....this case is replete with examples of at best, incompetence or gross mismanagement, and at worst with fraud and dishonesty.
First, Plasticon’s incurrence of more than $70 million in expenses when it earned no revenue in 2004, followed by an incurrence of an additional $31 million in expenses on revenues of only $65,000 during 2005, provides the simplest “bottom line” evidence of gross mismanagement or incompetence. Turek cannot justify these outlays as a capital investment because the overwhelming majority of these outlays went toward compensation for services.
In fact, the evidence is strong that this gross mismanagement was by design. Turek was issued millions of shares as “compensation,” public reporting (of Plasticon’s poor performance) was delayed, and in its place were misleading press releases.
This pattern of incomplete and misleading disclosures should itself constitute cause to appoint a trustee. See In re Wright Air Lines, 51 B.R. 96, 98 (Bankr. N.D. Ohio 1985) (section 1104 designed to remedy concealment in public reporting of securities transactions by Debtor) (dicta).
This pattern of behavior could only benefit an insider and major shareholder such as Turek. An insider such as Turek also benefits from the unclear ownership of the patents between the Debtor and PCI and Turek’s children.
Cf. In re Intercat, Inc., 247 B.R. 911, 922 (Bankr. S.D. Ga. 2000) (trustee appointed when debtor, inter alia, transferred intellectual property assets to another entity controlled by insider); In re Embrace Systems Corp., 178 B.R. 112, 128-29 (Bankr. W.D. Mich. 1995) (trustee appointed sua sponte after attempted sale of intellectual property to insider corporation; ownership of intellectual property was in dispute between debtor and insider corporation of which President of Debtor had an interest.)
Extract from Pacer Doc 156
MOTION OF THE UNITED STATES TRUSTEE FOR APPOINTMENT OF A CHAPTER 11 TRUSTEE |
