Bankruptcy Watchdog Retires After a Career Policing Failed Firms
(Bloomberg) -- The U.S. Justice Department’s top bankruptcy watchdog will retire this year after a career spent fighting executive bonuses and lawsuit protection for corporate owners, like the billionaire family that owns Purdue Pharma.
Under Clifford White, lawyers for the U.S. Trustee Program routinely opposed some of corporate America’s favorite Chapter 11 perks, including incentive pay for top managers and a legal shield, known as a third-party release, that is often used to protect owners from creditor lawsuits.
White held the top job in the U.S. Trustee’s office for 17 years, serving under four presidents. The program oversees both consumer and corporate bankruptcy cases, appointing court-supervised trustees to liquidate non-operating companies and setting up committees to represent lower-ranking creditors in big, corporate reorganizations.
During his time as director, White improved the quality of the legal work done by the 90 field offices of the program and ensured that the lawyers took consistent positions on how the bankruptcy code should be interpreted, said former bankruptcy judge Kevin Carey, who is now senior counsel for Hogan Lovells law firm.
Enforcing the Rules
While he was a judge, Carey relied on U.S. Trustee lawyers to point out potential conflicts in corporate reorganizations, he said in a telephone interview. Now that he has returned to private practice, Carey said he sees the other side.
“I’ve become directly familiar with some of the frustrations that practitioners may encounter,” he said. “But nothing that I consider to be unfair.”
White didn’t respond to a request for comment for this story.
The program employs government attorneys who are responsible for enforcing the bankruptcy rules. In the biggest reorganizations, where deal-making and compromises are expected, the U.S. Trustee is often the only entity objecting to billion-dollar deals.
In recent years, the office has fought a losing battle against one-day bankruptcy cases, in which a company spends months negotiating a settlement with nearly all creditors, then files a case and asks a judge to bless the deal a day later.
The office had one of its biggest court victories last year under White when it helped convince a federal judge in New York to throw out Purdue Pharma’s reorganization plan. Lawyers for the U.S. Trustee successfully argued that the plan violated the bankruptcy code because it gave Purdue’s owners broad legal protections.
“If not the U.S. Trustee, who would have the time or the ability to complain,” about some of tactics used in corporate bankruptcies, Carey said.
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