Since my January post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), has objected to the proposed plan and disclosure statement by his largest unsecured creditors Sleek Audio, LLC, Suntrust Bank and Lastonia Leviston (the “Proponents”) on the basis that it would subject to a “near indefinite period of involuntary indentured servitude during which he will be required to work solely for the benefit of creditors” and provides “little, if any, of the information necessary for creditors to make an informed decision regarding the Plan.” However, at a hearing before the Bankruptcy Court last week, the Proponents and the Debtor’s counsel announced that they hope to have a consensual disclosure statement and plan filed prior to March 17th.
Despite representations that the Proponents and Jackson may come to an agreement, the Court and the U.S. Trustee’s office are concerned about allegations by the Proponents of lack of transparency and non-disclosure by Jackson. Jackson made several social media posts after his bankruptcy filing which suggest he has retained material amounts of cash while at the same claiming an ongoing inability to satisfy the claims of creditors. These posts were brought to the attention of the Court by the Proponents, as outlined in a recent article by the Palm Beach Post.
Jackson’s counsel has attempted to downplay his social media posts as mere efforts to maintain his brand and image, but neither the Court or the U.S. Trustee’s office are satisfied by counsel’s explanation. The Court stated that there is a purpose in the bankruptcy process being transparent and part of that purpose is to inspire confidence that it is process where “an honest but unfortunate debtor can come into court and seek relief either through getting a fresh start and a discharge or through having a breathing spell in order to reorganize his affairs and when that process becomes public, the need for transparency is even higher.” Accordingly, the Court has ordered that Jackson appear before the Court to answer for his media posts and allegations of non-disclosure.
The U.S. Trustee’s office has also filed a motion for appointment of an examiner (“Examiner Motion”) on the basis that Jackson’s social media posts directly conflict with disclosures made in his court filings. Specifically, the U.S. Trustee’s office stated in its Examiner Motion that Jackson’s social media posts “whether true or not – are, at a minimum, openly contemptuous of the Bankruptcy Code and process and, if true, are potential evidence of serious misconduct.” If an examiner is appointed, he will be charged with conducting an investigation of the Debtor’s assets, post-petition income and post-petition expenses including identification of post-petition income from all sources, use of that income, accounting accuracy in court filings and whether the Debtor is fulfilling his fiduciary duties as a debtor-in-possession. The Court has scheduled a hearing on the Examiner Motion for March 9, 2016.
Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or firstname.lastname@example.org.