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Breaker

As the author of the quoted paragraphs that you start with in this post, I wish to clarify something that your DC friend may not fully appreciate.

Assuming the persons authorizing the sale for old Air America (Progressive Media) are the same as the persons managing new Air America (Piquant, LLC), then those persons have a hopeless conflict of interest. This makes a legal attack on them quite formidable.

As management of the old insolvent company, their fiduciary duty is owed to the creditors of the old Air America. Normally, the duty is discharged by obtaining the relevant facts and making a business judgment. Courts normally defer to the business judgment of management.

But in this case, assuming the new management consists of essentially the same persons as old management, the old management has a disqualifying financial interest. In that case, the old management would have the burden of proving that the sale transaction was objectively fair to the old company and the creditors. That burden is not a slam dunk to meet.

Unless the old management obtained unimpeachable, independent appraisals of value, then a legal attack by creditors would be a serious risk to the new company and its management. Another appraiser may be found who may give an opinion of a higher value. Then Air America would be in the soup. That's is why most of these kinds of transactions are cleansed with a trip through Bankruptcy court.

Finally, I understand that new Air America has committed to pay off Gloria Wise. That brings into question whether the payoff belongs to the other creditors who have been shafted by Air America. If I were representing a shafted creditor, I would bring an action against Piquant, LLC and Gloria Wise.

TC@LeatherPenguin

When everything is said and done, the question I had back in June of '04, when this change of Air Idiot's management occurred, still stands unanswered and probably is at the heart of what looks like a massive fraud case in the making: what assets changed hands?What did Drobny, et. al. sell, as "Progressive," to themselves under a new name, "Piquant," and who decided the valuation of these alleged assets?

MachoNachos

TC,

What assets changed hands? According to the Piquant LLC statement, Air America itself was the asset that Progress Media sold to Piquant LLC.

Who decided the valuation of these alleged assets? Now that IS very much central to this case. In a normal transaction, in which nobody involved is being investigated by the DOI, I would assume nobody even checks on such a thing. However, now that this fraudulent loan has come into question, every lawyer I have spoken with emphasizes the point that in order for this sale of assets to be a legitimate legal cover for Piquant LLC, it must be determined that the assets were sold at a legitimate price, rather than just as a dummy transfer from one entity to another.

Companies have ways of valuing assets which are frankly beyond my powers of understanding, but if this WAS a dummy transfer, smarter folks than I am will surely figure it out.

Breaker

Of course here is a very piquant development in the Air America stink.

http://breakers.typepad.com/leftbeach/2005/08/dan_rather_hire.html

TC@LeatherPenguin

"According to the Piquant LLC statement, Air America itself was the asset that Progress Media sold to Piquant LLC."

And therein lies my problem: at the time, Air America was an untested concept is possession of nothing but angry, unpaid creditors, quickly amassing even more debt (including salary owed their employees, for Pete's sake!). What did Piquant get at the time of the purchase other than possession of those bills? Air Idiot looked like a corpse, business-wise. No sane person familiar with the radio business gave them much of a chance of succeeding when all the free publicity they had received previous to their launch suddenly blew up and they were tossed off the air in Chicago and LA. A station owner in Chicago who they were in talks with to get back on the air there said he was willing to cut a deal as long as they paid upfront; no one trusted them to last long enough to extend any faith or credit in the very concept of Air America. They were untested, damaged goods.

The fraud started the day they swapped the "owners" names; it's just amazing they've lasted this long before it finally caught up to them.

Howard Veit

How about the failure of the buyer to do any due dilligence? This seems very strange, almost as if this was a sham transaction. I've been involved in the purchase of several privately held companies and I had a due dilligence firm ransack the places. And trust me, the sellers had to sign plenty to assure that all debt was accounted for. Doesn't this lack mean more than all the legal goblygook of your lady friend in D.C.?

johnt

I'm not a lawyer but I'm not so sure Piquant is off the hook. If I understand this corectly they purchased the assets but not the liabilities. Ok, so that means the have a direct,tangible benefit in the funding provided by the quesionable investments. They are carrying these funds either in their current accts or capital accts. Interested gov't lawyers as part of a recovery process,may well be able to bring legal action against the new owners,which may be the reason said owners are considering a payback. You benefit from a misuse of gov't grants,you return the money,you might say it's a variation on the unwitting use of stolen goods except in this case the owners knew about it.

Breaker

I will offer a response your pregnant question as to the responsibility of Piquant, LLC and its management for the debts of Gloria Wise, or lack thereof, due the nature of the funds loaned being traced to charitable or public funds.

The facts, of course, are murky so take this a speculation.

Assuming that no one in management of Piquant knew of the nature of the funds, the fact that the source funds to Gloria Wise are donations or received from Govenment sources should not matter - unless there is some New York statute that provides otherwise.

The management of Gloria Wise is exposed to liability for misuse of government funds, however.

The more interesting question - and probably the reason that Piquant is saying that it will restore the funds - is that at least some of the funds may have been stolen by the actions of Evan Cohen using a rubber stamp to forge checks conveying funds from Gloria Wise to Progressive Media.

Anyone receiving stolen property is required to return the property to its rightful owner whether or not the person receiving stolen property pays fair value for the stolen property. Someone advising Piquant may have concluded that the assets purchased from Progressive Media carried the taint of stolen property.

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