Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Daniel Gill
Curtis “50 Cent” Jackson III has filed a court complaint alleging his business advisers failed to give him good advice in his bankruptcy case, costing him more than $290,000 ( Jackson v. CSO Business Management LLC et al. , Bankr. D. Conn., AP 17-02068, Complaint 9/12/17 ).
The Sept. 12 complaint alleges that California firm GSO Business Management LLC and several individually named professionals were negligent and breached their fiduciary duty by failing to give the rapper, actor and entrepreneur good tax advice related to his bankruptcy filing.
The complaint filed in the U.S. Bankruptcy Court for the District of Connecticut also alleges the firm caused itself to be paid $90,000 without proper approval by the bankruptcy court.
One defendant named in the complaint is Jonathan Schwartz, who was convicted and sentenced to prison this year for stealing $4.8 million from singer Alanis Morissette while working as her business manager. He publicly confessed and apologized for embezzling millions from clients to finance gambling and drug addictions.
Jackson’s complaint seeks an accounting to determine if any of his money was stolen.
Jackson filed for Chapter 11 on July 13, 2015. Chapter 11 protects companies or individuals from creditors while they seek to reorganize their debt or liquidate pursuant to a plan which must be approved by the court.
According to the complaint, GSO and its professionals breached their fiduciary duties to Jackson and were negligent when they failed to advise him to make an election under the Internal Revenue Code to bifurcate tax year 2015 to a short year for pre-bankruptcy liability and one for the post-bankruptcy filing debtor.
Because he failed to make that election, the complaint alleges, he lost the ability to take advantage of net operating losses and wound up with an excess $200,000 tax obligation he might have otherwise avoided.
The complaint also alleges that the firm paid itself $90,000 from Jackson’s accounts for services rendered during the bankruptcy case. Under the Bankruptcy Codes, professionals must be approved to be employed by the bankruptcy estate and must get approval of their fees from the court.
GSO didn’t respond to a request for comment Sept. 14.
To contact the reporter on this story: Daniel Gill in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
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