Lawsuits target Irwin Jacobs and Genmar payoutsPosted on
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.
Welcome to TradeOnlyToday’s premium content! To continue reading, please register now, for access to 10 free stories per month. Or subscribe, for unlimited access to all TradeOnlyToday content!
Basic subscription: Registered members get free access to 10 premium content stories each month!
Individual subscription: $29 for unlimited site access for one year.
Small Business subscription: $140 for unlimited site access for up to 10 members of a company for one year.
Corporate subscription: $300 for unlimited site access for all members of a company for one year.
You may close this dialog after seconds.