Utilizing Cross-Border Insolvency Laws to Attack Fraud: An Analysis on How It Could Work (The United States Experience)

By: Joseph J. Wielebinski (Co-author and Co-speaker) and Davor Rukavina (Co-author)
Presented at the FraudNet Conference (London, England)
September 21, 2006

I. INTRODUCTION

With the receivership of Fraudsters under way in the British Virgin Islands ("BVI"), and the BVI Liquidator beginning to assemble and liquidate its assets, he will eventually be forced to consider what to do with Fraudsters' assets in the United States. The sooner that he does this, the better, because local creditors can seize those assets or encumber them with valid liens. Fraudsters has two assets in the United States of interest to the BVI Liquidator: (i) a bank account in New York; and (ii) Fraudsters United, Inc., Fraudsters' wholly-owned subsidiary located in Dallas, Texas and organized as a Texas corporation, which owns bank accounts in Florida and in Canada. His goal with respect to those two assets will be to obtain their benefit, and to distribute that benefit, if any, under the rules and laws applicable to the BVI Receivership, as opposed to a potentially haphazard, contradictory, and inequitable dismemberment that would occur through multiple, independent actions taken by creditors against those assets.

The United States, recognizing the importance of uniformity in international insolvencies, and in light of the rise of their number and the extent of their economics, has recently provided the BVI Liquidator with a new tool to help him obtain the benefits of Fraudsters' United States assets and to assist him and the BVI court that appointed him to fulfill his duties. This new option is Chapter 15 ("Chapter 15") of the United States Bankruptcy Code ("Bankruptcy Code") – a powerful new tool in cross-border insolvencies.

This section is intended to provide the experienced practitioner with a detailed understanding of Chapter 15 through the eyes of the BVI Liquidator and answer the initial questions he is sure to ask. First, what exactly is Chapter 15, and what is the Bankruptcy Code? Second, are there alternatives to Chapter 15, and what are the advantages, if any, to Chapter 15 over those alternatives? Third, how does Chapter 15 work? Finally, how does the BVI Liquidator initiate a Chapter 15 bankruptcy case and what happens thereafter?

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