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
RL asks: "Is the trustee going to leave the settlement offer
open indefinitely? Isn't it unfair to allow the same terms two years
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
- 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
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
- 15 USC Sec. 77b
When used in this subchapter, unless the context otherwise
(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
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
- 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 Bonhams business wasn't
- 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 thats 818
tickets per year. Raejean claims to have conducted her business
from 1986 to 1995, a total of about ten years. Thats 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 Deltas methodology was about $1,500,
thats total damages of $12,270,000.
- So Deltas claim doesnt prove anything except (a)
Raejean sold tickets for a long time, and (b) Deltas method
for calculating its damages may be a little on the high
- In any event, without knowing Raejeans true cost of
goods sold and overhead, you cant 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
- (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
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
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
- 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
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
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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