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August 2011

Thank You and update.

To the shareholders who have contributed funds:

We thank you very much.

Some of you were gracious beyond the recommended contribution.

We are grateful for that.

 

To all our shareholders in the path of Hurricane Irene on the eastern seaboard and the US Virgin Islands:

We hope you are safe and well and have weathered

the storm with minimal impact.

 

The court date for the jurisdiction appeal will be November 16th. We asked for two hours (maximum court time) and received it. In actuality between rebuttal and questions from the judges it is likely to be an all day event.

 

 

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What is a Fraudulent Conveyance?

What is a Fraudulent Conveyance and what does it mean to Birch Mountain Shareholders?

That question is best answered by Mr. Howard Gorman in his white paper on Bankruptcy and Insolvency published on his bio page on the MacLeod Dixon website:  http://www.macleoddixon.com/ourlawyers/gormanh.htm

Information on fraudulent conveyances start on page 33. The following excerpt is from page 35:

"The fraudulent conveyance provisions in the FPA and the transfer for undervalue provisions of the BIA (except for non-arm's length transfers made within one year of the date of bankruptcy) essentially require the Trustee or  complaining creditor to establish an intention to prejudice other creditors or, conversely, an absence of good faith and no  bona fides consideration. In reviewing such cases, courts generally refer to the existence of “badges of fraud” in  determining whether an attack on an impudent transaction can prevail. Such badges of fraud typically consider the  relationship between the parties, the severity of existing or impending financial difficulties, the reasonableness of  purported consideration, any secrecywith respect to the transaction, etc." (highlights added for emphasis) Source: http://www.macleoddixon.com/documents/Recovery__Insolvency__Bankruptcy_and_Arrangements_in_Canada__March_2011_.pdf

What does "secrecy with respect to the transaction" mean?

Essentially, it describes a transaction that is not known to others or the bankcruptcy/receivership court. We've been looking for disclosure of the Pattison Option Agreement in the PWC receivership filings and court documents and cannot find any evidence of that disclosure.

So, we have to ask. Was the receivership court aware of the private agreement between a director of Brookfield and Brookfield?

IF a "secrecy" issue is reviewed by the courts, what does Mr. Gorman have to say about how the courts might remedy the situation?

Also on page 35:

"When a fraudulent conveyance application is successful, judgment is awarded as against the debtor and the recipient  of the transfer compelling the return of the property and/or monetary judgment in an amount equal to the value of the  property so that the Trustee and remaining creditors are put in the same position as if the impugned conveyance had not occurred. Similarly, where the Trustee establishes a transfer at undervalue, the court may declare that the transaction is void as against the Trustee, and may grant judgment for the difference between the actual consideration received and  the fair market value of the property." (highlighted emphasis added)


Disclosure - just wondering.

What could have precipitated the need for Brookfield Asset Management to update their "disclosure" policy from a couple of paragraphs in their conduct guidelines to a full blown 24 page "Disclosure Policy" manual?

Is it possible that their CEO and largest BAM shareholder became aware that the company may have directors who have not followed disclosure laws?

Is it possible that a director had not properly complied with disclosure requirements? 

Was BAM’s CEO aware of the internal agreement between BAM's wholly owned privately held company and their own director?  Did he sanction it?

 

 

 


Evaluating a Risk?

For an example:

Why does Brookfield keep putting out press releases announcing their enormous cash flow?

Could it be it is the only thing that supports their BBB rating from Fitch?

    "The rating affirmation is supported by solid cash flow generation . . ."

 

See Wiki link for more information on credit risk: http://en.wikipedia.org/wiki/Credit_rating

If a rating were to drop to the "speculative" level, say a BBB-, would it be eligible for institutional investment, say teacher pension funds, etc?


What do shareholders deserve?

What do shareholders deserve?

        Resolution.

 What is resolution?

        Fair treatment.

Would a normal course issuer bid have been fair to shareholders?

Would it have been more fair if the $1.7 billion dollar asset had been evaluated by a third party, shopped around, and bids presented to the receivership court for full evidence?

Wouldn’t it have been fair if shareholders had received fair value for their shares?