OA284: Drain the Swamp, Starring Gordon Hartogensis

Transcript

This transcript was generated automatically and may contain errors — the audio is the record.

[0:00:03] So I hold myself in contempt if you try to pull me up here to court with that attorney. [0:00:19] I'll ask the questions here, carjacker Willie. Objection! I'm going to allow it. It characterizes the defendant as a carjacker. [0:00:30] You didn't kill Thompson, but you did, Mr. Wells. Yes! Yes, I killed Ned Thompson! I killed him! I killed him! I killed him! I killed him! [0:00:45] You're out of order! You're out of order! The whole trial is out of order! They're out of order! [0:00:54] Welcome to Opening Arguments, the podcast that pairs an inquisitive interviewer with a real-life lawyer. This podcast is sponsored by the Law Offices of P. Andrew Torrez, LLC, for entertainment purposes, is not intended as legal advice, and does not form an attorney-client relationship. Don't take legal advice from a podcast.

0:01:18 Thomas: Hello, and welcome to Opening Arguments. This is episode 284. I'm Thomas Smith. That over there is Andrew

[0:01:24] Torrez, Esquire. How are you doing, Andrew? I am fantastic, Thomas. How are you? You doing great? I am very...

0:01:30 Thomas: You, you, uh, teased the heck out of this one last week. I've been waiting with bated breath, uh, yeah, we, we've got a a nice good old-fashioned Opening Arguments deep dive and we've, I, I'm told, even in the preview, which was amazing, good preview, we've even got like the sequel to G. Zachary Terwilliger. You know, like once you take out one supervillain, villain, another one pops up, you know, like the Doc Ock in Spider-Man or whatever, you know, there's always another villain every movie. And uh, how do you, how do you think Doc

[0:02:02] Ock... where it's not a Hydra, right? Like it's not like you cut off one of his arms and two arms. Well, he was the villain in Spider -Man 2, I guess, is what I'm saying. You know, you got the, the first one was uh the Green Goblin or something, the

[0:02:14] green... first was indeed the Green Goblin, nice little green, there's too many, the Green Hornet, there's... there's too many green creatures. I don't know. Anyway, the Jolly Green Giant, one of them. And then the second movie was Doc Ock. I'm just saying, he's the... Well, actually, the second movie, there's like 70 villains. It was a mess. But what's not a mess will be this episode. Let's... are we diving in or are we doing any announcements first? No,

[0:02:39] let's get to it. We are diving in. Here we go. I'm a swamp. Ooh-ooh.

0:02:47 Thomas: Ribbit, ribbit. So, Andrew, I mean, you teased that this was Sears related, it was related to our deep dive that was shockingly five or six weeks ago by now, uh, where do we sit, where do we start with our

[0:02:59] Drain the Swamp, tragedy in three acts. So, act one takes us back to the halcyon days of 1974, right, pants were flared at the bottom,

0:03:12 Andrew: Cars were dangerously unsafe at any speed, uh, and Republicans

[0:03:18] in office were proposing things like ERISA, which is the Employee Retirement Income Security Act of 1974, and um, and what ERISA is, is, again, this is going to seem kind of odd coming out of a Republican administration, at a generally conservative time in our nation's history, it's a set of regulations, right, this used to be like what Republicans did, right. And so the idea was to encourage companies to provide pensions for their employees, and so they came up with Arisa, and Arisa, uh, was not just a set of, you know, crazy liberal government handouts, no, no, no, it was a set of regulations with single-payer insurance, and that, that single payer is an entity called the Pension Benefit Guarantee Corporation. It's basically like a government-run insurance company, right? And as you might imagine, the idea of that was, so you're a smaller company, you don't really know, you want to make sure that you can take care of your employees and provide them with pensions, and so you could buy insurance from PBGC. And I'm way oversimplifying

[0:04:41] here, but basically, the bigger the company, the more money you had in reserves, the lower your premiums would be, right? Because the premium, you know, that the insurance would only kick in if you can't afford to pay your pension obligations, and if you got a lot of money in reserves, then you need less insurance.

[0:04:59] If you have less in reserves, you need more insurance. Totally, yeah, makes, makes total sense. Um, there's only one problem with that system, uh, and that is the companies lie, uh, and so they lied to the PBGC over the course of about three decades, and they lied in order to get lower premiums, pay less in, in, in revenues.

[0:05:25] And, and, and by the way, um, this is, this is really, really important, the the PBGC is not funded with taxpayer payer dollars, um, it does not, otherwise, right, its sources of revenue are the premiums from the insurance policies that it sells to companies, um, investment income on those premiums, right, it doesn't just sit on it, it can then invest it in the stock market, and assets and recoveries from failed plans, right, so in other words, uh, the, the premiums are secured by loans from those entities. So when they fail, they become a secured creditor and they can get assets from a company's bankrupt estate. And in fact, that, that latter part is going to be really,

[0:06:08] really important. Put, the first of many, many pins. This is, this is going to be a Beautiful Mind level set of pins on this week's episode. So that's PBGC, uh, you know, good idea, bipartisan support, uh, encourage companies to provide pensions, provide a an insurance company that is private but, you know, kind of government managed, that is a federally chartered corporation, to use the legal language there, and um, it's working okay, except that companies are cheating the system, they're not paying in enough in premiums, uh, that, that is, that accurately corresponds to their true financial health package, and so PBGC is underfunded. And because of that, we

[0:06:57] then fast forward to 2006, the second term of President George W. Bush. Again, not a likely friend of the show, very conservative president in a very conservative organization, organization, uh, nevertheless, uh,

[0:07:16] got together, and um, the Democrats in Congress, 2006 was a Democratic wave year, right, um, the Democrats in Congress got together and passed the Pension Protection Act of 2006, um, I'm going to include the full analysis of this, I, this is not relevant for today's show, there's a lot of bad stuff in that bill, right, we've talked about this before, um, the way in which legislation used to get done, you know, you reach compromise, so I, I do not mean to defend everything that is in the, the, the, uh, Pension Protection Act of 2006, but for purposes of this discussion, the PPA amended Orissa and required companies that have underfunded their pension plans to pay higher premiums to PBGC, uh, and fixed a couple of other regulations

[0:08:06] designed to get more assets into the PBGC and and and fix that gap, right, so it closed some loopholes, it, uh, you know, provided additional incentives on uh amounts that employers could invest in their own plans, and I, you know, all sorts of complicated stuff, but basically the idea was, hey, look, there's a problem, there's an imbalance in between PBGC assets, uh, and PBGC liabilities, right, so they got together and they fixed it, yay, system works. Um, it's 12 years later, and it's

[0:08:44] still a problem. And here's the magnitude of the problem, this is, I want to say, I mean, I don't know, this is in the top 10 of problems that we're not talking about politically, right, like, um, but but almost nobody is talking about this as as a problem, and it is looming on the near horizon. So PBGC oversees right now nearly a million potential retirees, right, um, and uh, PBGC has 112 billion dollars in assets, right, again, those are the premiums and the return on investments paid to it since the establishment of Orissa in 1974, so that's an awful

[0:09:28] lot of money, 112 billion dollars, um, the problem is that Bbgc's liabilities under its insurance policies are 164 billion dollars, right, so that's a 52 billion dollar shortfall. Now, again, that's actually been getting better, it was worse than that prior to the the 2006 regulations.

[0:09:53] That shortfall is an immediate, immediate crisis, uh, as more and more uh baby boomers are retiring, uh, as more and more companies are, uh, going out of business with, uh, underfunded pension liabilities, thus leaving PBGC holding the back. So PBGC

[0:10:20] protects the pension benefits of more than 40 million Americans who are in private sector pension plans, and they're directly paying one and a half million

[0:10:33] uh, who are in failed pension plans, right, yeah, so super huge problem. Let me make a a side prediction here, and in fact, before I make the prediction, let me tell you, in addition to that 52 billion dollar, the problem with consolidation is that there are a number of PBGC customers that are too big to fail,

[0:11:05] mostly in rust belt industries, that is automotive plants, steel factories, where retirees outnumber employees.

[0:11:18] and, if, if one of the, I mean this is this is from PBGC's own website, if, if one of those plans, huge plans, uh, goes completely insolvent, then that could collapse the entire PBGC infrastructure, right? It would just be left with no, like, right now, even though there's a massive deficit,

[0:11:44] uh, uh, because of, uh, the the high level of assets, they can they can at least scramble and sort of keep it going and retirees are not will will be paid

[0:11:56] out. It's like a good version of a Ponzi scheme. Yeah, exactly, right. Though that that's I was I was struggling with that analogy.

0:12:02 Andrew: But um, but that's right. Like, there they can keep afloat right now by robbing Peter to pay Paul.

[0:12:09] But if all of a sudden— What happens when both Peter and Paul are retiring and the plans aren't— There's no Mary left, right? So, yeah, it's in an unbelievably precarious position. And that's why my belief is that despite Donald Trump, uh, despite Republican Congress, uh, Republican Senate, um, in the very near term there will be a PBGC bailout, right? Congress

[0:12:41] how much do you think I know you mentioned the 52 billion dollar shortfall, but it must be more than that, right? Because that's I mean, in the scheme of things, that's not that much money. You wouldn't think it would be that much money, but um, I mean, Trump's handing out, uh, you know, the incentive

0:12:59 Thomas: For the tariffs, he's just handing out like 12 billion dollars like it's nothing, for for that, you know, like, wouldn't is it is the 52 billion shortfall, I guess what I'm asking is, that not the whole story? Like, is that you know, if there's a worst case scenario, then it's gonna you're gonna need a lot more than that. It

0:13:18 Andrew: Depends on the status of regulations, right? So, yeah, yes, right, like it it right now that's the gap. Uh An infusion will fix that gap, but the gap will can will then start exacerbating on day two. Yeah,

[0:13:37] it's not like permanently fixing it, it's just kind of bandaging it. Exactly, right. Okay, but so, I I think there will be a 50 plus billion dollar bailout of PBGC, so that's that's kind of the end of of act one here, right? That's the state of pension plans in the United States today. Lots of big companies, in particular big industries, that are on a 20, 30, 40, 50 year, uh, sort of downward slide.

[0:14:12] Uh, lots of lots of of of those industries that are insolvent. They rely upon private insurance through a government federally chartered corporation, PBGC, and PBGC has a massive imbalance between its its assets and its liabilities. Opening Arguments is brought to

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[0:16:23] Excuse me, do you know how to get to town? Yeah, it's back the way you came. Now, act two. I would call this one, "Who the Hell is Gordon Hartogensis?" And well, that's gonna be the answer to the skin condition. Yeah, here, let's try to pronounce the drugs that you would use to treat Gordon heart agensis Go

[0:16:47] if you have Gordon heart agensis for more than four hours. Um, so yeah, you might start off with okay, who who runs the PBGC? Um, and and and the answer, up until a month ago, was a guy named W. Thomas Reeder Jr. So the BBGC

0:17:06 Andrew: Serves, the director serves five-year terms, so it's meant to stagger across political appointees. W. Thomas Reeder Jr., no, probably not a big donor

[0:17:19] to the Bernie Sanders campaign, right? Right, yeah, he's got an MBA. If it's like the other, um, you know, like federal

0:17:25 Thomas: Uh, uh, executive branch people that Trump has put into play, it's somebody who, like, hates retirees or something. It'll be somebody like their policy platform is like there shouldn't be pensions, we should just make people into

[0:17:37] soylent green, is that but, but Reader was appointed in 2015, okay, so the next person, yeah, was supposed to run until, uh, October of 2020, so he was an Obama appointee, but again, and not

0:17:50 Andrew: A crazy leftist, right? There's a guy with an MBA and a JD from the University of Texas. He then went to become a big firm lawyer, first with Akin Gump, then with Paul Hastings, Janowski, and Walker. Those

[0:18:02] are Covington and Burling style, right? Huge firms. Everybody knows them. And while he was there, he became an ERISA lawyer. And let me tell you, I have friends who do ERISA law. I would not like, there's literally no amount of money you could pay me to take an Orissa case right now, right? Like, I I just, it is a specialized area of

[0:18:26] the law and I don't have that information. I mean, I'll take some money. I mean, there is an amount that you can pay Thomas's second chance law firm to take it. Um, look, it's hard, right? Like, it's super, super complicated. And that's what he did, and he spent a decade, uh, as an Orissa lawyer, and then went to the government and spent 15 years in the government. Uh, he worked in the Department of the Treasury's Office of Tax Policy, first as an attorney advisor, um, then became a deputy benefits tax counsel, and eventually benefits tax counsel for the Treasury Department. Then he moved to the Senate Finance Committee to work as senior benefits counsel for the Democratic staff in 2009, went back to Treasury in 2013 as as Healthcare Counsel for the Internal Revenue Service, right? So here's a guy who's got good academic credentials and then has spent his entire professional life either doing ERISA law or working with retirees, pensions, benefits, right? It's hard to imagine someone more competent and qualified

[0:19:28] to run the PDGC. Can't wait to meet his replacement. Yeah, and by the way, his term, if you do nothing, he would just be there until October 2020. And even if all you wanted to do was you're worried about, you know, getting some regulations in place, yet you could still wait for him to leave. Trump will still be president, you know, or Pence will be president if Trump is impeached, uh, from till the end of 2020, right? You could sneak somebody in for a couple of months and do some damage if what you wanted to do was, uh, you know, put in some some political regulations in place. You know, let let the guy who's competent manage 112 billion dollars in assets. But no, three and a half weeks ago,

[0:20:12] he was replaced with Gordon Hartogensis, and now going back to the aggressive case of Gordon Hartogensis, yeah, oh, and the hell is Gordon Hartogensis.

0:20:26 Andrew: Um, I described him last week as our mirror universe G Zachary To Williger. Um, he is someone with no Wikipedia page. Um, he is somebody who has no publicly available

[0:20:38] photo on Google image. I found some photos on web md and you don't want to look at the the there are literally only two photos I could find of him online at all, and one is him, like, it's it's this terrible lighting and he's in a tuxedo.

[0:20:56] I mean, it it may well be like his wedding photo. Put a pin in that. Uh, no, I'm serious, that's a real pin, put that in, it will get pulled out in about five minutes. He used to have a Twitter account. It was it was he had it for 10 years, he's had it since 2009, he has not tweeted in 10 years, and he deleted it once Politico pointed out that he that the Twitter account followed

[0:21:21] Justin Bieber, Lindsey Lohan, and Donald Trump, his, his own. Hey, Meet our new director. Page on the PBGC's website is less than half a page long, uh, and we're going to talk about the bullet points. So in other words, he is an international man of mystery. Yeah, now you might be saying, okay, but maybe he's some kind of pension savant, right? Uh, no, um, he's a, uh, he's a computer software guy. Um, he has a BS in computer science from Stanford, by the way, seems to be smart at computer software, an MS in technology management

[0:21:58] from Columbia University. He is described as an entrepreneur. That is a lot of clown horning nonsense. There was, here's, here's what happened. Um, two guys, David Gamboa and Bill Miller, started a company called Petrol Soft in 1989. Um, and as you might imagine from parsing out that language, um, it was designed to be software to gas companies. Our antagonist here, Gordon Hartogensis, joined Petrolsoft in 1993, and he was the sales guy, right? So he was not the idea guy. He was not the development guy. He came in and sold and sold the software to Chevron and a bunch of other big oil companies and made a lot of money. And good for them, right? Like, seriously, like, I don't mean that in any way sarcastically. Like, they, uh, saw that, uh, that, that there was a need for computerized

[0:22:55] software in a major industry, uh, it wasn't there. They built the product, they sold it to a lot of big gas companies, and then they sold the company in 2000 to a giant software company called Aspen Technologies for $60 million, dollars and that, by the way, is when Gordon retired. He's 29, right? We made, he made a couple million dollars by being a part of this software company and retired. In his retirement, he screwed around for a little while, right? He tried to fund another technology company called AURIC, A-U-R-I-C Technology. That company has no webpage, no Wikipedia. I can't find anything. It was a failure, right? Right.

[0:23:41] But, but basically, he's done nothing since retiring in 2000 after the end of the dotcom boom, having, you know, been part of a successful technology startup. Oh, sorry. Two things. He has done two things in the past 20 years. Um, number one, he's administered his family trust, uh, which you have to point, which by which that just means he's managed investments for his, his family, right? Like, that, that literally is not the kind of thing you would put on a resume except when you have nothing to put on a resume for the past 20 years. Yeah, it, it is, I mean, like, don't be fooled when you look into this guy

[0:24:18] and see, oh, okay, yeah, he's administered the family trust of blah blah, which, like, that just means, like, that's just like, you know what you do when you, know, you uh open up, you know, a retirement

[0:24:31] account, right? Like, he's just more hands-on about it. And the other thing he did was married Elaine Chow's sister, so, uh, he's Mitch McConnell's brother-in-law, um, which led, uh, Ian Colgren, reporter for Politico, to write, uh, to do some investigative journalism when this guy was nominated to head the PBGC and figure out who, who Gordo is here. Um, I'm going to link this article in the show notes because, uh, it's one of the only pieces of information out there about Gordon Hartogensis, uh, and it is delightful. It, it includes interviews with

[0:25:10] his family, and, and I'm going to read some of the money quotes. Um, the fact that he's Mitch McConnell's brother-in-law, quote, "may be the reason they're appointing him as a family favor," end of

[0:25:23] quote, conceded George Hard to Gents, as his cousin. "The administration is not known for great people, but, uh, he has a lot of experience in business and he's smart," uh, George added. Quote, "it's like if your family member is a made man in the mafia, I mean, I'm proud of him at all, but they're still a band of criminals." Oh my gosh, wow. Um, so Donald Trump tried his own family. Yeah, yeah, that's his cousin. That's, that's the best they could get. Uh, that's not Nancy Pelosi or something, that's, uh, his family, uh, yeah, that's, that's George, right? This is Gordon, that's his cousin, George. Donald Trump tried to appoint him in, uh, the fall of 2018, but then because the Senate turned over, that, that appointment, uh, was, was required to to be, uh,

[0:26:12] uh, resubmitted in, uh, in, in 2019, but as a result, Heart agensis's confirmation hearing before the Senate Finance Committee was scheduled on the same day as the Kavanaugh hearing, right? So, by the way, that's why we missed it. Um

[0:26:31] and that's why, quote, "most of the committee didn't attend," end of quote, according to Politico, right? That was kind of a bigger thing going on that day. So, so this is the guy in charge of 112 plus billion dollars in assets. Oh, by the way, during his confirmation, uh, heart agensis confirmed that he would not be divesting the assets from himself and from his family trust. So, you know, remember, I remember I told you to put a pin in the wedding photo, that, that would have been why. So, okay, now you have another, uh, swamp creature in charge of 100 plus billion in assets who's probably going to get 50 plus billion dollars in taxpayer-funded bailout money, right, to to redress that probably real soon now, and somebody who has not pledged to do anything to

[0:27:20] avoid conflicts of interest because why would you. Now that moves us to Act Three. Well, what do you say we give Act Three the hard sell, as they do on movies, and take a, take a little break real quick. All right, let's take a break. Opening Arguments is brought to you by Green Chef. Green Chef is a USDA

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0:29:47 Thomas: There you happy, everybody? We took a break. Okay. Yep. So we can do it. All right. We can. We didn't give it the hard sell though. I kind of blew that part. I don't know what to...

[0:30:00] Give it the hard sell now.

0:30:02 Andrew: Here's the hard sell. Go back to episode 273, right? In that, we talked about Eddie Lampert and Steve Mnuchin, who were alleged to have acquired Sears, knowing that it was bankrupt. And then what they did was strip the company of its most valuable assets, looting it before the bankruptcy in order to distribute the proceeds of those assets to the shareholders, who, by the way, were Lampert and Mnuchin, and deprive the creditors of assets in the bank. Bankruptcy. By the way, Lampert and Mnuchin have responded to that complaint, and they deny that

[0:30:39] uh, the, uh, sales were intended to strip Sears of its assets, and, okay, they were in fact, oh, go ahead, no, I was just saying, I'm convinced they did not. Okay, well, that settles that. Yeah, that, but, but it's, what's important is the, the reason that they've done, they've said, "oh, no, we, we were trying to keep the company operating over this time frame.

[0:31:02] That's why we got rid of the only good parts of the company. That's why we got rid of the profitable aspect. Yeah, exactly. It's a hard one to swallow. It's so hard to swallow. As we pointed out, show crushes, Liz Warren and AOC have sent a letter as of May 23rd to Steve Mnuchin demanding information, and as we talked about in prior episodes, look, like that is the predicate to, uh, having the House Finance Committee issue a subpoena, um, that will be coming because Mnuchin is not going to give satisfactory answers here. But there's more to this story. After allegedly looting Sears's assets, the lampert controlled Sears did exactly what we said, which was declared bankruptcy in October of 2018, and in bankruptcy, then the committee for Sears had a choice, right, um, they could either liquidate the assets and come up with an orderly way of of disposing those assets to

[0:32:04] the various creditors of Sears, or they, they could sell them as a package, right? And here we had a dispute between what Sears wanted to do, which was sell The assets as a package. And what the creditors wanted, which was, "Don't try, just liquidate the assets

[0:32:23] and distribute them out." Um, ultimately, after litigation, there was was a hearing, and the bankruptcy judge approved Sears' request to sell the assets to a third party in exchange for just over five billion dollars. You want to guess who Sears sold the assets to? Oh, geez. Uh, one of Gordon heart of genesis's failed companies? Or maybe one of the successful? I don't know. No, they sold it to Transform Holdco LLC, a cryptic name, which was a wholly owned subsidiary of Eddie Lampert's hedge fund, ESL Investments Inc. So, yes, so let let's just bring that full circle. We

[0:33:13] have the allegations that Eddie Lampert, uh, acquired acquired the assets of Kmart in bankruptcy at a bargain price, used Kmart this is from 273 used Kmart to acquire Sears, instead of strengthening Kmart, became the beneficial majority shareholders of Sears, sold off all the goodies from Sears, drove Sears into bankruptcy, and then, while Sears was in bankruptcy, divested themselves of their ownership in Sears, formed

[0:33:45] Transform Holdco and bought back the assets of Sears in bankruptcy for pennies on the dollar. The the few remaining assets that Sears has, uh, were approved by bankruptcy court, uh, for sale to Transform Holdco, uh, a wholly owned subsidiary of ESL Investments, that's Eddie Lampert's hedge fund. So yes, the guy who owned the company took it into bankruptcy and then sold the assets to himself. This should

[0:34:16] be the most most basic kind of financial crime. Now, he stepped down from the board when, okay, well, what, a serious declared bankruptcy? Yeah, no, and that's why all of the creditors, all of the creditors, said, like, "Yeah, don't this is this is ridiculous, right? This is that this this sale is being orchestrated to benefit just one buyer, to make it only possible for one buy don't sell them off in bankruptcy, right, and pay us that way." Because otherwise, uh, these insiders are going to loot all the assets and we're not going to be left with anything. Um, I'm going there was a contested hearing, I'm going to upload the transcript. I want to focus in on an issue, because this issue is going to develop in the next couple of weeks, you will see stories about it, and remember, you heard them first on

[0:35:05] Opening Arguments. So, after the bankruptcy, Sears laid a bunch of people off. This is not surprising. In laying people off, it incurred certain severance and pension obligations. It incurred, as you will see in the transcript, 62 million dollars in claims for severance pay. Now, again, that is in the scope of this, not a lot of money, but those are longtime Sears employees that have pensions who were laid off as a result of the bankruptcy.

[0:35:43] As part of the court-approved asset purchase agreement, this ESL subsidiary, Transform Holdco Company, agreed that it would assume those liabilities.

0:35:56 Andrew: It is section 2.3K of the contract. It is called, capital letters, the Severance Reimbursement Obligations. Those were reduced as consideration, uh, for this ESL entity to buy it, to 43 million dollars. All right, so

[0:36:15] already, uh, pensionees are getting, uh, 75 cents on the dollar, right. But 75 cents on the dollar, I guess, is better than nothing. Um, and as a result, the PBGC, that is, at the time, the Obama-controlled PBGC, signed off on the deal. Now, they had previously objected, right, um,

[0:36:39] they, uh, and I'm going to upload their objection as well, uh, PBGC, we talked about this, has 1.7 billion dollars in claims against Sears, right. That is for, uh, liabilities that PBGC will incur if Sears does not

[0:36:58] pay, uh, its pension fund. But they agreed to the sale, uh, subject to the condition that, among other things, that PBGC assume those severance reimbursement obligations and pay off the people that, uh, were

[0:37:16] laid off during the bankruptcy. And then they also agreed to an unsecured claim against the Sears estate, right, against the the money that comes

[0:37:29] in as a result of selling off the Sears assets. Um, that is part of, uh, what is called a plan of reorganization. It's now on the second amended plan of reorganization, and that's where we are right now. And the way in which that works in a bankruptcy is, um, when you're in Chapter 11, you say, "Hey, look, look, we're going to come up with a plan to come out of the bankruptcy." And part of that plan, in order for the new company to get a fresh start, we need to make the creditors not whole, but to get rid of all the creditors. So we're going to satisfy all of the obligations against the creditors, clear off the books, and that's what the plan of reorganization is meant to do.

[0:38:17] That is the fight that is going on right now. And two days ago, Transform Holdco, LLC, filed a lawsuit, a declaratory judgment, seeking, among other things, a statement

[0:38:36] – this is preemptive – that it does not have to pay the settlement reimbursement obligations because of failure of Sears to turn over certain levels of assets. And then,

[0:38:48] their argument is that that reduces it dollar for dollar. In other words, Eddie Lampert controlled, ESL-controlled entity, Transform Holdco LLC, is now

[0:39:01] saying it reserves the right not to pay the pension obligations of Sears employees who were laid off as a result of the the bankruptcy. Now, put all three of these pieces together, what's going to happen? Um, that Transform Holdco lawsuit names PBGC. The allegations surrounding Sears directly implicate the Secretary of the Treasury, Stephen Mnuchin, uh, the person now in charge of how strongly to litigate the claims

[0:39:48] against Stephen Mnuchin and Eddie Lampert is Gordon Hartogensis. Um, my predictions are as follows. I think Transform Holdco LLC is not going to pay its obligations. I think PBGC is not going to get paid, uh, anything. They're going to get pennies on the dollar at best, uh, out ultimately out of the Sears reorganization.

[0:40:19] I think Lampert and Mnuchin are going to walk away with billions of dollars in assets. And, by the way, PBGC is going to get and that is going to be the trigger for PBGC to get tens of billions, maybe more, in taxpayer-funded bailout dollars. Because they're going to be like, oh, look, we had these unanticipated losses. I'm sorry. You know, Sears went bankrupt, and they didn't fund their pensions enough, and that is now unacceptable liability. You don't want Sears retirees to all go without their pensions, do you? And the person who will be in charge of administering those tens of billions of dollars in bailout funds is somebody with zero knowledge, experience, ability to administer pension

[0:41:16] funds, is going to be a guy who made money in a tech startup and then retired for 20 years before marrying Mitch McConnell's wife's sister. It it

[0:41:29] I cannot I mean, it there is not a drain the swamp analogy, you know, swampy enough to to describe this. Um, it's coming. Incredible. I mean, this is this is like, I

0:41:41 Thomas: How much this just makes me think, how much has been broken in this past few years that we just won't even hear about? Like, there's just so, there's no end to the swamp. I mean, there's so much opportunity for, you know, these are on the smarter end of criminals. These are sophisticated financial criminals to loot the American treasury, essentially. How many opportunities are they getting that we don't even hear about?

0:42:10 Andrew: Yeah, look, we went through this, right? And in episode 273, Lampert's

[0:42:17] scheme here is brilliant. I mean, again, alleged, right? But the allegations are very persuasive to me. I have never – I mean it's part of why – I mean I was certainly gratified to see Elizabeth Warren and Alexandra Ocasio-Cortez seize on the corruption elements. But the reason I wanted to do a deep dive on it is because I had never seen this technique of coming in, buying the distressed shares of a company, and then liquidating the profitable assets to drive it into bankruptcy. Bankruptcy, and I knew, I mean, I, you know, we'd sort of left out there, I gave, you know, that this isn't a a corporate fraud podcast, the second half of that to have successfully driven the company into bankruptcy and

[0:43:07] then be the guys to go back and buy what's left again. Yeah, I mean, it's just, you know, it it you're you were squeezing at both ends. And Ted Cruz, we

0:43:19 Thomas: Don't need to be worried about space pirates, we need to be worried about corporate pirates, like actual can

[0:43:25] We have a corporate force instead of a Space Force, Corporate Frauds Force, because that's so, I mean, it'll pay for itself. So there you go. Look, we have, no, I, I want to be clear on this, we have no evidence right right now that Gordon Hartogensis is a criminal, right? We also have no evidence that he's qualified in any way. Well, no, no, no.

0:43:52 Andrew: We, we have affirmative evidence that he is not qualified for the job, that he's, I mean, he, he has never

[0:43:58] the, the, the executive experience that you need to administer $112 billion in assets to more than one and a half million current pensioners with insurance that covers 41 million retirees in this country. It's just, you know, he doesn't know the industry. He doesn't know ERISA. He doesn't know the law. He doesn't have the executive experience. He doesn't know the insurance industry. I mean, look, it is rare that I say that, right? Like I just talked about how I wouldn't take an ERISA case. I would at least be a significantly better candidate to run the PBGC because I've done insurance work for 15 years, right? And the work I did for Equitas was similar to this, right? Was resolving liabilities so that the balance sheet corrected that imbalance, right? And, and, uh, and I would be grotesquely unqualified for this job, but at least I know one component of it. Um, I do not understand, there, there is no immediate need

[0:45:14] to have replaced Reader as director of this agency. Um, there was none. I mean, there, there was no legitimate need to have done so. Uh, there were no, that, right, this is not

[0:45:28] like, this is not the case. I mean, and then there were, were no political needs for it, right? Like, this is not like, um, putting Mick Milvaney in to head the CFPB. We know why Trump did that, right? Like, he, he did, he did that because politically Trump and his party hate the CFPB, and they wanted to put somebody in who didn't intend to

[0:45:47] prosecute any actions against consumer fraud, right? You, you don't have to assume any kind of, uh, corporate cheating or corrupt intent, uh, because political corrupt intent suffices. Here, there isn't a sufficient political purpose

[0:46:06] here. It's either all a giant coincidence, or it is getting your political lackey in a position to be adverse to your other

[0:46:18] political lackey. And, uh, you know, we're going to continue to follow the lawsuit, we're going to continue to follow this Year's bankruptcy, but, uh, if, and I really, really think that somebody on either the AOC or Warren staffs, or both, uh, listens to the show. Yeah, follow if you

0:46:37 Thomas: Do, please get us an interview. It would be a really good interview. It would be, a it would be, it would help the campaign. Well,

[0:46:43] AOC is not running for anything right now, but, you know, couldn't hurt. She's running every two years, every two years, yeah. She's got, it's true, it's already, gosh, it's gonna come up sooner than she thinks. Come on the show. And, and keep, keep your eyes open, because, uh, I, I believe that, um, the, the reason why sustained professionals at the PBGC signed off on the Sears deal was that they got certain assurances.

0:47:12 Andrew: And I think they got assurances, uh, that, I mean, look, we know from the filing that now

[0:47:18] that it's been approved, uh, that Lampert wants to back away from, he doesn't want to pay the current pensions. Um, if he doesn't want to pay $43 million dollars in current pension liabilities, do you think he wants to pay $1.7 billion dollars in outstanding pension liabilities? That strikes

[0:47:36] me as pretty unlikely. So, we'll, look, this is going to affect real people and, um, and it, it, I think, I think there is a, I think there's a crisis incoming. So, uh, there you go. That's the end of, uh, drain the, the swamp, the, the Gordon Hartogensis

[0:47:55] story. We need people, we need competent people in there. We need Liz Warren to.

0:48:02 Thomas: This is, there's so much, much damage to undo, you know, and maybe we need a CFPB, but for this, for whatever this, you know, if, yeah, that would be nice. Something, I, I mean, wow, there's going to be a lot of damage

[0:48:14] to undo. This is what, with the next time, I mean, this is, I just, I just want to drive it home. If, if, if you're one of the six libertarians for OA listeners out there, um, if, if you are remotely tempted by the, the, you know, fiscally conservative line of let's eliminate regulations, I, I I get that temptation, right? Like, I am a small business owner, a multiple small business owner, an entrepreneur. I work with small businesses and entrepreneurs. I get that temptation. Um, this is the positive side of regulation, right? Arisa is a bipartisan invention that is nearly

0:48:52 Andrew: 50 years old that was designed to do public-private partnerships to reach

[0:48:59] across, you know, not to, to, to, to bring together, uh, you know, Democrats and Republicans to help ensure that old people don't starve and die in the streets, um, and as recently as a Republican a decade ago, there was a bipartisan consensus that, look, some regulations are worth keeping,

[0:49:24] and now we're at a point where that Overton window has shifted so far that I am wistful for the George W. Bush administration.

[0:49:37] But look, this is what regulations do. You need regulations to ensure that you can appropriately have insurance to cover how companies pay out their pensions. Without that, they're just gonna lie to

[0:49:51] you. And we know that because we had the regulations and they lied anyway. Um, so, so there you go. All right. Well, this is frustrating. Do you think there's ever going to be any justice for

0:50:04 Thomas: These people? I mean, are they just going to get away with having looted these assets and not paying the

[0:50:10] retirees and all this, uh? I, I, it's, it's a, it's a really, really good question. I, I think that, uh, the, the, as you pointed out, I think that the, the, the corruption is, uh, so profound that, you know, that, look, I uncovered this, you know, we uncovered this with some research and some court documents and connecting up the dots. Um, if we

0:50:35 Andrew: Can figure this out, then, you know, that then that strongly suggests that we

[0:50:41] didn't find the one act of, of corruption in the Trump administration. Um, and and uh, I, I fear that it is so rampant, and, and there's just so much that, you know, the best that we can hope for is that, you know, a couple of these folks become kind of the signature Paul Manafort, you know, somebody gets caught. But, but I think for everybody who, who, who gets caught,

[0:51:06] um, there will be tens or hundreds, uh, that, uh, that got away with it. Could we do, like,

0:51:13 Thomas: 2020 happens, we win, say, could there be, like, a special council on stuff like that? Could there

[0:51:19] be like a Muller for this, except not Muller, somebody who actually is gonna go as far as we need to go? Sure,

0:51:26 Andrew: Uh, because there are underlying financial crimes, really. Right now, there are no criminal investigations

[0:51:32] open regarding Sears right now. What we've talked about is, uh, behavior that defrauded creditors in a case where the insiders knew the company was bankrupt, out

[0:51:45] of assets of the company, but that the evidence that comes out in those civil suits, and the hard legal legwork that is being done by Covington and Burling style firms, absolutely is something that government investigators could, and you would like to see them pick up on. There are, you know, financial crimes, reporting crimes, failure to disclose, right? Like, like, all of those are, are, you know, what

[0:52:16] what we would call white collar crimes, and, uh, make white collar crime illegal again has been this slogan

0:52:23 Thomas: And I don't know if "again" is proper, but but neither was "Make America Great Again," so it's, it's similarly, make

[0:52:29] White collar crime illegal again. Oh, wow. What a mess. What an impressive job, Andrew, in covering all this. And wow. Vote, everybody. Maybe we can. That's what all we can do. It's all we can do is make sure we vote. There's so much at stake. It's impossible to even keep in your head at once all the reasons that we need to get out there

[0:52:51] and get these people out of office. It really is. But we need to. So, all right. Right, uh, it is time to thank our new patrons over patreon.com/law and, uh, welcome aboard new patrons. Hope you're enjoying it. Hope you enjoy the bonus stuff and all that. And Andrew, why don't you start us off? Yeah, thank

0:53:10 Andrew: You to Travis the c-man can, Kenny Fryar-Ludwig,

[0:53:16] Brian Lehman.

[0:53:20] hippopotomonstrosesquipedalian. Ross Gronau.

0:53:24 Andrew: A, that's just the lowercase letter A. I like that. The minimalist. Earl H Schandelmeier, that is a fantastic, I hope that's a real name, but if that is, a if that's

[0:53:34] A pseudonym, that is a an A-plus pseudonym, on on an on an episode where we've got a lot of

[0:53:46] Earl H Schandelmeier, uh, Wendell Ang, and Is 'don't take legal advice from a podcast' legal advice.

0:53:52 Andrew: Legal advice, no, it is not. So there's no, um, no, no internal contradiction there. Yeah, someone

0:53:58 Thomas: Says, give me some financial advice, and I say don't take financial advice for a podcast, you're not really doing anything with it, that's not going to help you. Uh, Madelyn, thank you, Christopher Lovejoy, thank you to Otto Moses, Claire, Stop calling them 'autistic people.' It's 'people with autism.'

[0:54:18] Tingle Perrywinkle.

[0:54:21] Joakim Årbro? I'm not sure. Sorry, the characters are weird there. I Guess I've Mooched For Enough Mooches and Should Give U Moolah. Oh, thank you. We appreciate it. Yes, they should. Ben Hanten. Otto Moses and Eat The Rich did I stutter.

[0:54:39] All right. There you have it. Okay, now it is time for the thrilling conclusion of TTTBE, which I feel no confidence in. Let's see how I did. Oh, no associate of this firm has ever failed the bar exam. No kidding. All right, Thomas. So this was a criminal law question. This was the great McDonald's drive-thru caper. A woman pulls into the drive-thru, says, hey, I got a sniper with his rifle trained on you, and

0:55:11 Andrew: He's going to shoot you dead if you don't give me the contents of the register by the time I get to the window. And also large

[0:55:17] fries. She better have gotten some food with it, right? Yeah, well, I think that's implied but not stated. Plus, I mean, the black market value of a

0:55:29 Thomas: Crunchwrap Supreme. I mean, it's...

[0:55:32] Are we going to go get Taco Bell together in San Francisco? I'm down for that, by the way. That's why everybody comes to the great, there you go, yeah, right, San Francisco, burrito capital of uh the United States, uh, we're gonna go

0:55:45 Andrew: No, we're gonna hit it, we're gonna hit a nice uh authentic place. Anyway, um, back to the question, so uh, so she pulls up to the drive-thru and the cashier, um, wasn't sure whether anyone was actually there but uh puts five hundred dollars in a paper bag, gives it to her. And then she drives off. She's caught because, of course, she is, she's an idiot, um, and turns out there was never a sniper, the whole thing was just made up. What crimes can she be convicted, and uh, the answers were A, embezzlement, B, obtaining property by false pretenses, C, robbery and larceny, or D, robbery or larceny. Um, and Thomas, I want to tell you, you analyzed this question really perfectly, you

[0:56:28] eliminated off the bat embezzlement, right, that's that's a crazy answer, right, there was, there was not uh uh there was no embezzlement. You also eliminated uh obtaining property by false pretenses, um, that's a good elimination because uh in order to obtain property by false pretenses,

[0:56:47] you have to actually obtain the property, right? Right, yeah, I was gonna say, like, had she not been lying and there was a sniper, then then it's fine because it's not. No, no, but but if you think about it, right, like, notwithstanding the joke of, you know, possession is nine-tenths of the law, right, like, she never obtained the proper, right, like, obtaining property by false pretenses is when I tell you, like, hey, deed your house over to me and I'll make sure I take care of your grandma, yeah, and then I never have any intent, but you actually deed the house over to me, right, that's how I've obtained the property. She never got title to the money, right, she, she stole the money, right, so she, she didn't

[0:57:25] obtain the property, so she couldn't have obtained it by false pretenses, even though she was lying, so that narrows it down to either robbery and larceny or robbery or larceny. Listener

[0:57:37] question, what the hell is larceny? I don't know, yeah, I guess we'll find out. Great, that's that's what this question is testing, right? Um, larceny is a common law crime that has four elements, right? That is the unlawful taking.

[0:57:54] Crunch after freeze. Yeah, right, right, right. Nacho cheese. Tortillas, cheese.

0:58:01 Andrew: So, no, the four elements are, number one, the unlawful taking. Number two, of someone else's property. Okay, sure. Number three, without their consent. And number four, with the intent to

[0:58:13] permanently deprive the owner of the property. That sounds good. That sounds like robbery, though, like what's the difference. Robbery adds with it, uh, the, oh, a threat of violence or something. Threat of violence, that's exactly right. Maybe I did get this one right, so I don't know. The only question is could you be convicted of both robbery and larceny, or do you have to elect, and unfortunately

[0:58:38] you have to elect, it is D, robbery or larceny, and the reason is all of the elements of robbery are present in larceny, right, so you can't convict somebody of both of them. It is, you either determine that the threat of violence was there, at which point it's robbery, or that it wasn't because there was no sniper, at which point it's larceny. Convicted one or the other but not both. This was a lesser

[0:59:03] included offense question, and it was a tough one. I, I really, I was close, but I just did a great job right there, I was right there. So there we go. That sucks. Yeah, I didn't know the technical definition of those. But okay, robbery. And I'm glad we went through that because if larceny had any element that was outside, that was not an element of robbery, then

[0:59:28] you could convict on both. Yeah. But when one criminal offense is entirely included.

0:59:34 Thomas: Right, it's preventing them from like adding up a bunch of, you know, duplicative charges. Okay. Yeah. All right. Well, I messed that one up. I, I got, that's one of those tough breaks that I

[0:59:46] got most of the way there, but you couldn't close. That's how, that's how it goes. But, uh, ooh, the bar exam is an unforgiving mistress, and, uh, I failed. Okay. Who, uh, why don't you jump in your time machine and dust off the, uh, the, the crunch wrap dust and all all that and tell us who won this week's TTTBE, because it was surely not me. Meanwhile,

[1:00:11] at the Hall of Justice. Okay, Thomas, this week's winner, first out of the box, and really solid

1:00:17 Andrew: Pithy explanation, uh, is uh Jed sorokin altman that is at Jed's a Lawyer on Twitter, it kind of gives the game away a little bit, who says, C, taking another's property with the intent to permanently deprive them of it in their presence and under threat of imminent force is robbery, and larceny is a lesser included offense, aka all rectangles are squares, but not all squares are rectangles. Wish I'd thought of that analogy. Anyway, uh, that's dead on, congratulations Jed, and uh, and seriously, Jed's

[1:00:48] a great follow on Twitter, uh, and everyone should do that, at J-E-D-S-A-L -A-W-Y-E-R, Jed's a a Lawyer, uh, good, good stuff, uh, long-standing fan of the show, and

[1:01:01] congratulations on being this week's winner. All right, thanks so much for listening, uh,

1:01:07 Thomas: We love you, we love our patrons most of all, and uh, but we love everybody, and we will see you on Friday for

[1:01:13] another rapid response.

[1:01:21] This has been Opening Arguments with Andrew and Thomas. If you love the show and want to support future episodes, please visit our Patreon page at patreon.com/law. If you can't support us financially, it'd be a big help if you could leave us a five-star review on iTunes, Stitcher, or whatever podcast delivery vehicle you use. And be sure to tell all your friends about us. For questions, suggestions, and complaints, email us at openarguments@gmail.com. The show notes and links are on our website at www.openargs.com. Be sure to like our our page on Facebook and follow us on Twitter at OpenArgs. Until next time.

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[1:02:44] Uh, who in the hell is Gordon Hartogensis? Uh, but...