Restructuring

Contributed by Elisa Lemmer
For most of us, summer is a welcome reprieve from the hustle and bustle of the rest of the year.  Summer affords us the opportunity to host barbeques, swim in the ocean, attend a baseball game or two, and watch a healthy dose of reality TV.  While most of the year-round television shows are on hiatus, many television networks seize the opportunity to showcase “real life” – such as fraudulent transfer actions, chapter 7 bankruptcy filings, and bankruptcy auctions of personal of personal property.  That doesn’t sound like the plots of the reality television shows you watch? In this installment of Reality Bites, we take a look at what’s going on behind the scenes in the (bankrupt) lives of some of the women who appear in various franchises of Bravo’s Real Housewives.
Sour Grapes
One of the most infamous of the Real Housewives is Michaele Salahi.  She, along with her husband, Tareq Salahi, crashed a White House party hosted by President Obama in the “party crash” watched round-the-nation – originally televised by the mainstream news media and later on the now-canceled Real Housewives of D.C.  It seemed that the White House crash was only the icing on the cake of the Salahis’ woes.  Though portrayed as members of D.C.’s elite, the Salahis’ wining and dining days did not last very long.  Their wine company, Oasis Vineyard, Inc., filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Eastern District of Virginia in late 2008.  After the debtor failed to file timely monthly operating reports, the United States Trustee requested that the case be converted to chapter 7.  The sparkly bankruptcy fizzled out last year with an asset sale conducted by Oasis’s chapter 7 trustee.  The assets sold included various relatively mundane items such as tables, chairs and kitchenware, as well as cases of “Oasis Brute Sparkling Wine” which sold for $2.00 each.  Perhaps if the Salahis had personally autographed the bottles the bankruptcy auction would have been more lucrative, but they didn’t and, ultimately, the debtor’s estate received only approximately $116,000 in sales proceeds. Sour grapes, indeed.
Losing Their Shirts?
The Salahis’ vineyard’s financial woes are not the only newsworthy drama currently plaguing the ’wives.  Some members of the Garden State’s Real Housewives of New Jersey also have found their way to the halls of the bankruptcy courts.  Although the recent personal bankruptcy cases of Teresa Guidice and her husband, “Juicy” Joe Guidice, have been the subject of much tabloid fodder, more timid housewife, Jacquelyn Laurita, is also no stranger to the bankruptcy world.  Jacquelyn and her husband Chris are currently defendants in an adversary proceeding pending before Judge Peck in the United States Bankruptcy Court for the Southern District of New York in the chapter 11 case of Signature Apparel Group LLC, a clothing design and manufacturing company founded by Jacquelyn’s husband and brother-in-law.  Although the order confirming the chapter 11 plan of Signature Apparel was entered in June of 2010, the suit against the Laurita family members still continues, and the allegations are juicier than the table flipping and hair pulling drama televised on the show.  The complaint asserts causes of action for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, conversion, fraudulent transfer, and unjust enrichment, among others.  It alleges improper payments made to fund at least $1.9 million in credit card payments for Jacquelyn and other members of her family, as well as private airplane rentals and other travel expenses. The suit also alleges that funds were diverted from the debtor to make payments on at least 11 leased luxury cars. Though filed two years ago, the adversary proceeding is progressing slowly, so we cannot yet know whether the court will find that any of the allegations made against the Lauritas have merit or whether a judgment against the Lauritas will cause them to “lose their shirts.”  Stay tuned.
“Reel” Life
As we are learning by a review of bankruptcy dockets around the country, life on reality television is not always picture perfect.  Ostensibly occasioned by a $7 million judgment obtained by movie studio Hannibal Pictures, Inc. against her, Real Housewife of New York and self-proclaimed socialite Sonja Tremont-Morgan sought chapter 11 protection in 2010 in the United States Bankruptcy Court for the Southern District of New York.  Although many socialites find their personal and financial lives gracing page 6 of the New York Post, Sonja’s “secrets” have been showcased, instead, in a different outlet – Judge Chapman’s bankruptcy docket. From the pleadings and transcripts of hearings before the court, it appears Sonja’s drama-filled life follows her onscreen and off-screen.  She unsuccessfully sued her former counsel for malpractice in connection with the Hannibal litigation and since then, her former counsel is attempting to collect its attorneys’ fees from her.  On another front, Sonja continues to fight for access to property she owns in France that she allegedly won in a divorce settlement with her ex-husband, John A. Morgan (who, incidentally, is rumored to be a descendant of the famous J.P. Morgan and who, according to a court transcript, is approximately 82 years old and still competent – though he did suffer a traumatic brain injury in a car accident).  She even went so far as to file a motion under section 362 of the Bankruptcy Code seeking to “punish” Mr. Morgan unless he provides her with access to the French property.  Sonja is standing her ground.  Meanwhile, keeping its name in the limelight, Hannibal Pictures has filed its own disclosure statement in Sonja’s bankruptcy case in which it discloses, among other things, its views of how exactly Sonja’s assets should be distributed to her creditors.  Like Jacquelyn Laurita’s adversary proceeding, we still don’t know how this particular movie ends, but from the looks of it, it appears that docket watchers will be in for quite a show.
Have a great weekend, and keep watching the dockets for a real dose of “reality” TV.