This is a tough one for me. I have been in cases where I and my firm worked very hard, obtained great results, but produced little return for creditors. The recent Le-Nature’s settlement with K&L Gates was for big bucks, adding to the $100 million obtained so far. Two problems, however. One, their creditors list is so long that these settlements will produce less than 5 cents on the dollar for creditors. Two, the expenses of collection will also be in the millions.
That is always a rub in these cases. Often the professionals gain significant fees, while an individual creditor gets cents on its claim dollar. But if the professional can’t get paid, they have little incentive to take on these tough cases. Believe me, there are many times when the lawyers get nothing because there is no recovery to pay them from.
On the other hand, the total dollars returned to creditors can be very large. Here, there may be tens of millions of dollars returned to creditors (hopefully more than the professional fees), but any one creditor gets less than 5% of its debt. I think this is still a beneficial result in this situation. Another possible result is that no one would collect, no one would be punished (financially) and there would be no financial penalty for these kinds of financial and business shenanigans.
What do you think?
– Bob Bernstein