ANALYSIS: When a Criminal Indictment Disrupts Chapter 11

For some Chapter 11 filings, the tumult of what were likely years of liquidity distress, market unreliability, lender anxiety, and failed negotiations doesn’t culminate with the relief that Chapter 11 typically affords. Instead, it also becomes the forum that converts private distress into public enforcement of alleged criminal activity.

The bankruptcy petition creates an environment that neither tolerates nor shields (often decades-worth of) alleged misconduct. This shift makes criminal activity more likely to surface.

Once surfaced, the issue for practitioners is no longer how that conduct arose, but how to navigate all the uncertainty. Here’s what to expect when you’re ...