"Appellant Helig-Meyers Company and five of its wholly-owned subsidiaries appeal the decision by the [US] Bankruptcy Court [BC] for the Eastern District of Virginia that debtors were solvent on the date of the alleged preferential transfers to Wachovia Bank, N.A., and others (collectively 'the lenders'), as part of a financial restructuring on May 25, 2000. ... The debtors argue that the [BC] improperly applied the balance sheet test and relied upon an analysis of the creditor's expert on the mistaken belief that sich expert executed a balance sheet test of the debtor's solvency", In Re Helig-Meyers, 328 BR 471, 474 (ED Va., 2005). "The burden is on the trustee to prove the avoidability of a transfer under subsection (b); however, 'the debtor is presumed to have been insolvent on and during the 90 days immediately preceeding the date of the filing", 475. "The definition of insolvency nicely frames the issue. An insolvent debtor's financial condition is such that 'the sum of such entity's debts os greater than all of such entity's property at a fair valuation.' ... The qualification of 'a fair valuation' in the definition often requires that the judge sort through the differing presentations by the parties' valuation experts and to make factual findings. Not surprisingly in this case, the two valuation experts reached vastly different conclusions regarding the value of the debtors' assets. ... As a threshold matter, Judge Tice considered whether, on the date of the transfers, the debtors collectively operated as a going concern or were on their deathbed", my emphasis, 477. "A debtor lies on its deathbed where the debtor is 'in a precarious financial condition' so that 'liquidation was imminent when the petition was filed", 477. "As a going concern, the court applies the balance sheet test to measure the debtors' solvency. The balance sheet method 'contemplates a conversion of assets into cash during a reasonable period of time'," 477.
If HM is right, "the fallout ... could have been avoided", why does HM think the regulators "totally missed it"? Did they? Was the result intended? In reading this I conclude A&M and HM "cleared" reports before release. They both want to protect LEH's board and the counterparties. "Look what happened"! Yes, look! "Forced into bankruptcy", what nonsense. Either ZB, CC and HP did not anticipate what looks like the counterparities $50 billion gain, or they did. Is A&M preparing a smiliar AIG report at this minute? "Orderly unwinding"? Should HM come back, in his next life, he could make a fine offensive lineman, protect that quarterback! What does "cost the economy" mean? Which participants in the economy? "Counterparties ... are all financially exposed". Yes they were. Should they be dragged into federal district court? Well HM, how big are your cojones? Will you make enemies of every other Wall Street house to benefit LEH's unsecured creditors? If not, you should be replaced. I refer again to Switzer, my 18 December post: http://skepticaltexascpa.blogspot.com/2008/12/deprizio-doctrine-and-aig.html.
Look at some expert "advocacy". In about 1971, McKinsey, the big consulting firm, disgraced itself, in my opinion, by writing Pan American's plea for government subsidies. In about 1999, KPMG wrote a report economically "justifying" subsidies for a Hartford, Connecticut sports stadium. Forensic experts produce junk to attempt to mislead juries into convicting defendants with forensic evidence, my 8 June 2008 post: http://skepticaltexascpa.blogspot.com/2008/06/expert-monopolies.html. No matter how much expertise A&M supposedly has, we don't know why it wrote what it did. No document reveals the circumstances of its preparation, my 7 February 2008 post, link: http://skepticaltexascpa.blogspot.com/2008/02/why-dont-we-learn-from-history.html.
A significant similarity between LEH and AIG is: the derivatives counterparties were protected. HP, ZB and CC seem to have their answer to "Carthago delenda est", i.e., "The counterparties will be protected".
What Judge Tice did at Helig cannot be done for AIG lest someone conclude AIG was insolvent months ago and that liquidation, not going concern valuation was appropriate.