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AnnG

Being sued for return of stock dividends received 2011, 2012

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I owned stock in a rollover IRA account. Purchase recommended by broker. Co. went bankrupt. Had preferred stock so broker thought investment would come out OK with re-organization (Chapter 11).  Lost a third of my modest retirement fund. Accepted the fact and just moved on. Yesterday, received a letter notifying me that I am being sued for return of dividends paid during 2011 and 2012, the years I owned the stock. Reason:  the company should not have been paying dividends or something; this predated the bankruptcy filing.

 

Do I have to repay this money?? How do I stop the proceeding against me without repaying the dividends?  How in the world would I know  a company should not pay dividends??

 

Thank you

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There are to many facts left out to give a reasonably good suggestion.  Forinstance, the dates of the various activities may be relevant.  Also, what kind of a company are we talking about: OTC, NASDAQ, unlisted, etc?  The receipt of a letter does not require any response and may simply be a notice to you that a claim is being made.  If a claim is being made one would asume it would be made against all the owners of the stock.  Who is making the claim, a bankruptcy trustee or another shareholder?  What is the status of the bankruptcy?

 

I would suggest you consult with an attorney who can review all of the documents and ask the necessary questions.  This is not something that allows for analysis on an online chat site.

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Yesterday, received a letter notifying me that I am being sued

 

No, you aren't being sued.

 

A "letter" is not a lawsuit.

 

A summons and complaint is a lawsuit. Were you served with a summons and complaint by a process server or is this just a threat of a lawsuit?

 

Answer that question and also reveal the state you reside in as that is also important.

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Thank you RetiredinVA and adjusterjack. I received the letter on Saturday and am trying to get an idea which way to go Monday morning.

The First Amended Joint Plan of Reorganization was signed by Judge "X". and the effective date of the Plan was Feb. 3, 2014. The Plan created the "Y" Trust and "John Doe" became the trustee .

 

I owned shares in 9.25% Series B Cumulative Preferred Stock in "Company ABC" and received dividends which were contained in my 401(K) rollover account. Total value of the shares at purchase was 30K. Purchase was  a recommendation from the broker we had at the time.

 

The letter I received states " The Creditor Trustee is preparing to initiate lawsuits (no later than March 31, 2015) to recover Dividends paid to holders of Preferred Stock during 2011 and 2012 as fraudulent conveyances. In an effort to quickly and amicably resolve the claim against you for recovery of the Dividends, without the time, cost and expense of litigation, the Creditor Trustee offers to---"

 

and  then proposes settlement of 75% return of the Dividends I received and signing a "SETTLEMENT OFFER AND ACCEPTANCE FORM.

 

Another interesting portion of the letter states:

"Although this letter offers a settlement, any of the terms of the settlement offer contained herein are inadmissible pursuant to Federal Rule of Evidence 408. Nothing contained herein should be construed as an admission of fact or law by the CT."

 

I think that gives you the general idea. I lost my entire investment in "Company ABC." The amount in question is 5k+. Since I live on SS, should I just pay this and be done with it??

 

Thanks for any input you wish to provide.

Edited by Findlaw_JN
Edited to remove personal or identifying information. - Moderator

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This is stemming from the bankruptcy.  You don't need a securities lawyer, you need a bankruptcy attorney's assistance.

Thank you LegalwriterOne. This gives me a place to start on Monday. In your personal, non-professional opinion, if this were your situation, would you just pay up the 5K and forget it or risk losing more money going to a lawyer.  Thanks again--much appreciated.

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I don't know enough about bankruptcy law to have an opinion.  I would certainly at least run everything past an attorney who does it for a living.

Thanks LegalwriterOne. This just caught me totally off guard; I have never heard of anyone having to repay dividends. Thanks again.

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Call the broker that sold you this POS and ask him/her to return his/her commissions to you!

Thanks, harrylime. Actually, as I have continued researching this topic today, I discovered that a class action suit was brought against "Company ABC" (investor fraud) starting in 2009--two whole years before my broker recommended this stock. Raises many questions, indeed. btw, that class action suit was dismissed. Boy, was I ever stupid.

Edited by Findlaw_JN
Edited to remove personal or identifying information. - Moderator

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Hi AnnG,

 

It sounds like you've found some helpful answers on here over the weekend. Like the others said, a local bankruptcy attorney would be in the best position to review your documents and apply the relevant law to your situation. You can find bankruptcy attorneys in the Boise area using FindLaw's lawyer directory.

 

Given the many different moving parts in your situation (the demand for repayment, the bankruptcy, the class action) you might want also want to read up on bankruptcy, in general -- so that you can put these issues into context. Here are some FindLaw articles you might find helpful:

Best of luck to you!

 

The FindLaw.com Team

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