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Federal judge dismisses Brightpoint fraud suit

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A federal judge has dismissed a lawsuit filed by a London-based hedge fund over a $10 million loan it said Indianapolis-based Brightpoint Inc. fraudulently brokered in anticipation of an acquisition that never materialized.

Sofaer Global Hedge Fund claimed Brightpoint CEO Bob Laikin persuaded the fund to lend $10 million to Hong-Kong based Chinatron Group Holdings Ltd., a company that invested in wireless communications firms. In Sofaer’s complaint, Laikin was described as a founding shareholder and former director of Chinatron.

According to the 2009 lawsuit, Brightpoint had been a Chinatron customer for a decade. The complaint alleged that Chinatron owed the mobile phone distributor $5.4 million from a line of credit extended during a previous business deal, but lacked funds to repay it.

“If Chinatron could not repay its debt to Brightpoint by the end of 2007, Brightpoint would be forced to record it as ‘bad debt’ on its books, which would be subject to scrutiny by Brightpoint’s audit committee, a situation Laikin very much wanted to avoid,” according to Sofaer’s complaint.

The lawsuit also alleges that Laikin had been in discussions with Chinatron throughout 2007 about the possibility of Brightpoint's purchasing Chinatron subsidiary Mobiltron France for $14 million by March 2008. Sofaer loaned Chinatron $10 million, in anticipation of a $12 million repayment due in March 2008 from the proceeds of the Mobiltron deal, which never came together.

Brightpoint asked the court to dismiss the lawsuit, arguing that Sofaer had no legal claim against Brightpoint or Laikin.

Judge Tanya Walton Pratt issued her ruling on Friday, siding with Brightpoint.

“Sofaer simply had to understand that there was some risk that the deal would fall apart,” she wrote. “Apparently, though, Sofaer was blinded by rose-colored glasses,  believing that a deal in its infancy was actually carved in stone.”

Sofaer’s lawsuit alleged that on Dec. 17, 2007, Laikin and the Chinatron CEO held a conference call finalizing details of the loan with Sofaer.

“Laikin told Sofaer on this call that the deal for Brightpoint to purchase Mobiltron France for [$14 million] by the end of March 2008 was ‘as good as a done deal,’ that the deal was ’99.9 [percent] done’ and that Laikin was ‘99.9 [percent] certain’ that the deal would go through,” Sofaer’s complaint read.

Sofaer made the $10 million loan to Chinatron in December 2007, according to the complaint, and Chinatron used the money to repay the $5.4 million it owed Brightpoint.

According to the complaint, subsequent Brightpoint due diligence led the company to offer just $6.25 million for Mobiltron France. Chinatron turned down that offer.

“If a promise was actually in place for a $14 million purchase price, then Chinatron’s counter-offer for $6.25 million for 92.5 percent of Mobiltron France makes virtually no sense, and forcefully demonstrates that the deal was speculative,” Judge Walton Pratt wrote.

In response to the ruling, James Masella III, an attorney with Blank Rome LLP in New York representing Brightpoint and Laikin, said Monday: "We have maintained throughout this litigation that Bob Laikin is a man of his word, and I believe the decision gives Mr. Laikin and Brightpoint complete vindication."

 

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  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

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