Receiver, Trustee, Investors, Victims, Hundreds of Millions of Dollars…Challenge to Petters Receiver/Trustee Rebuffed

Whether it is analysis of what constitutes a “final order” for purposes of appeal or an analysis of conflicts of interest, given the very different nature of bankruptcy proceedings from generic civil litigation, courts often adopt a more flexible and pragmatic approach in bankruptcy cases.

Such is the case in the Petters Bankruptcy where U.S. District Court Judge Montgomery has upheld a ruling by Bankruptcy Judge Gregory F. Kishel on a challenge to the appointment of Doug Kelley as Receiver and Trustee of the “Petters Debtors,” a small handful of business entities in bankruptcy following the collapse of the alleged Petters’ Ponzi scheme. Particular hedge fund investors challenged the appointment of Kelley as being the Receiver and the Trustee of multiple entities thereby, they argued, causing actual or potential conflicts of interest in his performing duties owed to various entities in various capacities (e.g., as Receiver vs. as Trustee).

The crux (as Judge Montgomery quoted Judge Kishel): “[T]he characteristics of these cases and their backdrop cannot be ignored: multiple pending, major criminal prosecutions against key management personnel of the Debtors; the sheer magnitude of the sums of money in question; the present indeterminacy of what happened to build and then fell the edifice of Tom Petters’s enterprise; and the large complexities that must be coordinated to responsibly propel bankruptcy procedures forward. These circumstances powerfully support the concentration of attention and effort into one fiduciary steward, at this time and for a while to come. Kelley has gone up an immensely steep learning curve in the last five months; he has had to amass knowledge, and analyze it with his professional persons; he is making use of that to recover assets, via legal proceedings and otherwise.”

And a disclaimer: Connie Lahn & Dave Runck, of Fafinski Mark & Johnson P.A. are counsel for the Official Committee of Unsecured Creditors in the case discussed. As noted in the disclaimer in the margin, anything in this or in any entry www.Minnesota-Litigator.com reflects the personal statements, views, and/or opinions of the author, not the statements, views and/or opinions of any past or present employer or institution with which the author is affiliated.

Order on Appeal Overrruling Ritchie Objection to Petters Trustee