Guest Post: Not So Fast: Indiana State Pension Fund Seeks To Block Chrysler 363 Sale, White & Case Retained

Submitted by Tyler Durden of Zero Hedge

White & Case, made famous by its irreverent lawyer Tom Lauria, who led a valiant fight for the non-TARP lender committee until its disbandment after holdout after holdout decided fighting against the US government was not reasonable, has been retained again, this time by Indiana Pension Funds, holders of Chrysler first-lien claims, who are continuing where the non-TARP lenders dropped off.

In several motions with the Chrysler docket earlier, the Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Movers Construction Fund, fiduciaries for “approximately 100,000 civil servants, including police officers, school teachers and their families” have objected to the 363 sale, and demand Judge Gonzalez should block the sale, claiming “the plan is illegal and tramples their rights.

Among other things, the Indiana Pensioners seek to appoint both a trustee and an examiner in the case (an examiner was eventually retained in the Lehman bankruptcy), claiming that the company “has ceded control over their business and their restructuring efforts to the United States Treasury Department” which is using the Chapter 11 process to reward creditors that thegovernment deems politically important.”

Not only that, but lawyers added that “the Treasury Department has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of credit rights.

Whereas before it was easier to scapegoat certain evil, vicious hedge fund managers who could much easier be stripped of their fiduciary obligations and painted for the greedy, disgusting animals they are, Obama and Rattner will have a much more difficult time playing the blame game on this occasion, where the actual impaired party is so much closer to the people for whom it is a fiduciary, in this case, as the filing notes, roughly 100,000 ordinary men, women and children in the state of Indiana.

Lastly, this could significantly derail any plans for a fast and streamlined 363 sale: hopes were high that with the dissolution of the non-TARP committee it would be smooth sailing for Fiat and for the administration to get everything they wanted. With this last minute objection coming completely out of left field, Chrysler and its advisors will be stumped which lever in the media blame game to use now.

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  1. Doc Holiday

    Someone forgot to tell the Hoosiers that Treasury is now in the business of commerce. Be that as it is, Treasury obviously has no Constitutional authority to usurp control in the way it goes about its new interest in doing business, but no one in Congress understood what was going on (with The Emergency Economic Stabilization Act of 2008, aka TARP and abuses of power by Treasury) including super-pro politicians like Lugar and Bayh.

    Meanwhile, the theft continues and the only hope The Hoosiers have is to burn up cash with a legal firm that will do what … prove that Treasury is corrupt and directly linked to lobby groups that are financed by wall street thugs? These people have to suck it up I'm afraid and realize that it would be easier to bring back slavery to America than honesty!

    Re: … "claiming that the company "has ceded control over their business and their restructuring efforts to the United States Treasury Department"

    Re: House Speaker Nancy Pelosi, D-Calif., welcomed a proposal from Treasury Secretary Timothy Geithner to give the Treasury the authority to unwind large, nonbank financial institutions that have become insolvent.

    Pelosi said that the proposal, raised by Geithner in testimony before the House Financial Services Committee on Tuesday, would "help us move forward in a positive way."

    > As many will recall, Paulson's version of The New & Improved Treasury with Unlimiyed Powers and No Accountability, was scratched as a few notes on the back of a matchbook. After scribbling utter bullshit, he then threatened everyone he could find, got down on all fours while begging and even then, as green foam bubbled from his nose and ears — and while everyone had a clear line-of-site to see the horns on his head — no one really understood the ramifications of what might be connected to a few trillion bucks. The other theory is, no one cared, including The Hoosiers that were home planting weeds.

    Now we have a few people that want accountability after the fact, after they were so comfortable being out of the loop? This is what will kill legal case, i.e, time, these people did not file the claim early enough IMHO and as with most cases of abuse, the longer people wait, the less rights they have. TARP and Treasury are moving too fast and the chaos involved in this mess will prevent justice and they damn well know that!

    See: Sen. Richard Lugar (R-Ind.), who favored assisting the auto industry last year, said the discussion of the president’s power over TARP funds is “ongoing.”

    “The debate is continuing to whether that authority is there,” he told

    “Essentially TARP is meant for troubled assets and banks but, as you pointed out, it has been utilized in the auto industry–not by unanimous consent,” Lugar said.

    The Author understands that this is dis-jointed and should care less…

  2. Mark from Michigan

    What a bunch of tripe.

    The “surgical” bankruptcy provisions were’nt a creation of the Obama administration, they’ve been used for years against the little guy – for once, it get gets used against specuvestors and all in the sudden we’ve “turned contract law on it’s ears”.

    This is especially galling since the chief proponents of using a “surgical bankruptcy” are the same blowhards talking about “communism” now.

    Everyone wants to stiff the autoworkers – I don’t understand that, since it was the bankers that have looted our treasury – but hey, why ruin a good diatribe with facts?

  3. bob

    Looking at the chrysler bankruptcy is like a doctor looking up a patients’ ass while trying to diagnose a headache. He might find something, but its probably just shit.

    Look at the “buyout” for answers.

  4. Mark from Michigan

    These guys bought the debt in August for 43 cents on the dollar, and they were offered 29 cents on the dollar.

    Chrysler was in the dumps before August.

    If that isn’t a speculation play, I don’t know what is. This is almost as ridiculous as “Joe the plumber” talking about his “tax increase” – and no doubt financed by the same interests.

  5. Doc Holiday

    Check this feces out on melting assets…>

    FYI: So what's the risk for the proponents of the sale? As Chrysler's own counsel at Jones Day wrote in this 2002 publication:

    [U]nder certain circumstances a debtor may sell all or substantially all of its assets without making the sale part of a plan of reorganization. Where a chapter 11 debtor proposes to sell its assets or business "outside of a plan of reorganization," creditors are entitled to notice of the sale and an opportunity to voice any objections they may have with the court. However, the sale will not be subject to the same creditor disclosure and voting rights attendant to a sale as part of a plan of reorganization. Moreover, the proposed sale will be subject to the less exacting "business judgment" standard of review. For this reason, some courts refuse to approve a proposed sale outside of a plan of reorganization if it appears that the transaction is really a "sub rosa" or "de facto" plan because the terms of the sale will necessarily dictate the provisions of any future plan.

    > That there crud is from here:

    Chrysler Files Bankruptcy – Part II: Testing The Limits Of Section 363 Sales

  6. Russell

    “Obama and Rattner will have a much more difficult time playing the blame game on this occasion”

    Nah. Indiana is a red state.

  7. scattershot

    Hmmm. I read the motion, and then I read the comments – and I am completely shocked by the latter. I have no interest in Chrystler and no interest in any public pension plans. It just seems to me to be a very clear case of existing laws which are backed up by the Fifth Amendment.

    We have ways as a country to override laws when they are deemed to be against the best interests of the population. If Congress wanted to vote money to help prop up Chrystler that would be legal – but the way this sale is going through is so clearly against the existing laws that it is wrong. Breaking that foundation would be a far worse outcome from this crisis than the possible worsening in the depth of the recession that might result from following laws in this case.

  8. Doc Holiday

    Deep feces: Business Judgment Rule in Multi –Debtor Cases:

    Conflicted directors and officers in multi-debtor cases may lose the presumption that business decisions were made in the directors’ or officers’ business judgment because of
    their conflicting interests.

    ii. Relevant Cases: As was noted in a presentation at the ABI’s 9th Annual New York City Bankruptcy Conference, in both the Mirant and Calpine reorganization cases, creditors raised claims that management’s decisions were prejudicial to certain debtors and beneficial to others. . . . In Calpine, the
    Court held in an unreported bench decision,
    that all of the debtors in the Calpine case
    comprised an integrated enterprise. The
    Court determined that so long as a business
    decision of management and the board of
    directors was supported by sound business
    judgment in furtherance of the interests of
    the integrated enterprise, that decision
    should not be second guessed because any individual debtor would be prejudiced by the

    Pirated from: Bankruptcy 2007: Views From the Bench

  9. Doc Holiday

    In no case has the Court considered the merits of the intra-enterprise conspiracy doctrine in depth. Indeed, the concept arose from a far narrower rule. Although the Court has expressed approval of the doctrine on a number of occasions, a finding of intra-enterprise conspiracy was in all but perhaps one instance unnecessary to the result.

    The problem began with United States v. Yellow Cab Co., 332 U.S. 218 (1947). The controlling shareholder of the Checker Cab Manufacturing Corp., Morris Markin, also controlled numerous companies operating taxicabs in four cities. With few exceptions, the operating companies had once been independent and had come under Markin’s control by acquisition or merger. The complaint alleged conspiracies under 1 and 2 of the Sherman Act among Markin, Checker, and five corporations in the operating system. The Court stated that even restraints in a vertically integrated enterprise were not “necessarily” outside of the Sherman Act, observing that an unreasonable restraint

    “may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent. Similarly, any affiliation or integration flowing from an illegal conspiracy cannot insulate the conspirators from the sanctions which Congress has imposed. The corporate interrelationships of the conspirators, in other words, are not determinative of the applicability of the Sherman Act. That statute is aimed at substance rather than form. See Appalachian Coals, Inc. v. United States, 288 U.S. 344, 360 -361, 376-377.

  10. SteadyTim

    I’m suprised that there isn’t more coverage on this story. This court case is of such monumental importance to the meaning of our country; it will show the world whether we are a country of laws, or a country in which the influencial can steal and take anything. If the rights of the Chrysler bondholders aren’t upheld, foreign money will begin to leave the US in earnest. Who would invest in a country that not only does not enforce contract (debt) laws, but is an active party in usurping the rights of the bondholders?

  11. Doc Holiday

    What happened to justice and law in America?

    Remember the good ol days… huh, huh?

    John Quincy Adams rose to speak on February 24. First, he reminded the court that it was a part of the judicial branch, and not part of the executive. Adams introduced correspondence between the Spanish government and the Secretary of State, criticizing President Martin van Buren for his assumption of unconstitutional powers in the case.[9]
    This review of all the proceedings of the Executive I have made with utmost pain, because it was necessary to bring it fully before your Honors, to show that the course of that department had been dictated, throughout, not by justice but by sympathy — and a sympathy the most partial and injust. And this sympathy prevailed to such a degree, among all the persons concerned in this business, as to have perverted their minds with regard to all the most sacred principles of law and right, on which the liberties of the United States are founded; and a course was pursued, from the beginning to the end, which was not only an outrage upon the persons whose lives and liberties were at stake, but hostile to the power and independence of the judiciary itself.[9]

  12. Hugh

    Chrysler, the hedge funds, and the pension funds are all insolvent. The only difference is that Chrysler is officially bankrupt while the others are playing games to avoid as long as possible their own admissions of insolvency. And too perhaps they hope to wheel and deal and get the government to cover this instance of their reckless speculation or perhaps they hope to drag this out as long as possible in order to keep inflated valuations of these and other assets on their books.

    Shorter version: They are all bankrupt but so far only Chrysler has had to admit it.

  13. B. Mull

    My only question: Why the heck does Indiana have 100,000 civil servants? California with 6x the population has only 200,000. If I were them, I’d swallow the loss and try to keep a low profile.

  14. Septly

    B. Mull, what freaking planet do you live on? You didn’t read the article. The “civil servants” include teachers and police officers. I’m from California, and I can assure you that if you include all government workers, including teachers and police officers the state has FAR MORE than 200,000. Try reading carefully next time. As for the pension funds, they have a LEGAL duty to the pension holders to zealously represent their interests. I’m sure the concept of legal obligations and fiduciary duties doesn’t mean much to a flip soul such as yourself, but to others take their responsibilities seriously.

  15. LeeAnne

    Indiana Business Journal“The losses, however, are a sliver [$5.6 million invested] of the overall value of the funds. The police fund holds about $350 million, the road fund $2.5 billion and the teachers’ fund $6.9 billion.”

    IMO more evidence Loria is manufacturing ammunition for the Republican strategy of name calling to win elections. They’d just rather see Republicans in the finance/kleptocracy seat than Democrats.

    Obama’s a socialist naa naa na na

    I prefer Democrats myself. They’re just as bad but not as mean.

  16. LeeAnne

    Re: House Speaker Nancy Pelosi, D-Calif., welcomed a proposal from Treasury Secretary Timothy Geithner to give the Treasury the authority to unwind large, nonbank financial institutions that have become insolvent.Treasury needs this to help them decide who should be insolvent and who should be helped. We can then have too big to fail EVERYTHING. I can’t wait.

  17. joebek

    The US financial and economic crisis will not even begin to be resolved until public employees pension funds are put at serious risk. Why? There is always an option for legislators to make up shortfalls in public pension funding through increased taxation. While politicians usually and naturally desire to raise taxes, they are generally morose about feeling pressure to raise taxes. Politicians are in the business of feeling superb and pressure and accountability are antithetical to superbia.

  18. Mark from Michigan

    The pension funds were put at risk by the pension fund manager – read the pleading, they were interested in a “safe” return, so they bought securities that retailed for less than half of face value, in a company that everyone knew was teetering. This “zealous defense of pensioners” could really backfire on them if people bothered to learn the facts. I’d be a little po’ed if it were MY pension dollars they were gambling with

  19. Dan

    I’m sure that $43 million would not be the entire pension fund for 100,000 people. You will need billions$ for that number of people. This would only be a small portion of their entire fund.

    Didn’t they already agree to this ?


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