, Genmar’s assets sold for $77.05 million, which was to go toward secured claims against the company, most notably money owed to banks. In the bankruptcy filings Wells Fargo and Fifth Third Bank were listed as being owed a combined $75 million.

The new owners purchased Genmar’s assets free and clear of liens, including any debts owed to unsecured creditors.

There were about 4,000 unsecured creditors in the case, and their claims exceeded $140 million.

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Comments

3 comments on “Lawsuits target Irwin Jacobs and Genmar payouts

  1. Fred Smarts

    Where is “Paul Benajmin” now. What you can’t stand behind IJ now. This article goes to show the type of business man he is. If he made $100m plus in ’04 and was out of business in June of ’09 there surely was significant writting on the wall and it appears he took heed while stringing out vendors and others. Not to mention he could come up with enough resources to buy it out of bankruptcy but did not have the resources to pay the $140m owed or even restructure his debt. That does not seem to credible. Even worse government entities have decided they should lend money to a business man who in the last few years ran a billion dollar business into bankruptcy. Unreal, I have always heard your credit is bad for 7-10 years after bankruptcy. But, since he was not personally guaranteeing the debit it is like it never happened. I am not a democrate but no wonder the rich get richer. If I had people willing to loan me money if I failed I would be able to throw all kinds of stuff and the wall and hope for something to stick. Just like Bain Capital and Romney, he didn’t break the law (or maybe in this case he did “clawback”) but it sure stinks!

  2. kgram

    This is what is wrong with our country today. Big business can manage a company poorly and the principle owners can still draw a salary and reap the profits with no concern for the financial health of others involved. A corporation protects the rich from any liability to their own finances. If I mis-manage my personal finances I can’t walk away from them with no remorse. I feel a person like Jacobs should be held accountable to all the people he pillaged. I feel the same about all those in charge of AIG and the rest of the banking industry. There should have been a law that would not allow Jacobs to purchase a company he drove into bankruptcy. The scum should be holding the bag just like all of the other people, big and small, still left wondering what happened.

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