http://www.law360.com/bankruptcy/articles/254651/wamu-investors-denied-access-to-insider-trading-docs
(Law360).Sargent: "[EC] has plenty of evidence for IT"
(June 29, 2011) -- A Delaware bankruptcy judge on Wednesday denied Washington Mutual Inc. shareholders access to more information in their insider trading probe of four hedge funds related to a settlement at the center of the financial giant's reorganization plan.
Last week, the official committee of equity security holders took depositions from principals at the four hedge funds — Owl Creek Asset Management LP, Appaloosa Management LP, Centerbridge Partners LP and Aurelius Capital Management LP — and argued that those depositions highlighted a need to compel more documents.
The equity security holders contend that the hedge funds used material nonpublic information gleaned from settlement negotiations between the financial giant and JPMorgan Chase & Co. to trade in WMI debt. It intends to use those allegations to mount an opposition to WMI’s reorganization plan.
The hedge funds hold around $2 billion in WMI notes and were instrumental in forging the settlement, which was deemed fair by the court in January and lies at the heart of WMI and its affiliated debtors’ Chapter 11 plan.
“The settlement noteholders did not maintain internal ethical walls between employees involved in the bankruptcy and those that were doing trading,” committee attorney Edgar Sargent of Susman Godfrey LLP said at the hearing.
Among the documents sought by the committee were investment models calculating recoveries in the bankruptcy under different scenarios and internal emails at the hedge funds. The equity security holders also said they needed communications between the debtors and the hedge funds’ attorneys, as the funds maintained that their counsel served a crucial role in filtering material nonpublic information from their view.
Attorneys for the hedge funds countered at the hearing that they had already produced all the information required by the judge’s order permitting the committee’s investigation, and that the request was a mere delay tactic by an out-of-the-money constituency.
U.S. Bankruptcy Judge Mary F. Walrath took counsel at their word that they had produced all the required documents in their possession and said that the investment models and internal communications were not relevant to the insider trading allegations.
“What’s relevant is what information [the hedge funds] had, not how they analyzed it,” the judge said.
Brian S. Rosen of Weil Gotshal & Manges LLP, lead counsel for WMI, said that the company’s only concern was avoiding a delay of its July 13 confirmation hearing, noting that the debtors felt the bankruptcy should have wrapped up last year and delays to this point have cost creditors an estimated $250 million.
Sargent said after the hearing that he did not think the judge’s ruling would hinder the insider trading investigation.
“We think we have plenty of evidence without it,” he said.
Judge Walrath did, however, deal a blow to the hedge funds in granting another low-ranking creditor group — holders of WMI trust-preferred securities — access to the same information that was already produced to the equity committee, arming another potential adversary at the confirmation hearing with information to pursue the insider trading claims.
The global settlement the hedge funds helped forge resolves disputes over the failed bank's assets among WMI; the FDIC, which was appointed as Washington Mutual Bank NA’s receiver after it failed in 2008; and JPMorgan, which bought substantially all of the bank’s assets for nearly $1.9 billion.
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Ahora que el Gurú y su pupilo vengan a decir que el EC es corrupto y que no va a encontrar nada de Insider Trading amen de chorradas varias que me estoy aburriendo...
