ABA Section of International Law, Fall Conference 2017
Sophia Rolle-Kaposouzoglou presented on:
“Use of the U.S. Bankruptcy Code to Support Investigations of Corporate Fraud (Business Law) Foreign creditors”, especially banks and financial institutions, can benefit from proceedings under Chapter 15 of the U.S. Bankruptcy Code, which provides an “exclusive door” to the U.S. court system for the foreign representative of a non-U.S. bankruptcy estate. In situations where a non-U.S. insolvency involves or has been caused by fraud, including by a corporation’s senior management or by its controlling shareholders, bankruptcy judges in the U.S. have given trustees fairly wide discretion to conduct discovery and seek assets in the U.S. They have done so in some instances by recognizing the validity of non-U.S. veil piercing orders, which can extend corporate liability to third parties when the estate can demonstrate an intent to defraud creditors. This presentation explained how Chapter 15 of the U.S. Bankruptcy Code can be a powerful tool in the investigation of fraud, and gives trustees and creditors the authority to obtain critical evidence for use in non-U.S. proceedings, claw back misappropriated funds, and secure assets for distribution to corporate stakeholders left holding the bag after corporate fraud that results in insolvency.
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