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January 8, 2010
Exclusive: Was The Court Order that Stripped Hundreds of Chrysler Dealership Owners of their Businesses Legal?
Is it all about politics? Does the buck stop at the top? Well if you are James Anderer of Island Jeep in Lindenhurst, New York, it starts at the top and filters its way down from there.
(To hear Jim Anderer speak directly about the case, click here for the Fox Business News report.)
During the summer of 2009, many of us watched helplessly the bailout of GM and Chrysler, the misuse of TARP funds, the sudden new ownership of the UAW to the tune of 60 percent of Chrysler and the sale of the remainder to Fiat, the Canadian government and the U.S. Government with nothing short of astonishment. Many of us could sense the fundamental wrong that was occurring, but the public was kept in the dark regarding the devil in the details – what was being done and who it was being done unto – until it was far too late to stop it.
Who engineered one of the most glaring abuses of power in the history of the United States? That would be both the administration and the team created by the White House that has crafted and supported the deal that sold Chrysler to Fiat and the UAW et al. The administration crafted and hired a team that gave the labor union UAW 60 percent ownership of a business its members were employed at, something unions have been vying for since they were first created in the 1800s (it has been labor’s historical stance that they should be the ones running the show, not the businesses owners). In a deal of highly questionable legality and zero ethics breaking standard business practices, the Union now does. That’s quite the payoff for union support, isn’t it? Talk about a quid pro quo. Then there is the several billion in taxpayer dollars that went to Fiat, an Italian company, to seal the deal. But pay no attention to the man behind the curtain…
Beyond lost billions and the blatant payback to the Union, there were a large number of victims in the actions taken following this unbelievable decision in New York. How could this happen, and specifically, who requested of Judge Gonzalez the Dealer Rejection Order? The short answer is: only one, Old Chrysler.
Wait a moment: Does this mean that a Judge in a Bankruptcy Court, took it upon himself to write an Order that would strip nearly 800 small business owners of their livelihoods, based on the request of one party in the transaction? The party which following the transaction, would no longer exist? You have got to be kidding. Yet that is exactly what the Official records in the case state. Old Chrysler had no reason to reject the dealers because no party involved with the purchase of Chrysler – the UAW, the Canadian Government, the American Government and Fiat – requested it, officially. The Court should have rejected this request to strip 789 Dealerships; it created 789 new unsecured creditor claims, and did absolutely nothing to help Old Chrysler’s estate. Why on earth would Old Chrysler specifically request the destruction of 789 businesses that had been the lifeblood of the company?? Cue the crickets…
The Italians testified quite clearly that it was not needed. Fiat Executive Alfredo Altavilla, in sworn testimony in the Bankruptcy hearings, told the Court the existing dealership agreements, which in some cases had been in place successfully for decades, did not need to be addressed as a condition precedent to the sale closing. He further testified that whether the dealer restructuring happened before or after the sale did not make a “material difference” to Fiat. No restructuring of those agreements was needed for the Fiat purchase of Chrysler to proceed.
Yet the Judge in the case, the Honorable Arthur Gonzalez, United States Bankruptcy Judge for the Federal Court, Southern District of New York, decided the exact opposite. Despite the fact that no party other than the Debtor itself, Old Chrysler, asked for the restructuring of the dealer agreements. No Dealers needed to be stripped of their businesses, but the Court did exactly that.
Why? That’s the $30 billion dollar question, and there is no readily apparent reason that does not involve corruption.
The Bankruptcy Case
Anderer’s Motion Memorandum states they are asking for reconsideration based on the factual testimony of Fiat Executive Alfredo Altavilla, and seeks relief from the Rejection Order which stripped 789 Dealerships violating “business standard judgment,” and not the Sale Order. Because the court found that the rejection of those dealers was required by Fiat, when a Fiat Executive specifically stated the opposite. In reality, as was stated in the original case, no party to the transaction made the rejection of the dealers a condition of the agreement. Only Old Chrysler – the debtor seeking relief – requested it. Anderer and his legal team believe;
“… the Court overlooked longstanding authorities indicating that prepetition obligations to waive protections of the Bankruptcy Code are against public policy and are therefore unenforceable. While the Court’s Rejection Opinion (Id.,406 B.R. at 190) relied upon In re Trans World Airline, Inc.,261 B.R. 103 (Bankr. D. Del 2001) on separate grounds, the Court overlooked that part of the TWA holding which held that “…a debtor may not agree to assume or reject an executory contract until after the bankruptcy case is commenced and the debtor is acting in the capacity of debtor-in-possession.” Id. at 115. Therefore, and as fully discussed in more detail below, based upon the Court’s failure to consider this important aspect of TWA, the Court’s Rejection Order (Stripping the dealerships) should be vacated.”
Anderer’s attorneys, Leo Donofrio and Steve Pidgeon, give further reasoning supporting their Motion, including the Sale Order’s specific language protecting “first lien lenders” without encompassing both secured and unsecured creditors. The Court’s Rejection Order created 789 unsecured creditors to Chrysler's estate, and those creditors were left hanging. The reasoning behind this gross miscarriage of justice was that it had to happen in order for the Sale Order to be approved, when in fact refusing approval of the Rejection Order would not have affected the Sale Order at all. At the time, appropriate and equitable relief was available against the debtor’s estate, and it is Anderer’s contention that it still is.
This miscarriage of justice has had serious repercussions. Let’s be very clear: there is absolutely zero record of any party requesting the Dealer Rejection Order that stripped 789 Businessmen of their legal contracts as a condition of the deal other than Old Chrysler itself. Old Chrysler has offered absolutely no reasonable justification for it.
None. Zero.
It is obvious there was a back room deal. That Order didn’t write itself; it’s not an issue that was likely to be overlooked as just one of the other details of the deal. Old Chrysler got its Bankruptcy – who got the quid pro quo on the other side? It had to be good enough to justify the firestorm this would create. Laws and standard business practices didn’t get broken with this Order by accident or some frivolous whim. Certainly the creation of 789 new unsecured creditors and the destruction of as many as 40,000 jobs, was not undertaken at the sole request of the Debtor? Why did Old Chrysler request this outrage, and why did the Judge sign the Order when none of the buyers wanted it or 789 more unsecured creditors?
The only clues we have lay in looking at who benefited from it. The UAW, the DNC and well over 700 political donors who got sparkling new dealerships out of it most certainly did. Who decided who kept their dealerships, and who lost them? That would be the team the White House put together – and what an immense power rush that must have been! Power to devastate your enemies, and reward your friends… with the stroke of a pen... what a rush! Anderer's charge of cronyism seems more than accurate. That team was under no obligation whatsoever to justify their actions. Indeed, there is no ethical justification possible. No answers are forthcoming from Old Chrysler, or the administration.
Fiat Reaps the Rewards
Just when you think it couldn’t possibly get any uglier…back to Fiat, because the details of their involvement are rarely touched upon.
It has been publically admitted that the Government gave Fiat over $15 billion to help finance the deal. Literally, Fiat paid nothing for Chrysler. According to the Wall Street Journal May 1, 2009, “Fiat will contribute no money to the alliance. It has committed what it says are billions of dollars in technologies and designs for fuel-efficient vehicles.” Now there is a nice deal if you can get it. 20 percent ownership of a huge Auto maker paid for with nothing other than a statement about what you already have. That is like asking for 20 percent ownership of a corner market based on the fact that you already own another little market in another country. In fact, that’s exactly what it is, only writ very large.
Ultimately the Administration has forgiven Fiat and the Italians billions in TARP funded loans. In essence, it’s gifting the Italians billions of TARP dollars, no strings attached. It is also interesting to note according to USAToday, in the Administration’s recent cap on the salaries and bonuses in those companies receiving TARP assistance, the new Chrysler Group EO Sergio Marchionne and other Fiat executives are exempt from those caps. “'I don't stand with those who held out when everybody else is making sacrifices,' the President said when speaking of those unsecured creditors when they balked at the deal which would forgive Chrysler the debt that it owed them. Unsecured American creditors, including the 789 Dealers are just not as important as the billion dollar gifts given the Italians, the UAW, and a large number of political donors.
There you have it: the overall loss to the American taxpayer for the bailout of GM and Chrysler is estimated in the neighborhood of $30 billion and tens of thousands of lost jobs. The White House gave Chrysler to Fiat for free; Fiat Manages Chrysler with their 20 percent stake and the UAW owns 60 percent plus of the remainder. One of the largest American built companies now lay in the firm control of unions deep in the pockets of the DNC and foreigners in an orgy of globalism and wealth re-distribution, all financed by the taxpayers of the United States. Fiat can also choose to expand its holdings in the auto maker by a further 15 percent, though they may be required to pay back some of the original "loan" if they choose to do so.
Isn’t that just a wonderful dish of hope and change?
To top it all off, this was all financed with TARP funds; the program sold to America as being utterly necessary in order to avoid economic Armageddon and the loss of an uncountable number of jobs. It seems accurate to say now, TARP funds were used illegally to benefit members of the Democrat party as payback for their support in the 2008 elections, billions went overseas, a large American Car maker went to the UAW and Italian Fiat, and thousands of newly unemployed workers in Detroit waiting for “free money” to be doled out. Is this what America has come to, where free men and women can have their livelihoods stolen from them by the highest power in the land, for partisan political party benefit?
The abuse of power from the administration, the cronyism and political payoffs that this deal created should be cause for immediate removal from office. Corruption at this level comes with the official seal of the federal government in 2009. National disgrace just doesn’t seem to cover it at this point.
Welcome to the new American Government– where the most corrupt thug wins.
FamilySecurityMatters.org Contributing Editor Dianna Cotter is a married mother of three, and a Golden Key International Honor Society student at American Military University. She can be contacted at: cotter.d.c@gmail.com.
Reader Comments: Submit Your Comment (3) | Sign Up for FSM Updates!
It's not just the Dealership Owners who suffered from the Dictatorship of this Administration. The employee's did as well. Let us not forget those who did business with them, like: Auto part stores, Tool distributors, Specialty Repair shops, Used car dealerships..... The list goes on. This action was deliberate destruction, full circle of the Free Market, Small Business & Self Employed.
posted by: CharlieChatBox
Saturday, January 9, 2010 at 10:17 PM
One must keep hoping that there are some honest attorneys and judges left that will take this over and file a class action suit, including the investors that had to be made whole first, and go all the way to the Supreme Court. Otherwise - we're doomed. Pure and simple.
posted by: Dan
Sunday, January 10, 2010 at 05:42 PM
i note no mention in this article of the inclusion within this lawsuit of a quo warranto action against obama (in dc, as it needs to be)to finally establish his eligibility status.... any comment FSM?? seeing as it looks likely that anderer and donofrio have the law on their side in this case, i suspect obama is rather worried now...
posted by: howdy
Tuesday, January 12, 2010 at 12:00 AM
