Michael Klein is an associate in the Corporate
Restructuring and Bankruptcy practice of Cooley
LLP in New York. Klein’s practice focuses on
litigation and transactional work, including the
representation of debtors, creditors’ committees
in Chapter 11, and secured creditors.
2 Two insiders caused a debtor to repurchase the insiders’ shares
and to repay the loans made by the
insiders, all while the debtor could not
pay its suppliers. In re Le Café Crème,
Ltd., 244 BR 221, (Bankr. S.D.N. Y. 2000).
3 An insider made a “loan” to a debtor that was in actuality just a
cash infusion, as there was no
documentation, maturity date,
payment schedule, or interest paid. In
re Interstate Cigar Co., Inc., 182 B.R. 675
(Bankr. E.D.N. Y. 1995).
4 The president of a debtor bribed a public official, then caused the
debtor to engage in a transaction to
attempt to cover up the bribe. In re
Mid-American Waste Systems, Inc.,
284 BR 53 (Bankr. D. Del. 2002).
Unsecured creditors seeking to
equitably subordinate loans made
by insiders should take careful note
of the Bankruptcy Court’s decision
in In re SGK Ventures, LLC, which
is subject to an appeal pending
before the U.S. District Court for the
Northern District of Illinois. J
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Jeremy Rothstein is a former associate of
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Restructuring & Bankruptcy group.