Wilshire Bankruptcy Case Will Stay Closed
The federal bankruptcy judge's move clears the way for lawsuits against investment advisory firm Capital Consultants
By Jeff Manning of The Oregonian staff
Friday, February 2, 2001
A federal bankruptcy judge in Delaware on Thursday rejected Wilshire Financial Service Group's request to reopen its bankruptcy case.
The decision clears the way for several high-profile local lawsuits against defunct Portland investment advisory firm Capital Consultants to proceed. Capital Consultants clients, who have lost more than $200 million in failed investments, sued the investment firm, its two top executives as well as Wilshire Financial this fall after the massive losses came to light.
Much of the losses -- about $160 million – stemmed from failed loans that Capital Consultants had extended to the former Wilshire Credit Corp., a Wilshire Financial affiliate.
Wilshire Financial argued that the U.S. Bankruptcy Court had in 1999 already approved the terms of its restructuring. The restructuring included Capital Consultants agreeing to forgive the $160 million it had loaned to Wilshire Credit.
All the parties to the Wilshire Financial restructuring, including Capital Consultants, signed releases agreeing not to sue one another.
"Wilshire Financial is still perfectly free to assert the defense that it is released from liability in (the current) case because of the releases obtained in the bankruptcy proceeding," said Elizabeth Schwartz, a Portland attorney representing Wilshire Financial.