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Monitor's Ch. 7 Estate Seeks $6M In Slew Of Clawback Suits

August 4, 2014 | By Matt Chiappardi | law360.com

The Chapter 7 trustee for the bankruptcy estate of once-powerful consulting firm Monitor Co. Group LP launched dozens of so-called avoidance actions in Delaware on Monday, looking to claw back a total of more than $6 million in alleged preferential transfers.

In roughly 130 filings that trickled into Delaware bankruptcy court Monday and most of Friday, trustee Alfred T. Giuliano sought to recover alleged preferential payments made during the 90-day period before the consulting firm filed for Chapter 11 protection in November 2012.

Monitor had its case converted to a Chapter 7 proceeding in August 2013, seven months after it was bought by rival Deloitte Consulting LLP for $116 million, according to court records. The amount of money being sought tops $6 million, with the lawsuits looking to recover sums from anywhere as little $5,000 to as much as $1 million.

One of the largest is a $1.1 million suit lodged against an entity called Research2video. Other large actions include $850,000 sought from Dunhill Asset Services III LLC, $574,000 from Wells Fargo Bank NA unit Flatiron Capital and $298,000 from Grail Research, according to court records.

The clawback suits indicate that Giuliano sent demand letters to the targets in late February seeking return of the relevant transfers.

"As of the date hereof, the defendant has failed and refused to return the transfers to the debtor estates," the bulk of the suits state. "The trustee is entitled to an order and judgment against defendant under [the Bankruptcy Code] together with the award of pre- and post-judgment interest."

Monitor's creditors committee had launched a clawback suit of its own in May 2013, looking to recover $2.1 million in rent payments the consulting firm had made to its landlords Two Canal Park LLC and Mid-West Portfolio Corp. in the 90-day run-up to the bankruptcy case.

The committee had argued Monitor was insolvent and "experiencing significant cash flow problems" when the payments were made, and the landlords received more than they would have under the Bankruptcy Code, according to court records.

The case was settled for $350,000 in June 2014, court records state.

Citing an industrywide downturn and the poor global economy, Boston-based Monitor filed for court protection listing $200 million in debt, with a deal in hand to sell itself to U.K. firm Deloitte for $116.2 million.

The court approved the sale in January 2013, but preference actions were a major point of contention. The committee contended that the deal included improper protections from clawback litigation for Monitor insiders.

U.S. Bankruptcy Judge Christopher S. Sontchi ultimately sided with Monitor, finding that the releases shielding its partners from potentially $16 million in clawback claims were critical to convincing the partners to stick together and move to Deloitte.

The deal included $9 million in avoidance claims covering payments to Monitor insiders in the year prior to its filing, along with claims to recover some $7 million in salary and bonuses from the top earners at the firm that Deloitte agreed not to pursue.

Attorneys for the Chapter 7 trustee did not immediately respond to a request for comment Monday.

Founded in 1983, Monitor employed about 1,200 people in 17 countries and had around 100 active partners when it entered Chapter 11.

The trustee is represented by Eric A. Browndorf, Mark A. Fiore and Erin K. Brignola of Cooper Levenson PA.

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