In a decision impacting millions of dollars and hundreds of people in Lubbock, San Antonio and elsewhere, Delaware bankruptcy Judge Laurie Selber Silverstein transferred the Collins Asset Group bankruptcy to Texas.
The case is directly related to both Ferrum Capital in Lubbock and the criminal charges currently pending against Lubbock businessmen Joshua Allen and Michael Cox.
Victims of Ferrum won’t have to consider traveling to Delaware in efforts to recover money from Collins – a financial relationship we’ll explain in the next few paragraphs. They’ll instead travel to San Antonio if their testimony is needed in court.
“They were pleased,” said San Antonio attorney Randal Pullman who represents more than 70 plaintiffs against Ferrum Capital.
In this article:
- How Collins connects to Ferrum Capital in Lubbock and the criminal charges against Allen and Cox.
- Why the judge transferred the Collins bankruptcy to Texas.
- What this means for Ferrum victims.
Quick recap of the criminal case
Allen, Cox and their San Antonio business affiliate, Brooklynn Chandler Willy, are under a July 2 federal indictment for conspiracy and wire fraud. The indictment stops short of using the term “Ponzi scheme,” but official statements including a press release from the IRS accuse them of a Ponzi scheme.
The ongoing indictment said investors put up roughly $67 million. (Ongoing lawsuits have listed even higher dollar amounts.)
“Allen, Cox, Willy, and others affiliated with them collectively made millions of dollars while most of the investors lost some or all of their investment,” the indictment said.
Allen and Cox face a September 15 trial date or a September 5 deadline to make a plea deal. Willy – at last check – didn’t have a trial date yet on the newest indictment. She faces two separate indictments.
All three have been allowed to post bond and remain free while the criminal charges are pending.
How this ties to Lubbock
Collins owed $47 million to Ferrum, according to its bankruptcy filing in early June. But the same bankruptcy case said there will likely be no assets to pay back unsecured creditors.
The Collins bankruptcy (with a similar one by Collins’ parent company Hollins Holdings) was filed in Delaware even though Collins’ primary place of business was Austin.
At the same time, Collins’ partner company, Oliphant, moved one of the Ferrum lawsuits from state court to bankruptcy court – a legal maneuver we described here.
Three attorneys who spoke to LubbockLights.com agreed if the lawsuit continued in front of a San Antonio bankruptcy judge, Oliphant would likely try to move all the different lawsuits to Delaware.
The extra travel expense would have been hard on people who already lost their retirement savings – most of them in Texas. So, they fought to get the Delaware case moved to San Antonio. They’re also fighting to get the lawsuit moved back into state court.
Ferrum Capital coverage
Cancel the road trip to Delaware
Pulman filed a request to bring the Collins bankruptcy to Texas instead of Delaware.
Pulman quoted a lawyer for Oliphant during a previous hearing on this issue as saying, “The train was being driven by lawyers for disgruntled investors.”
Pulman argued Ferrum victims were never told about the true risk.
“That’s the point. This was a fraud built on a fraud built on a fraud,” Pulman said.
But he added a practical consideration.
“Everything happened in Texas. Nothing happened in Delaware,” Pulman said to LubbockLights.com on Tuesday.
The Delaware judge agreed. Silverstein considered:
- Proximity of the debtor to the court
- Proximity of creditors
- Proximity of witnesses
- Location of the assets
- Administration of the bankruptcy estate
Silverstein told the attorneys in making her ruling, “The dispute surrounding Ferrum cannot be underestimated.”
“Ferrum, which is located in Texas – as is the receiver, is scheduled as the largest secured creditor by claim amount. … Both debtors are Delaware entities, but their place of business to the extent they really have one, is in Texas. … None of the witnesses are in Delaware,” she said in court.
“I also note that many of the claims of – and against – the estate are governed by Texas law,” Silverstein added.
There is some question as to whether the bankruptcy trustee, George Miller, would get paid for the work he already did in the case.
Pulman thinks possibly not.
Miller will not continue as trustee now that the case goes back to Texas.
“The next thing will be the appointment of a new Chapter 7 trustee,” Pulman said.
