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Did eToys commit fraud against its shareholders when its corporate officers paid themselves millions of dollars and then filed bankruptcy?

The shareholders say yes and are yelling foul about every one washing their hands of the crime in bankruptcy court while the Wilmington, Delaware U.S. Trustee turns a blind eye to the mouns of evidence given them that the fraud continues in the bankruptcy case with sweetheart deals between the bankruptcy trustee and liquidation companies.

A small group of the shareholders organized to fight back when they learned that the attorney that was supposed be representing the creditors was in bed with the bad guys.

As they investigated eToys, they uncovered layers of fraud within the Delaware Bankruptcy System, where lawyers and bankruptcy trustees conspire with each other to benefit at the expense of the victims; and that justice from the U.S. Trustee is just a word with no meaning.



The Shareholders Revolt

 

In the late 1990s, eToys growth was staggering and investors dumped millions into the on-line retailer giant.

But like so many of the dot.com companies, it was an illusion. In this case, Merrill Lynch cooked the books to make eToys look profitable.

By 2001, eToys, like so many other dot.coms, collapsed. Months before filing bankruptcy, the corporation's officers gave themselves millions of dollars and then quit. An interim chief was appointed to manage the company through its asset liquidation in bankruptcy.

The eToys shareholders have found themselves in the position as other victims of bankruptcy fraud, when they gave the U.S .Trustee in Wilmington, Delaware, the criminal complaint and evidence goes into a black hole and no justice.

"I have been trying to get the FBI and the Dept of Justice to clean up the corruption and I am always sent to a party of authority that places the investigation in a dead end, with no results," said Stephen L. Haas, who is calling for justice in the eToys case. "I alleged possible corruption, failure to perform by the attorney for the bankruptcy trustee Mark Kenney, who has sat idle while these crimes against us all continue to be rampant, blatant and flagrant."

Below is a Wall Street Journal article about the eToys bankruptcy scandal. The victims say the story is from a business publication standpoint and misses the big story, which is hedge fund corruption (big money, power and influence) on the Bankruptcy Court.

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Shareholder's Issues:

eToys bankruptcy trustee, Mark Kenney, hired John Traub, a lawyer from the firm Traub Bonacquist & Fox to be legal counsel for the Kmart Shareholders.

Traub Bonacquist & Fox are involved in an extremely large percentage of all retail bankruptcies over $10 million such as Office Max, Montgomery Wards, Sears Homelife, KB Toys, Standard Living, Brueners, Finova and many more.

The Kmart shareholders received $0 and yet Kmart was able to acquire Sears just a few months after exiting from bankruptcy.

1 - US Trustee Robert DeAngelis replaced by Kelly B Stapleton in Phil Region 3 on Dec (the date of the hearing on the original allegations).

2 - RR Donnelley and Goldman Sachs dissolve themselves of one another on Jan 5th 2005. ($300 million suit of Sachs that RR Donnelley voted on.)

 

3 - The US Trustee has sought sanctions, (due to the responses of Jan 25 2005, in the public record, the Hearing of Feb 1, 2005 where we were permitted to place the attorney's on the stand, the Depo's of Feb 9 2005, where we were permitted by the Court to depose the Attorney's and Barry Gold) where the sanctions were for $1.6 million and $750,000 (the 750 was agreed to by Traub).

4 - The March 1 2005 hearing where James Garrity (former Fed Justice NY, who is of the firm Sherman Sterling and was hired by Traub to negotiate the Trustee settlement) -- where the Court (Her Honor Walrath) rejected approving the settlement, took all matters under advisement and most importantly, when Garrity raised the issue that I could no longer be Pro Se as my claim was by a Corporation, the Court did the depose of Traub, Barry Gold etc, on the Stand, under Oath, on the details of the Payments by Traub's firm to Barry Gold and gave us the terms, in Her Court room discussions, of void "ab initio" and removal of Mark Kenney by USC 324 for "failure to do and continued failure to perform". (the fact that brought light to the legal terms was the way counsel(s) went quite on the subject when the terms were stated.)

Lawrence A. Friedman
Former Chief Administrator
U.S. Trustee Office Washington, D.C.

 

5 -Lawrence Friedman -- the Chief Administrator in Washington DC of the Dept Of Justice US Trustee Office (who had personally corresponded with Haas and assured him that corrective measures would be taken) -- RESIGNED for personal reasons shortly afterwards.

6 - The Judge in the KB case did strike and expunge Haas notes in the public pacer system of the same conflicts ongoing in that case where Paul Traub partner with Barry Gold, who worked at Stage Stores with Michael Glazer (CEO of KB) -- where Traub asked the Court for permission to prosecute the $100 million payment Michael Glazer paid himself and others prior to filing Bankruptcy of KB.

7 - 5 days after Judge Sullivan did strike and expunge my notes to him and the public he was removed from the Case and replaced by His Honor Shapero. ( I feel it was most likely the corny consistent references to the "concern" about the 8000 employees for Christmas.)

8 - The firm of Traub Bonacquist & Fox is now just the firm of Traub as Bonacquist is out of touch and Michael Fox has gone to Olshan & Frome for better business opportunities, where Frome does no Bankruptcy work and TBF was doing mega millions a year in billings.

 

 

 

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