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Names of bankruptcy creditors must be public

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    NMU         TEXAS         Secret Courts         May 11, 2000    

Names of bankruptcy creditors must be public

  • A seal keeping the names of creditors secret in a complex bankruptcy case was improper, a federal judge found.

A San Antonio federal court judge ruled on May 2 a list of creditors in a bankruptcy case must be released to the public.

U.S. District Judge Edward Prado ruled that the names of the individuals and entities owed money by bankrupt company InverWorld had been improperly sealed by San Antonio U.S. Bankruptcy Court Judge Leif Clark. Prado’s decision is a victory for the San Antonio Express-News, which had appealed Clark’s decision.

Although district court judges like Prado normally sit as trial courts, they also review appeals from bankruptcy courts.

Prado wrote that “the evidence is inadequate for the task of rebutting a presumption of openness.” He held that any papers subject to a confidentiality order entered by Clark must be made accessible to the public.

According to the Express-News, the case concerns $425 million in debt carried by InverWorld, a San Antonio-based brokerage with a client base comprised principally of Mexican and Mexican-American clients, some of whom were wealthy Mexican nationals concerned that news of their investments and wealth would subject them to danger in Mexico.

Prado held that the concerns of the creditors in this case did not trump the public’s rights of access to information in the bankruptcy courts.

Express-News lawyer Mark Cannan told the newspaper that his client had sought access to the creditor list to ensure accurate reporting of the company’s financial travails. “The investors and creditors showed no adequate reasons for justifying the privacy,” the Express-News quoted him as saying.

The Express-News reported that InverWorld and its subsidiaries are juggling bankruptcy proceedings in the United States, Great Britain and the Cayman Islands, and that cross-jurisdictional work alone by an appointed attorney has already cost the InverWorld estate more than $100,000.

InverWorld is also battling a Securities and Exchange Commission enforcement proceeding, civil lawsuits and a federal criminal investigation, according to the newspaper.

(In re InverWorld; Media Counsel: Mark Cannan, San Antonio)

© 2000 The Reporters Committee for Freedom of the Press

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