In re Raejean S. Bonham dba World Plus
Bankruptcy No. F95-00897
Unofficial Web Site

Frequently Asked Questions (FAQS)

This page reports questions that the Chapter 7 Trustee gets asked a lot. Some of the answers are quite complex, and difficult to set out briefly. So there are necessarily some partial answers.

You can submit your own question if you want.

RL asks: "Is the trustee going to leave the settlement offer open indefinitely? Isn't it unfair to allow the same terms two years later?"

It's true that BRA defendants settling now are getting a little bit of a break - presumably they could have made interest on their payments. And no, the Trustee will not leave the settlement offer open indefintely.

The Creditor's Committee Web Site says that World Plus investment contracts aren't "securities." Is that true?

Generally, questions about the Credit Committee site ("The Forum") aren't suitable for FAQs. There are a lot of misconceptions and misunderstandings posted at the site. There's no point in developing warring web sites. But this one is easy.

The definition of "security" in this case is governed by Federal law, not the Alaska Uniform Commercial Code section that they refer to. Basically, they are talking about the wrong definition from the wrong government. The governing statute provides:

15 USC Sec. 77b

When used in this subchapter, unless the context otherwise requires -

(1) The term "security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

There are lots of pages of regulations further defining the term. There are thousands of cases interpreting the statutes and regulations. There really isn't any question that the "investment contracts" issued by Raejean Bonham and World Plus were "securities."

What's the Securities and Exchange Commission's claim and role in this case?

The Securities and Exchange Commission ("SEC") has filed a proof of claim for an unliquidated sum as Claim No. 859. It has also filed a U.S. District Court lawsuit, Case No. F96-0023 CIV (HRH). The lawsuit seeks disgorgement, among other things. The prayer for relief asks that any recovery be distributed by the Bankruptcy Court in the Bonham case; see Complaint, page 17-18. Finally, it has filed a complaint to have any judgment it obtains deemed nondischargeable.
Unlike the Delta claim, the SEC doesn't seek anything for itself. Instead, it seeks disgorgement from Raejean Bonham, and to have the proceeds distributed to the other creditors.

How do you know that Raejean Bonham’s business wasn't legit?

As the Trustee put it,"Which illegal business are you talking about?" There is no credible evidence of large purchases of mileage. The limited evidence that has been found is fraudulent. The ticket sales that did occur are barred by a U.S. District Court injunction. And there is an order for summary judgment from U.S. District Court holding that the tickets sales that did occur were a fraud on Delta.

Doesn't Delta's claim for $10 million prove she sold large volumes of tickets or frequent flier miles?

The known business activity of Raejean Bonham involved gross ticket sales in the range of $350,000 - $450,000 per year. At an average sale price of $550/ticket, at the high end that’s 818 tickets per year. Raejean claims to have conducted her business from 1986 to 1995, a total of about ten years. That’s 8,180 tickets. Delta claims its damages should be calculated at the highest possible fare for the flight involved (typically purchasing the ticket on the day of the flight). Assuming the average price under Delta’s methodology was about $1,500, that’s total damages of $12,270,000.
So Delta’s claim doesn’t prove anything except (a) Raejean sold tickets for a long time, and (b) Delta’s method for calculating it’s damages may be a little on the high side.
In any event, without knowing Raejean’s true cost of goods sold and overhead, you can’t calculate whether the volume of tickets would pay a significant part of the known debt service. As an intellectual exercise, using the total investor proofs of claim, calculate the required net profit to pay investors. Then estimate her margin, and calculate the number of tickets required to be sold.

EW asks, "What does it mean when a trustee dismisses a bankruptcy case? What are the consequences to the debtor?"

Your question doesn't appear to really relate to Bonham and World Plus. But assuming it does,
(1) Bankruptcy judges, not trustees, dismiss bankruptcy cases.
(2) Dismissal means, among other things, (a) the debtor/bankrupt did not receive a discharge (except in special circumstances in Chapter 13) and therefore still owes his or her creditors any monies otherwise due and payable, and (b) the debtor/bankrupt is no longer protected from the claims of creditors by the automatic stay under Bankruptcy Code Section 362.

Exactly how does bankruptcy work?

This is too big a question. But here are some highlights. For the most part, bankrtupcy is a matter of Federal law. The U.S. Constitution directs Congress to provide for a uniform system of bankruptcy. State law still applies where Congress says it may. Current bankruptcy law is codified at 11 U.S.C. Section 101 et seq. To look at provisions of the United States Code, including the Bankruptcy Code at Title 11, try a resource like GPO Gate.

There are liquidations and reorganizations. Since the World Plus case is a liquidation (Chapter 7) we'll skip reorganizations.

Liquidation is the process by which the assets of the bankrupt person or debtor are distributed among the creditors of that person. The definitions of "assets" and "creditors" and the order of distribution are fairly complex. But "assets" include property recovered for creditors through the use of the "avoiding powers" of the trustee. "Avoiding powers" include the right to drag back into the bankrupt person's estate things that the bankrupt had conveyed to someone else. Congress, not bankrupts, determines how assets are distributed when there is not enough to go around. Some of the assets in the World Plus case may include personal property owned by the debtor, claims under the avoiding powers by the trustee, and contract rights of the debtor.

The "assets" are collected and sold, and the monies are distributed to the persons involved in the bankruptcy case in an order prescribed by Congress. The priorities are generally established by 11 U.S.C. Section 507. Payments go first to the expenses of administration. Expenses of administration include:

See Section 507 for more information on priorities.

What's this "voidable preference" business?

There are whole volumes written on just this question. It starts with the Bankruptcy Code section involved, Section 547 - Preferences. Simply stated, Congress lets the bankruptcy trustee set aside or "avoid" transactions not in the ordinary course of business made in the 90 days preceding the date of the bankruptcy petition, 365 days in the case of a transaction with an insider.
If World Plus made a payment to you in the 90 days preceding the date of the involuntery Chapter 7 petition, December 21, 1995, then that payment may be a voidable preference.

What's with all the lawyers?

Anyone can have a lawyer. Many creditors in this case do. The Chapter 7 Trustee has two: Jim DeWitt of Guess & Rudd and Cabot Christiansen of Bundy & Christiansen. DeWitt is general counsel for the trustee; Christiansen has applied to the court to represent the trustee in a series of actions against investors, and will represent the trustee when DeWitt has conflicts of interest.

Attorneys for the trustee are paid either on an hourly rate basis or on a contingency fee basis. Pending fee applications are usually available for inspection at this Web site. Lawyers' fees are subject to review and approval. See 11 U.S.C. Section 330 and Bankruptcy Rule 2016.

Why isn't the debtor in jail?

Bankruptcy Judge, attorneys and trustees have very little to do with the enforcement of the criminal laws. While all are required to report bankruptcy crimes when they encounter them, none of them are prosecutors. Sorry.

Why aren't the debtor's pleadings posted at this site?

We can post the pleadings we generate, and certain kinds of court documents, because we have them as computer files. It is quite difficult and time-consuming to take paper-based copies and convert them to computer files. In addition, our computers are Macintosh-based, which imposes some additional limitations.

Are we paying for this?

Nope. It's donated.
How can I ask a question here?

Send questions through the form at submit your own question. If the question is answerable, doesn't involve specific legal advice, and the answer will benefit World Plus creditors in general, the answer may be posted here...


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