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Marcia Goldstein

The largest corporate bankruptcy in U.S.A. history was the MCI / Worldcom bankruptcy filed in the Southern District of New York, a/k/a "Debtors Paradise". The bankruptcy was necessary after an extreme amount of executive greed and corporate criminal activities at the firm. But was the criminal activity confined to the period of time prior to filing for bankruptcy? Does everyone believe that a criminal enterprise is somehow magically cleansed by their filing for bankruptcy protection and hiring bankruptcy lawyers?

Before you answer those deep questions, let us draw your attention to written testimony presented to the United States Senate Committee on the Judiciary which held hearings on whether the criminal enterprise should be allowed to reorganize. The testimony appears below and is available for download free at BankruptcyMisconduct download section devoted to WorldCom here.

The attorney introduced "Death Threats" to the discussion. A true transcript of such discussion was filed in the proceedings, and the very same counsel did not object to any word therein, but rather complained to the Court that "apparently" the conversation had been recorded without his knowledge.

Some neo-coincidental facts contemporaneous, and intertwined, with the WorldCom bankruptcy - at the time the largest ever in the U.S. - include the incongruous treatment benefiting a certain group of bankruptcy claims traders. When a different claims trader - who was excluded from the favored treatment (would have only gotten as much as normal creditors) - demanded that his counsel ask the Court to form an investigation of the conflict of interest and favoritism related to the so-called "inter-creditor agreement", as well as further discrepancies in the timing and amounts distributed to creditors - the attorney refused and then introduced "Death Threats" as part of the discussion. A true transcript of the "death threat" discussion was filed in the proceedings, and the very same counsel did not object to any word therein, but rather complained to the Court that "apparently" the conversation had been recorded without his knowledge. If you enjoy the transcript, you might also enjoy the opposition to counsel's motion to be relieved together with its exhibits.

BankruptcyMisconduct doesbelieve that there was considerable crime as part of the WorldCom / MCI bankruptcy proceedings.

How did some claims traders buy so many claims? Why did a unique claims trading process get implemented (invalidating FRBP 3001 protections for creditors) in the bankruptcy case? Why was special treatment given to the claims traders holding the $600 Million in debts? What conflicts existed between associates of the entities holding the $600 Million and the official lawyers in the case? Did the Judge, U.S. Trustee and other lawyers obey their duties under 18USC3057, the New York Lawyer's Code of Professional Responsibility and so forth?

And what did Eliot Spitzer do with the package delivered to him by certified mail? Should we be surprised that Spitzer was doing business with organized crime at the time?

This Document, "Marcia's Petard", was written by Marcia Goldstein partner of WEIL, GOTSHAL & MANGES LLP, the law firm which the criminal enterprise chose to hire as their bankruptcy counsel. We have reproduced Marcia's sworn testimony below and bolded one amazing claim of Ms. Goldstein as to the purpose of the Federal bankruptcy code. Her claim that creditors of equal rank are supposed to receive equal treatment is 100% in agreement with the law. {see Title 11 U.S.C. § 1129(b)}

What we find amazing is that Marcia would bring up the fair treatment of similarly situated creditors in the MCI/Worldcom case when she must know the real world is so different, for some. Surprise of surprises, we find that the modus operandi employed by bankruptcy professionals when "certain" hedge funds and related distressed investors are involved was also a part of the MCI/Worldcom bankruptcy: special treatment was provided for certain clients.

There is a basic bankruptcy industry circle here: The distressed investors who buy large positions on a target prior to a bankruptcy filing have influence over the selection of bankruptcy professionals, who in turn have quid pro quo influence over the timing and amount of distributions to those hedge fund, private equity, bankruptcy industry investors.

Now, this may seem complex and some may think it doesn't affect them. Just remember every time you pay your mortgage or your car loan, a portion of your interest charge goes to reimburse the financial institutions for their losses in these huge corporate bankruptcy cases. Those losses also happen to form some of the fees earned by the bankruptcy professionals and investment profits of the bankruptcy investing hedge funds.