SEC, Woodbridge cut bankruptcy deal
New board to help steer alleged Ponzi firm’s reorganization
Federal regulators and the Woodbridge Group of Companies have agreed to a new board of directors to guide the business through bankruptcy court, in a deal that removes a roadblock to a potential recovery for victims of an alleged Ponzi scheme.
The agreement approved Tuesday by a U.S. bankruptcy court judge resolved weeks of legal fighting among the Securities and Exchange Commission, creditors and investors over who would control the real estate development company and usher it through Chapter 11 bankruptcy proceedings. The company is based in Sherman Oaks, Calif., but recruited hundreds of investors in South Florida, saying their money would be used to help fund its real estate business.
Woodbridge filed for protection from its creditors early last December and was later sued by the SEC for allegedly operating a $1.22 billion Ponzi scheme and defrauding about 8,400 investors.
In its lawsuit filed in U.S. District Court in Miami, the SEC alleged company founder Robert Shapiro diverted $21 million for his own use and improperly comingled investor money, using $328 million in new investor money to repay earlier investors. Shapiro, who has been removed from the company, has denied the charges.
The deal does not constitute admission by any party to any of the allegations brought before the court, according to the agreement.
Under terms of the deal approved by U.S. Bankruptcy Judge Kevin Carey in Delaware, a new, three-member board will seek and appoint a new chief executive to run the company, and Shapiro will not have the ability to unseat the new board.
In his order, Carey said the agreement “is in the best interests of the debtors, their estates, their creditors, the committee and all other parties ...”
Last Friday, Lawrence Perkins of SierraConstellation Partners LLC of California resigned as chief restructuring officer. He and his firm had been retained prior to Woodbridge’s bankruptcy filing in early December. Despite his prior experience in helping to restructure a variety of troubled compa-