Alert from Montgomery McCracken’s Bankruptcy & Corporate Restructuring Practice

May 16, 2012

Bankruptcy Perjury Not Cause for Deportation

On April 16, 2012, the Third Circuit Court of Appeals reversed a Jamaican immigrant’s deportation order even though he pled guilty to making a false statement under penalty of perjury in a chapter 11 bankruptcy case.   The panel concluded in Singh v. Attorney General of the United Sates, No, 11-988, 2012 WL 1255061 (3d Cir. Apr. 16, 2012), that because he never actually possessed funds being held by an informant for the Port Authority of New York and New Jersey in connection with his construction business bankruptcy, he could not be found to be an aggravated felon under 11 U.S.C. section 1101 (a)(43)(M)(i) and be deported.  This statute makes it a deportable aggravated felony if an alien causes an actual loss to a victim in excess of $10,000.

Nigel Singh was a lawful permanent resident in the U.S. since 1975 because he married a U.S. citizen.  He founded a construction company that wound up in bankruptcy in 2005.  At the time, Singh was being investigated for exchanging kickbacks for contract work from the Port Authority.  During a sting operation, while trying to hide $54,000 in revenue from a Port Authority project, unbeknown to Singh, he transferred it to an informant for the Port Authority.  In 2009 he pled guilty to a charge of failing to disclose all of the company assets on its bankruptcy petition in violation of 18 U.S.C. section 152(3).  In addition to a 10 month prison sentence and being directed to make restitution by having the $54,000 turned over to the company’s  bankruptcy estate trustee, the Department of Homeland Security successfully obtained a deportation order based upon Singh’s agreement to pay the $54,000 restitution as causing a loss to the trustee in excess of $10,000, making him an aggravated felon.  The Board of Immigration Appeals agreed and upheld Singh’s deportation.

The Third Circuit disagreed.  The Panel found that Singh never possessed the funds being held by the Port Authority informant when he committed the  offense of failing to disclose them on the company’s bankruptcy petition.  Accordingly, he could not cause an actual loss to the trustee because he had no control over the funds.  Moreover, the Court noted that because the trustee was to receive the funds Singh tried to hide, there was no impact on the bankruptcy.  Since the government failed  to  meet its burden of showing that Singh caused an “actual loss” under the statute, Singh could not be found to be an aggravated felon under the deportation statute.

This case is yet another example of how bankruptcy matters intersect with other areas of the law and how bankruptcy professionals often rely on a multi-disciplinary approach in resolving complex matters affecting the administration of a bankruptcy estate.

Supreme Court Alert

The U.S. Supreme Court recently heard oral arguments on the propriety of depriving a secured creditor  of  the right to credit bid the amount of the debt owed to it in connection with a debtor’s disposition of property securing the debt under a plan of reorganization.  The issue was ripe for Supreme  Court adjudication given the split amongst the Third Circuit in the Philadelphia Newspapers case, upholding the Debtor’s right to sell property under a plan without a credit bid as long as the creditor receives the “indubitable equivalent” of what it is owed under section 1129 of the Bankruptcy Code (i.e. the proceeds of the sale), and the Seventh Circuit, in Radlax Gateway Hotel, LLC, where a similar reorganization plan provision was struck down as not being fair and equitable under Code section 1129.  The Radlax court disagreed and found that preventing a credit bid by a secured creditor deprives a creditor from protecting against undervaluation of its assets and was therefore inconsistent with other  provisions of Code section 1129.  Based upon the questions asked at oral argument, there is a consensus building that the Supreme Court will rule in favor of credit bidding.