The 2nd Circuit Court appeals in New York has issued a stay in the Chrysler bankruptcy proceedings. The Court has agreed to hear arguments on behalf of Indiana Sate Police, Teacher’s Retirement Fund and the Major Moves Construction Fund.
The hearing is set for Friday at noon. State Treasurer Richard Mourdock says the state’s appeal will make the following points.
- The secured creditors, such as the Indiana funds, have been made secondary to unsecured creditors in contravention of longstanding bankruptcy law. The proposed sale gives majority ownership of the company to the government’s preferred unsecured creditors, while secured creditors receive only 29 cents on the dollar.
- The federal government has illegally used TARP funds to leverage this sale because the United States (US) Congress intended TARP funds to solely be used to aid “financial institutions.” If the US Congress wanted TARP funds to be used for the automobile industry, why did they specifically try to craft a separate bailout bill that ultimately failed? Chrysler, LLC is not a “financial institution” and therefore the government’s sale plan is illegal.
- The government’s plan constitutes an illegal “sub rosa” plan and not an arm’s length transaction. Chrysler’s receipt of federal TARP funds has compromised its independence, and Chrysler has become a puppet of the federal government. The proposed sale is an insider transaction that gives 20% ownership to Fiat, an Italian company, which is not investing a single dollar in exchange for their ownership interest.