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'Bad Boy' Guaranties: Does the Punishment Fit the Crime?
At one time in the not-too-distant past, “bad boy” guaranties provided additional protection to lenders in the event of serious malfeasance by borrowers or guarantors, such as fraud or misappropriation of funds. But with the explosive growth of non-recourse finance transactions in the past decade, particularly in the real estate area, lenders began to expand the scope of those guaranties to include as “bad acts,” among other actions, voluntary bankruptcy filings by borrowers. Once the economy soured, therefore, distressed borrowers and guarantors found themselves with a dilemma: forego using bankruptcy to effect an orderly restructuring or reorganization of borrower indebtedness or find yourself liable for hundreds of millions of dollars of formerly non-recourse debt. This sounds like a quandary that would make even a bad boy cry.
Not surprisingly, these previously non-contentious guaranties have emerged as a fertile source of conflict between lenders and borrowers and have become the subject of several judicial challenges. Here, we discuss two recent New York decisions: UBS Commercial Mortg. Trust 2007-FL1 v. Garrison Special Opportunities Fund L.P., No. 652412/10, 2011 N.Y. Misc. LEXIS 4490 (N.Y. Sup. Ct. March 8, 2011) and Bank of Am. v. Lightstone Holdings, LLC, No. 601853/09, 2011 N.Y. Misc. LEXIS 4412 (N.Y. Sup. Ct. July 14, 2011), both of which enforce the “bad boy” guaranties at issue.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
The DOJ's New Parameters for Evaluating Corporate Compliance Programs
The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.
Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.