Judge strikes down motion in A&M bankruptcy; case will proceed through courts
A bankruptcy judge ruled that “a predictable bankruptcy system” is favorable over an alternative plan presented by the local Plain Community to deal with the A&M Investments bankruptcy.
U. S. Bankruptcy Court Judge Russ Kendig ruled against a dismissal of bankruptcy proceedings that would turn over the assets of A&M owner Monroe Beachy to an ad hoc committee for distribution to creditors.
The A&M trustee committee was formed in August in reaction to Beachy seeking bankruptcy protection. Beachy allegedly went to the courts because of a reported Security Exchange Commission investigation into A&M. Court filings by the U.S. Trustee’s office have stated that Beachy operated A&M as a Ponzi scheme, seeking new investors to cover losses.
The Plain Community is opposed to bankruptcy on spiritual grounds. In testimony before Kendig Jan. 18, A&M committee trustee Wayne Wengerd testified that it is rare for a member of the Amish community to approach the courts, and bankruptcies have been routinely handled, with success, within the community.
Writing in his memorandum, Kendig expressed little faith in the ability of Amish and Mennonite churches to work jointly together. Kendig stated, “there is no such thing as the Amish Church” if the church is to be considered on the same level of inter-connectedness as “the Presbyterian Church (U.S.A.) or the United Methodist Church.” Kendig wrote that to accept the creditors of the Amish and Mennonite faiths as part of a collective community requires “the world’s largest grain of salt.” For the purposes of the case, however, Kendig stated that “the court adopts the committee’s self-references to the Plain Community.”
In his memorandum, Kendig took the argument expressed by bankruptcy trustee Ann Silagy, who was appointed to liquidate and coordinate a pro rata distribution of Beachy’s assets. Silagy, in filings with the court, said that releasing the funds from the protections of the U.S. court system would result in “a run on the courthouse” as creditors filed suit to collect. Such a situation would allow creditors who filed first to possibly recover all of their losses, leaving less for other creditors.
Only through a pro rata, or percentage, distribution handled by the courts and not a committee, would creditors be equally served, Kendig wrote. Kendig further wrote “that at least some” creditors would seek relief outside of the Plain Community’s plan, causing “disorder, uncertainty and unequal distribution of assets.”
Kendig stated that the trustee’s plan was more or less doomed from the start. He ruled it as unconstitutional and outside the provisions of the Religious Freedom Restoration Act of 1993.
Kendig wrote that an offer from the Amish Helping Fund to make a further $1 million available to creditors if the alternative plan is adopted may be illegal.
“More bluntly, we don’t abandon the law of the land any time an alternative claims to be more profitable,” Kendig wrote.
Beachy filed for bankruptcy June 30, 2010. Prior to filing for bankruptcy, Beachy told A&M’s 2,600 creditors that their investments totaled $33 million, when in fact, they stood at less than $18 million.
Kendig’s order allows the bankruptcy to proceed through the court system. No date has been announced when creditors can expect to see their share of the remaining assets.
U. S. Bankruptcy Court Judge Russ Kendig ruled against a dismissal of bankruptcy proceedings that would turn over the assets of A&M owner Monroe Beachy to an ad hoc committee for distribution to creditors.
The A&M trustee committee was formed in August in reaction to Beachy seeking bankruptcy protection. Beachy allegedly went to the courts because of a reported Security Exchange Commission investigation into A&M. Court filings by the U.S. Trustee’s office have stated that Beachy operated A&M as a Ponzi scheme, seeking new investors to cover losses.
The Plain Community is opposed to bankruptcy on spiritual grounds. In testimony before Kendig Jan. 18, A&M committee trustee Wayne Wengerd testified that it is rare for a member of the Amish community to approach the courts, and bankruptcies have been routinely handled, with success, within the community.
Writing in his memorandum, Kendig expressed little faith in the ability of Amish and Mennonite churches to work jointly together. Kendig stated, “there is no such thing as the Amish Church” if the church is to be considered on the same level of inter-connectedness as “the Presbyterian Church (U.S.A.) or the United Methodist Church.” Kendig wrote that to accept the creditors of the Amish and Mennonite faiths as part of a collective community requires “the world’s largest grain of salt.” For the purposes of the case, however, Kendig stated that “the court adopts the committee’s self-references to the Plain Community.”
In his memorandum, Kendig took the argument expressed by bankruptcy trustee Ann Silagy, who was appointed to liquidate and coordinate a pro rata distribution of Beachy’s assets. Silagy, in filings with the court, said that releasing the funds from the protections of the U.S. court system would result in “a run on the courthouse” as creditors filed suit to collect. Such a situation would allow creditors who filed first to possibly recover all of their losses, leaving less for other creditors.
Only through a pro rata, or percentage, distribution handled by the courts and not a committee, would creditors be equally served, Kendig wrote. Kendig further wrote “that at least some” creditors would seek relief outside of the Plain Community’s plan, causing “disorder, uncertainty and unequal distribution of assets.”
Kendig stated that the trustee’s plan was more or less doomed from the start. He ruled it as unconstitutional and outside the provisions of the Religious Freedom Restoration Act of 1993.
Kendig wrote that an offer from the Amish Helping Fund to make a further $1 million available to creditors if the alternative plan is adopted may be illegal.
“More bluntly, we don’t abandon the law of the land any time an alternative claims to be more profitable,” Kendig wrote.
Beachy filed for bankruptcy June 30, 2010. Prior to filing for bankruptcy, Beachy told A&M’s 2,600 creditors that their investments totaled $33 million, when in fact, they stood at less than $18 million.
Kendig’s order allows the bankruptcy to proceed through the court system. No date has been announced when creditors can expect to see their share of the remaining assets.
Published: April 10, 2011
