City Investing was a holding company with unites engaged in insurance, manufacturing, housing, real estate and community development.Their holdings included Home Insurance Company, Federal Home Life Insurance Company, Rheem Air Conditioners, World Color Press, General Developemnt Corporation, Guerdon Industries, Motel 6, California Savings and Loan, and more. Due to financial problems they were forced to liquidate the company. According to plaintiffs, they continued to control and conceal the fraudulent scheme until GDC's indictment in April 1990. Barber, Mershon, Sawyer, Johnston, Dunwody & Cole, Miami, FL, and Joseph L. Duckstein, Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross, Newark, NJ, for defendants Reubin O'D. Adler, Cole, Schotz, Bernstein, Meisel & Forman, Hackensack, NJ, for defendant First Nat. (Id.) According to plaintiffs, the City Defendants, GDC, the Director Defendants and Cravath knew the City Dividend Prospectus contained misrepresentations. at ¶ 283.) The Prospectus claimed that Fannie Mae's decision to cease purchasing GDC mortgages was due to a periodic change of purchase criteria — rather than admitting that the GDC's non-conforming appraisal methods never met Fannie Mae's standard. at ¶ 284(a).) The Prospectus failed to disclose that since it had not changed its non-conforming appraisal method, the company was forced to sell its mortgages only through fraudulent practices or be excluded from the secondary mortgage market altogether. at ¶ 284(b).) Similarly, the prospectus did not reveal the deceptive practices GDC used to lure prospective purchasers to buy lots and houses and to entice owners to "upgrade" to another lot or house, that 50% of purchasers defaulted within 2 years or that their lots were recycled. at ¶ 284(c).) Plaintiffs allege that the Inside Director Defendants, with the assistance of Cravath and Ormsby, caused GDC's subsequent financial statements to be issued with materially false and misleading statements. at ¶¶ 285, 295.) GDC's 1985, 19 Form 10-Ks failed to provide the information that also had been previously concealed in the City Dividend Prospectus. at ¶¶ 286-93.) According to plaintiffs, each of the City Defendants materially aided GDC's fraud by allowing GDC to use its name in connection with sales presentations and documentations, thereby enhancing GDC's reputation in the public eye. at ¶ 294.) When City sold GDC, City and the Inside Director Defendants earned almost 0 million — 0 million from the sale of 62% of GDC to the public (netting City million and allowing City to place a value of million on the GDC stock it retained for further distribution in 1986), plus 0 million from the City Dividend. at ¶ 296A.) At the same time, the Inside Director Defendants retained control of the GDC board pursuant to the Amended Certificate of Incorporation. Callahan, Callahan, Delany & O'Brien, Voorhees, NJ, for plaintiffs. Dodyk, Cravath, Swaine & Moore, New York City, and Bruce Rosen, Matthew P. According to plaintiffs, each of the Inside Director Defendants is a "controlling person" within the meaning of the 1934 Act because of his position as an officer and/or director. at ¶ 319; see generally chart of inside directors and their positions, supra pp.
Shareholders approved the liquidation plan last Wednesday, defeating a blocking attempt by Tamco Enterprises Inc., City's largest stockholder, with 8.8 percent of the shares.
This is an appeal from a final judgment entered in the United States District Court for the Southern District of New York (Stanton, J.), dismissing on the pleadings a diversity action brought by plaintiff-appellant Am Base Corporation (“Am Base”) against defendants-appellees for indemnification of legal expenses incurred in a tax dispute with the Internal Revenue Service (“IRS”). Ch.2001) (“Delaware Action”), which was dismissed as time barred by Delaware's shorter statute of limitations. Between 19, the Trust distributed over 0 million in cash and assets to the former stockholders of City.
This dispute concerned certain tax liabilities that allegedly were assumed by the predecessor corporation of defendant-appellee City Investing Company Liquidating Trust (the “Trust”). For the reasons that follow, we conclude that Am Base's claims are barred as a matter of law by the doctrine of res judicata. Certain directors and officers of City (“Trustee Defendants”) occupied certain fiduciary positions with both Am Base and the Trust.
Marbury Rainer, Jay Basham, Parker, Hudson, Rainer & Dobbs, Atlanta, GA, and James A. Dreyfuss, Hellring, Lindeman, Goldstein & Siegal, Newark, NJ, for defendant Stanchart Business Credit, Inc. Sparks Jr., Hughes, Hubbard & Reed, Miami, FL, and Norman C. (Id.) Simultaneously, they required GDC to borrow in excess of 0 million and remit it to City as a dividend (the "City Dividend"). 4(f), which sets the territorial limits within which service of process will be effected upon a party, states: [a]ll process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held, and when authorized by statute of the United States or by these rules, beyond the territorial limits of that state.... This rule extends the district court's ability to obtain personal jurisdiction over a defendant beyond the boundaries of the state in which the district court sits by authorizing nationwide service of process by federal statutes or rules.
at ¶ 262), and consequently decided to separate themselves from GDC. at ¶ 267.) According to plaintiffs, the City Defendants, with the assistance of Cravath, conceived a plan to extract over 0 million from GDC and simultaneously appear to separate themselves from GDC, while still retaining control over GDC and ensuring concealment of their participation in the fraudulent scheme. at ¶ 268.) The City Defendants and Cravath arranged for City to sell 62% of GDC stock to the public and retain 38% in City Trust for later distribution.
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