On June 20, 2001 Bankruptcy Judge Raymond B. Ray entered an Order confirming the Trustee's Chapter 11 Plan. The confirmation order is reproduced here.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
Fort Lauderdale Division
FINANCIAL FEDERATED TITLE & TRUST, INC. a/ka ASSET SECURITY CORP. a/k/a VIATICAL ASSET RECOVERY CORP., a/k/a QUAD-B-LIMITED, INC., and AMERICAN BENEFITS SERVICES INC.,
|CASE NO. 99-26616-BKC-RBR
ORDER CONFIRMING AMENDED CHAPTER 11 PLAN
On Wednesday, June 20, 2001, at 9:30 a.m. the Court conducted a hearing to consider the confirmation of the Amended Chapter 11 Plan dated April 25, 2001 (the "Plan") filed by John W. Kozyak, as Chapter 11 Trustee for Financial Federated Title & Trust, Inc., a/k/a Asset Security Corp., a/k/a Viatical Asset Recovery Corp., a/k/a Quad-B-Limited, Inc., and American Benefits Services, Inc. ("Trustee" or "Proponent").
By Order dated April 25, 2001, this Court approved the Trustee's Amended Disclosure Statement for Amended Chapter 11 Plan filed by John W. Kozyak, as Chapter 11 Trustee (the Disclosure Statement"), authorized the solicitation of acceptances and rejections of the Plan, set deadlines for objections to confirmation of the Plan, and scheduled this hearing on confirmation of the Plan.
An objection to confirmation of the Plan was filed by Ronald J. Srein and R. J. Srein Corp. Pension Plan Trust (collectively "Srein"). Also, a broker named Bernard Miskiv sent several letters to the Trustee, to counsel for the Trustee and to the U.S. Trustee objecting to the subordination of his claim and requesting his claim be treated as a Class 4 Claim. Trustee's counsel filed with the Court the letters that Mr. Miskiv sent to her and the Court will treat these letters as an objection to Confirmation.
The Court has considered the Disclosure Statement and Plan, the evidence presented, the presentations of counsel, the Trustee's certificate regarding the results of the voting on the Plan, the objections to confirmation, and the record before the Court in these cases, and, based thereon, the Court makes the following findings of fact and conclusions of the law, and enters the following Orders:
A. The Trustee has provided sufficient notice of (a) the Plan and Disclosure Statement, (b) the deadline to file and serve objections to the confirmation of the Plan and Disclosure Statement, (c) the deadlines for voting on the Plan, and (d) the hearing date on the confirmation of the Plan. The Trustee has afforded all parties in interest with an adequate opportunity to be heard regarding the Plan. The Trustee served the Plan and Disclosure Statement on all Creditors entitled to vote on the Plan and Creditors holding Claims to which the Trustee has filed objection, but which objections have not been resolved. The Plan and Disclosure Statement were served on all other parties requesting notice. Therefore, notice of the Plan and Disclosure Statement, and the opportunity to vote and object, were provided as required under Title 11 of the United States Code (the "Bankruptcy Code").B. The Amended Disclosure Statement previously approved by this Court satisfied the requirements of § 1125 of the Bankruptcy Code. The Trustee prepared the Disclosure Statement in good faith and with reasonable care and diligence. The Trustee has not knowingly or negligently omitted material facts from the Disclosure Statement, nor has the Trustee included in the Disclosure Statement any materially misleading or erroneous statements or representations. The Trustee's solicitation of acceptances of the Plan was conducted in good faith and in compliance with all applicable provisions of the Bankruptcy Code.
C. The Plan complies with all applicable provisions of the Bankruptcy Code.
D. The Trustee, as proponent of the Plan, has complied with all applicable provisions of the Bankruptcy Code.
E. The Plan has been proposed in good faith and not by any means forbidden by law.
F. Any payment to be made by the Trustee or the Liquidating Debtor, or from property of the Debtors' estates, or by any person issuing securities or acquiring property under the Plan, for services or for costs and expenses in or in connection with this case, or in connection with the Plan and incident to this case, has been approved by, or is subject to the approval of, the Court as reasonable.
G. The Plan will be executed by the Plan Administrator. The Trustee has disclosed that John W. Kozyak will serve as Plan Administrator after confirmation of the Plan, whose appointment is consistent with the interests of Creditors and with public policy. No other individuals are proposed to serve, after confirmation of the Plan, as a director, officer, or voting trustee of the Debtors. No insider of the Debtors will be employed or retained by the Liquidating Debtor. The current members of the Official Committee of Unsecured Creditors shall serve as the Post-Confirmation Creditors' Committee.
H. There is no governmental regulatory commission with jurisdiction, after confirmation of the Plan, over the Debtors whose approval is required under § 1129(a)(6) of the Bankruptcy Code
I. With respect to each impaired class of Claims and Interests under the Plan, either each holder of a claim or interest of such class has accepted the Plan, or will receive or retain under the Plan on account of such claim or interest property of a value as of the Effective Date of the Plan, that is not less than the amount that such holder would so receive or retain if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code on such date.
J. The classification of Claims and interests under the Plan satisfies § 1122 of the Bankruptcy Code.
K. Approximately 1,700 victim Creditors filed their Claims as secured or priority Claims. The Plan sought to reclassify these Claims as Class 4 unsecured, non-priority Claims (or, where the Creditor is a Broker, as a Class 5 unsecured, non-priority Claim). In an abundance of caution, the Trustee also served each of these Creditors with his Eighth Omnibus Objection to Claims. The Court has made a ruling (the "Eighth Omnibus Objection Ruling") holding that except as otherwise stated in Court and below, individuals whose Claims arise from the loss of funds provided, directly or indirectly, for investment in viatical settlement purchase agreements as marketed by or for FinFed or ABS, are holders of unsecured, non-priority Claims.
L. However, neither the Eighth Omnibus Objection Ruling nor this Order shall constitute an adjudication of, or have any res judicata effect with respect to, the Trustee's objection to the status of the Claims filed by Srein or of Srein's asserted interest in various insurance policies or the proceeds of any policies in which the Trustee also asserts an interest. These issues shall be adjudicated separately and the Trustee shall not dispose of, or enter into any agreements to dispose of, any policies or the proceeds of any policies in which Srein asserts an interest without further order of this Court. No provision of this Order shall bar, prohibit, prejudice, or otherwise prevent Srein from asserting any interest Srein may have against any policies or proceeds of any policies which are not listed in either the objection to confirmation or Claims filed in this case by Srein, or from seeking appropriate judicial relief to determine and enforce such interest.
M. Morever, neither the Eighth Omnibus Objection Ruling nor this Order shall constitute an adjudication of the Claims of the Urban Group (a group of individuals acting through an agent, and fellow investor, Howard Urban) which claim objections the Court currently holds under advisement following the hearing on the Trustee's Third Omnibus Objection to Claims conducted on June 6, 2001.
N. Finally, neither the Eighth Omnibus Objection Ruling nor this Order shall constitute an adjudication of the status of the Claims of those Creditors represented by J.C. Deboard & Co., more particularly identified in the Joint Response of Claimants to Trustee's Eighth Omnibus Objections to Claims filed as Secured or Priority Claims (C. P. 1288) (collectively the "DeBoard Claimants"), or of the Claims of Bandre (C. P. 1269), Schneider (C. P. 1241), Hallblade (C. P. 1172), and Lyman (C. P. 1264), or of the seven Creditors who the Trustee has advised did not receive notice of the hearing on the Eighth Omnibus Objections to Claims. The Trustee's objections to the status of these Claims will be set for hearing at a later date.
O. The Court notes that no one filed an objection to the separate classification of Brokers; Mr. Miskiv only objected to the classification of his particular Claims as Class 5 Claims. In any event, the separate classification of the Class 5 Broker Claims is appropriate. The Claims which are classified as Class 5 Claims are asserted by Brokers who acted as agents for American Benefits Services, Inc. ("ABS") to raise money to be invested in this fraudulent scheme, and who received commissions for the money they raised. Unlike the investors classified in Class 4, the Brokers have already recovered some funds out of this fraud through their commissions, to the detriment of the Creditors whose funds were the basis for those commissions.
P. Classes 1 and 2 are unimpaired under the Plan and they were not entitled to vote on the Plan.
Q. Classes 3 and 4 are impaired under the Plan and have voted to accept the Plan. As to Class 3, 100% in amount and 100 % in number of the allowed Class 3 Claims that have accepted or rejected the Plan voted for its acceptance. As to Class 4, 91% in amount and 94% in number of the allowed Class 4 Claims that have accepted or rejected the Plan voted for its acceptance.(1)
R. Therefore, at least one class of claims that is impaired under the Plan has accepted the Plan, determined without including any acceptance of the Plan by any insider.
S. Class 5 is impaired under the Plan. Class 5 has voted to reject the Plan, although, with the exception of three rejecting ballots, all Class 5 Creditors cast their ballots as Class 4 ballots. Even if all Class 5 ballots were treated as Class 4 ballots, or even if all Class 5 ballots were treated as rejecting Class 4 ballots, Class 4 would still be an accepting class.
T. Class 6 is impaired under the Plan, and no Class 6 interest holder cast a ballot.
U. The Plan does not discriminate unfairly, and is fair and equitable with respect to Classes 5 and 6.
V. Except as provided in the following paragraph, the subordination of the Class 5 Broker Claims is justified in that the Brokers engaged in inequitable and overreaching conduct, that conduct has injured Creditors (specifically, the non-broker investor Creditors whose Claims the Broker Claims are being subordinated to), and the subordination is not inconsistent with the Bankruptcy Code.
W. One broker, Mr. Miskiv, has alleged that the subordination to Class 5 of his Claims is inappropriate. Mr. Miskiv asserts that his Claims should be allowed as Class 4 Claims. The Court shall treat Mr. Miskiv's Claims as Class 5 Claims for purposes of balloting, although reclassification of Mr. Miskiv's ballots as Class 4 Ballots would not change Class 4 from an accepting class to a rejecting class. The Court shall set a separate hearing to consider the appropriateness of the Trustee's subordination of Mr. Miskiv's Claims. If the Trustee makes any Distributions prior to entry of a final order on Mr. Miskiv's Claim, the Trustee shall reserve an appropriate amount as provided by the Plan as if Mr. Miskiv's Claims were Disputed Class 4 Claims.
X. With respect to Class 5, no holder of a claim or interest that is junior to the Claims of Class 5 will receive or retain any property under the Plan on account of such junior claim or interest, unless the Claims of the Creditors in Class 5 are paid in full.
Y. With respect to Class 6, there is no holder of any interest junior to the interests of such class that will receive or retain under the Plan any property or account of such junior interest.
Z. Except to the extent that the holder of a particular Claim has agreed to a different treatment of such Claim, the Plan complies with the provisions of § 1129(a)(9) of the Bankruptcy Code with respect to the treatment of priority claims as identified in § 507(a) of the Bankruptcy Code.
AA. The Plan has a reasonable prospect of success. The Plan is feasible. The Plan is a liquidating plan and the Trustee has established sufficient procedures and safeguards to liquidate or otherwise manage all Estate Assets, and to ensure equitable distribution. Confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtors or any successors to the Debtors under the Plan, except as proposed in the Plan.
BB. All fees payable under 28 U.S.C. § 1930 either have been paid or will be paid as required by law.
CC. The Debtors have no obligations to pay retiree benefits, and thus § 1129(a)(13) of the Bankruptcy Code does not apply.
Accordingly, it is hereby ORDERED and ADJUDGED that:1. The Plan is in all respects CONFIRMED pursuant to § 1129 of the Bankruptcy Code, and all of its terms and provisions are hereby approved. The terms and provisions of the Plan are incorporated into this Order by reference. In the event of any conflict between the terms and provisions of the Plan and the terms and provisions of this Order, the terms and provisions of this Order shall control.
2. The terms and provisions of the Plan and this Confirmation Order are binding on the Debtors, the Trustee, the Liquidating Debtor, the Plan Administrator, each creditor and interest holder, and each and every other party in interest in this case.
3. John W. Kozyak shall continue to serve as Trustee until discharged by further order of this Court.
4. After the Effective Date, the Plan shall be administered by the Plan Administrator. John W. Kozyak's appointment as the Plan Administrator is hereby approved and confirmed. Mr. Kozyak shall have full authority, as Plan Administrator, to act for the Liquidating Debtor, including without limitation, the authority to execute any and all documents, including check signing authority, on behalf of the Liquidating Debtor, and including closing documents to be executed in connection with the sale of real or personal property of the estate.
5. There shall be a Post-Confirmation Creditors' Committee, consisting on the Confirmation Date of the members of the Official Committee of Unsecured Creditors. Changes in membership of the Post-Confirmation Creditors' Committee shall be made in accordance with the provisions of Article XI of the Plan.
6. The Liquidating Debtor and the Post-Confirmation Creditors' Committee shall have the power and authority provided in the Plan. The Trustee and the Plan Administrator are authorized and directed to perform their respective obligations under the Plan and to take all actions and execute all documents and instruments reasonably necessary to consummate the transactions contemplated by the Plan in accordance with its terms. Without limiting the foregoing, the Trustee, the Plan Administrator, the Liquidating Debtor, and any other necessary entities are authorized and obligated (i) to take all actions and execute all documents and instruments reasonably necessary to implement effectively the provisions of the Plan, (ii) to pursue all litigation as contemplated by the Plan, and (iii) to make all distributions required to be made pursuant to the Plan. Further, upon the Effective Date, the Liquidating Debtor shall be vested with the rights and powers granted to the Trustee under Section 1107(a) of the Bankruptcy Code with respect to the allowance, treatment or avoidance of liens or claims which are part of the Assumed Liabilities, and which remain unresolved as of the Effective Date, and the Liquidating Debtor is authorized to prosecute or continue the prosecution of any and all actions under 11 U.S.C.§§ 544 through 550 (the "Avoidance Claims"), to commence the filing and continue the prosecution of all objections to claims and equity interests and to otherwise act in accordance with the Plan.
7. The Estate Assets shall be and remain free and clear of the Liens, Claims, and Equity Interests of any Entity except for those of the respective Creditors, post-confirmation U.S. Trustee's fees, and any other assumed liabilities, and no Entity shall be permitted to execute against or receive Distributions from the Liquidating Debtor except in accordance with the terms of this Confirmation Order and the Plan. All entities shall be forever precluded from asserting claims against Estate Assets. All entities are hereby enjoined from commencing or continuing any action, the employment of any process, or any act to collect from, or offset against the Debtors or the Liquidating Debtor on account of a lien, claim, or equity interest, except as expressly provided in the Plan.
8. The Estate Assets will automatically vest in the Liquidating Debtor, without any further action on the part of the Trustee or the Liquidating Debtor or the execution, delivery and filing or recording of any documents of conveyance, free and clear of all liens, claims, and equity interests of Creditors and holders of equity interests, except to the extent contemplated by the Plan.
9. Pursuant to 11 U.S.C. § 1146(c) no taxing authority may impose any tax under any law imposing a stamp tax or similar tax based on the issuance, transfer or exchange of a security, or the making or delivery of any instrument of transfer as contemplated by the Plan, or the issuance, transfer or exchange of a promissory note, bond or written obligation for the payment of money or the making, delivery or recordation of a mortgage, trust, deed, security agreement or other evidence of indebtedness arising in connection with any settlement entered into in this bankruptcy case, even those which are consummated post-petition, as all such settlements are essential to consummate and implement the Plan.
10. All executory contracts and unexpired leases not previously expressly assumed or rejected by the Trustee shall be deemed rejected as of the Confirmation Date. Any claim arising from rejection of an executory contract or unexpired lease must be filed within thirty (30) days after entry of this Order.
11. The entry of this Confirmation Order shall not have any res judicata or other preclusive effect with respect to any claims of the Trustee against third parties that are not specifically and expressly released by the terms of the Plan or this Confirmation Order. This Confirmation Order is not in any way a bar to asserting any such claims.
12. The Liquidating Debtor shall pay the U.S. Trustee the appropriate sum required pursuant to 28 U.S.C. § 1930(a)(6) within twenty (20) days of the entry of this Order for pre-confirmation periods, and simultaneously provide to the U.S. Trustee an appropriate report indicating the cash disbursements for the relevant period. The Liquidating Debtor shall further pay the U.S. Trustee the appropriate sum required pursuant to 28 U.S.C. § 1930(a)(6), as amended, for post-confirmation periods within the time periods set forth in 28 U.S.C. § 1930(a)(6), based upon all post-confirmation disbursements made by the Liquidating Debtor until the earlier of the closing of this case by the issuance of a final decree by the Court, or upon the entry of an order by this Court dismissing this case or converting this case to another chapter under the Bankruptcy Code. The Liquidating Debtor shall provide to the U.S. Trustee upon the payment of each post-confirmation payment an appropriate affidavit indicating all applicable cash disbursements under § 1930(a)(6).
13. The Trustee and the Liquidating Debtor shall be entitled to seek such orders, judgments, injunctions and rulings as they deem necessary to carry out any further intentions and purposes, and to give full effect to provisions, of the Plan.
14. Notwithstanding anything in the Plan to the contrary, professionals seeking compensation from the Liquidating Debtor shall apply to the Court for approval. The form of applications shall not be as formalized as that required by Local Rule 2016-1(B)(1), but shall include sufficient information to allow the Court to consider the reasonableness of the fee and expenses requested. The time detail may be filed under seal, if an appropriate showing is made. Copies of the unsealed portion of the application shall be served on all parties requesting such information
15. The Liquidating Debtor is named as Disbursing Agent. The Liquidating Debtor is directed to make the Initial Distribution as soon as practicable consistent with the terms of the Plan. Within one year from the date hereof, unless extended by order of this Court, the Liquidating Debtor shall file a final report of estate and motion for final decree closing case on the Court - approved local form.
16. Notwithstanding anything herein to the contrary, neither the Eighth Omnibus Objection Ruling nor this Order shall constitute an adjudication of, release of, bar, or have any res judicata effect with respect to the Trustee's objection to the status of the claims filed by Srein or of Srein's asserted interest in various insurance polices or the proceeds of any policies in which the Trustee also asserts an interest. These issues shall be adjudicated separately and the Trustee shall not dispose of, or enter into any agreements to dispose of, any policies or the proceeds of any policies in which Srein asserts an interest without further order of this Court. No provision of this Order shall bar, prohibit, prejudice, or other otherwise prevent Srein from asserting any interest Srein may have against any policies or proceeds of any policies which are not listed in either the objection to confirmation or Claims filed in this case by Srein, or from seeking appropriate judicial relief to determine and enforce such interest.
17. The Court hereby retains jurisdiction as provided in the Plan.
18. All objections to confirmation of the Plan not specifically sustained or modified herein, are overruled.
ORDERED in the Southern District of Florida on June 20, 2001.
Copies furnished to:
Laurel M. Isicoff, Esq.
Robert Angueira, Esq.
[Attorney Isicoff is directed to serve copies of this order on all interested parties and to file a certificate of service]
1. Certain Creditors whom the Trustee has proposed to treat as Class 4 Creditors filed proofs of claim as secured or priority Claims. To the extent the Trustee's objections to those Claims are unresolved as of the confirmation hearing, if those Claims were excluded from voting as Class 4 Claims, Class 4 would still have accepted the Plan.