In a development that you just don’t see very often, the primary investor under one of the two competing chapter 11 reorganization plans in the Hawaiian Airlines chapter 11 case was arrested yesterday in St. Louis for allegedly trying to bribe an undercover FBI agent in a fraudulent scheme to fund the plan.
I guess that means that the other plan is the odd’s on favorite to be confirmed as the winning plan.
At any rate, Paul Boghosian was arrested after he allegedly agreed to pay a half million dollaar bribe to an FBI agent who was posing as a hedge-fund manager in exchange for a $2.5 million loan. Mr. Boghosian was the lead representative of Hawaiian Investment Partners Group LLC, which is the take out financier behind one of the competing plans in the Hawaiian Airlines chapter 11 case.
In addition to the bribe allegation, the government is also alleging that Mr Boghosian made a number of misrepresentations regarding his group’s ability to provide plan funding in his group’s Disclosure Statement filed with the bankruptcy court in connection with its competing plan in November, 2004. Mr. Boghosian was charged in U.S. District Court in Manhattan with conspiracy to commit bankruptcy fraud and two counts of commercial bribery. Each count carries a maximum punishment of five years in prison.
Hawaiian Airlines has been wallowing in chapter 11 since 2003. The other competing plan — one proposed by the airline’s trustee Joshua Gotbaum, Ranch Capital LLC, and the company’s unsecured creditors’ committee — will take place today and tomorrow.
I think it’s safe to say that Mr. Boghosian will not be attending that confirmation hearing.
I often advise clients and lawyers not experienced in reorganization cases that chapter 11 is strong medicine with serious side effects. Although bankruptcy crimes are not often prosecuted, it’s easy to commit such a crime in connection with a reorganization case without even knowing it. Thus, it is a wise move to have reorganization counsel standing by at every step of the process.