Where Some of the Heller Money Went

I wanted to point out an article from The Recorder on February 25th entitled “Heller’s Last Laterals Took $7 Million” since several loyal readers have asked what this means for the ex-Hellerites and the bankruptcy process.

As the article states, as shareholders began to exit Heller, they took with them some or all of their capital contributions.  This amounted to approximately $7 million as shown in the bankruptcy filing of February 20, 2009.

What was true during the Brobeck process should hold true for us as well: the banruptcy court will be looking as far back as four years of transactions to look for sources of money to pay creditors if needed.

I’d appreciate any insights some of our bankruptcy experts can shed on this situation.

Over and out,

Heller Drone
Cruise Director

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8 Responses to “Where Some of the Heller Money Went”


  1. 1 Former Heller Staffer 13 March 2009 at 4:42 pm

    That article pointed the finger at several shareholders who cashed out their equity when they retired. The shareholder agreements stated that shareholders who turn 65 could continue to practice at the discretion of the firm, but they would no longer be equity partners. That meant the firm owed them their capital just as it has owed capital to preceding retirees. The article seemed to imply that these retirees had done something untoward, but I disagree. I do think that they should share the pain of the capital accounts, but I don’t think they should be villified for taking action which we all might have done in their shoes.

  2. 2 Observer 15 March 2009 at 2:35 am

    I think there is a Much bigger point here:

    During the 12 months prior to the bankruptcy filing, the firm disbursed over $100 million in shareholder compensation. Payments to insiders (which includes shareholders) may be preferential, and therefore potentially recoverable by the bankrutpcy estate, up to one year before the filing, if the debtor was insolvent at that time.

    As I have noted several times before, it is enormously important whether and when the firm became insolvent. If it never was insolvent (just had its cash tied up), these payments stand. But from whatever point it is determined the firm actually was insolvent, claw back of these payments could begin.

    The firm and the Committee have been inconsistent on insolvency. On the one hand, the schedules, and the January monthly operating statement, show balance sheets that indicate solvency throughout. On the other hand, the Committee particularly (but sometimes also the debtor) has indicated in narrative, without quantitative support, that the firm became insolvent at some point.

    The debtor’s consultants, DSI (who are excellent analysts), are supposed to be analyzing insolvency, among other issues. Whenever they report back, that will be very big news.

  3. 3 P-Owed 20 March 2009 at 9:32 am

    Does anyone know what the size of the bankruptcy estate is right now? Sure there are important issues still to be resolved but I’d like to get a general ballpark figure.

  4. 4 Observer 21 March 2009 at 12:59 am

    Sometime in the next fews days, HD should be posting the Feb. monthly operating report here. That was due to be filed at the court today.

    In the Jan. monthly operating report — which is on here at the bankruptcy tab at 2/20/09 — the firm showed total assets of $119 million and total liabilities of $41 million. I believe the assets are somewhat overstated (as to realizable amounts) and the liabilities somewhat understated (perhaps by as much as $10 million).

  5. 5 Former Heller Associate 21 March 2009 at 2:07 am

    At least one of the recent retirees was not 65 and did not retire because of hitting the “retirement age.” I’m just saying do not assume because they are called retired that they retired under the terms of the shareholder agreement. The article suggested something untoward because there was.

  6. 6 Seattle News 21 March 2009 at 12:53 pm

    I spoke with Craig Collins of Blum Collins yesterday. He says that according to state law involving waiting-time penalities, Washington state ex-Hellerites should put in for double damages on their proof of claim forms. That means that, among other items, any accrued but unpaid vacation and WARN act monies should be doubled. Given the technicalities, Collins will complete the proof of claim form for me. I suggest you contact him with any questions.

  7. 7 Former Associate 21 March 2009 at 3:51 pm

    FHA is right. One of the so-called “retired” shareholders took over as department head of another firm. I’m not sure of the timing of his “retirement,” but he certainly left the firm within the last year (i.e., he may have gone retired more than a year ago, cashed out his equity, but not left the firm until more recently). As Observers says, the insolvency analysis will be critical here.

  8. 8 Anon 22 March 2009 at 9:39 am

    I am a former Brobeck attorney and out of interest I just reviewed the docket in the Brobeck case.

    There was a former Brobeck attorney–named Jeffrey Garfinkle from Brobeck’s San Diego office (I did not know him). He is a bankruptcy attorney and now a partner at Buchalter Nemer.

    He represented himself in the case and filed a number of pleadings related to the employment claims, including non-payment of contributions to his 401(k) plan.

    From the pleadings I read, it seems like he did quite well.


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