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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowTwo affiliates of Indianapolis-based developer HDG Mansur have filed for Chapter 11 bankruptcy protection in an attempt to fend off a $5.8 million court judgment in New York City.
HDG Mansur Investment Services Inc. and HDGM Advisory Services LLC filed to reorganize their assets Wednesday in U.S. Bankruptcy Court in Indianapolis. They list both assets and liabilities of less than $10 million.
The Mansur affiliates managed and provided advisory services to a pair of Cayman Islands-based equity funds that comply with Muslim Sharia law, according to court documents.
The Sharia funds, GPIF Equity Co. Ltd. and GPIF Finance Co. Ltd., sued the HDG Mansur affiliates in federal court in January 2013, accusing them of misappropriating $5.8 million in assets. The judge awarded GPIF the damages in August, rejecting HDG Mansur’s argument that it charged the additional fees to rectify a billing error.
The judge had yet to grant final judgment pending a counterclaim brought by HDG Mansur against GPIF, claiming that the funds owe the local firm more than $20 million in fees.
But, on May 16, the judge awarded the GPIF funds the $5.8 million in addition to $970,707 in interest, prompting the affiliates to file for bankruptcy protection.
“In light of developments that lead this court to conclude that HDG may not be able to satisfy a judgment on the breach-of-contract claim in the absence of an immediate entry of judgment, the court concludes that there is no just reason for delay in entering judgment,” the judge wrote.
A trial on HDG’s counterclaim and remaining issues is set for May 27. HDG late last month attempted to get the trial delayed, divulging in court documents that it's the target of a federal criminal probe.
The HDG affiliates argue in their bankruptcy filing that if the $5.8 million judgment is not stayed, “prospects for a successful plan of reorganization could be threatened.”
HDG also is asking the bankruptcy court to halt GPIF’s lawsuit against company CEO Harold Garrison, who GPIF alleges knew about and helped cover up the $5.8 million payment.
Garrison isn’t named in the Chapter 11 and isn’t protected by the so-called automatic stay.
HDG argues that continuing to prosecute Garrison “poses a direct threat” to its property because any judgment against him “would deplete his assets available to satisfy the claims.”
Moreover, HDG says Garrison is vital to the company’s restructuring efforts as a “potential plan funding source” and a “valuable repository of information and history” who needs to concentrate on the company’s reorganization efforts.”
Earlier this week, another HDG affiliate was ordered to sell Market Tower, one of the city's largest office buildings, after the company defaulted on loans totaling $60 million.
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