WE TERRESTAR SHARE HOLDERS OBJECT TO THE MEMORANDUM OF LAW IN SUPPORT OF CONFIRMATION OF 3RD AMENDED JOINT CHAPTER 11 PLAN OF TERRESTAR CORPORATION

In Re: Lead Case No

TERRESTAR CORPORATION, et al 11 CV 10612 (SHL)
TERRESTAR NETWORK, et al 10 CV 15466 (SHL) 
DEBTORS IN POSSESSION,

A). What is the title of our petition?

WE, THE TERRESTAR CORPORATION COMMON SHAREHOLDERS OBJECT TO THE TSC DEBTORS’ MEMORANDUM OF LAW IN SUPPORT OF CONFIRMATION OF THE THIRD AMENDED JOINT CHAPTER 11 PLAN OF TERRESTAR CORPORATION, MOTIENT COMMUNICATIONS INC., MOTIENT HOLDINGS INC., MOTIENT LICENSE INC., MOTIENT SERVICES INC., MOTIENT VENTURES HOLDING INC., MVH HOLDINGS INC., TERRESTAR HOLDINGS INC. AND TERRESTAR NEW YORK INC.
 
In Response To:

TSC DEBTORS’ MEMORANDUM OF LAW IN SUPPORT OF CONFIRMATION OF THE THIRD AMENDED JOINT CHAPTER 11 PLAN OF TERRESTAR CORPORATION, MOTIENT COMMUNICATIONS INC., MOTIENT HOLDINGS INC., MOTIENT LICENSE INC., MOTIENT SERVICES INC., MOTIENT VENTURES HOLDING INC., MVH HOLDINGS INC., TERRESTAR HOLDINGS INC. AND TERRESTAR NEW YORK INC.  (Docket #650) AFFIDAVIT OF SERVICE (Docket #646)

B). Who is the target of our petition?

The Honorable Judge Sean H. Lane

C). What issue best describes our petition?

i). We the shareholders are objecting to this reorganization plan, because it violates the "VALUE MAXIMIZATION NORM". This corporate bankruptcies proceeding violates the priority of claims, and the priority violation at least prima facie is driven by the quest to maximize firm value.

Those exercising control rights do not make value-maximizing decisions. 

It fails to appoint an equity committee and independent examiners to maximize its value. This reorganization planning was done in bad faith.

ii). We objecting to this reorganization plan, because-

(a). It provides the release of certain causes of action of the TSC Debtors and their estates and the release of certain causes of action by certain holders of Claims and Equity Interests. Please see docket #650 item 82.

(b). It provides for the release and discharge of the Released Parties (the “Third-Party Releases”) from all claims that holders of Claims or Equity Interests would have been entitled to assert individually or collectively, except for claims or liabilities arising out of gross negligence, fraud or willful misconduct (the “Third-Party Releases”). Please see docket #650 item 83.

Although, strategic bankruptcy is not a criminal act, concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent transfers, fraudulent claims, false statements or declarations, or redistribution arrangements are Bankruptcy fraud, a white-collar crime

We are objecting to the release and discharge of the released parties (the “Third-Party Releases”) from their fiduciary duties to shareholders. 

Share holders can hold officers and directors liable for damages they suffer, as a result of the directors' and officers' breaches of fiduciary duties. Liability can also extend to third parties, such as professionals or accountants, who aid and abet breaches of the officers' and directors' fiduciary duties.
 

Dear Judge Lane,
 
Yesterday, we noticed on the TerreStar Corporation reorganization web site docket #646, AFFIDAVIT OF SERVICE.  In the Affidavit of Service item 2, "List and Notice of Appearance Parties, and Affected Parties"; but, some of us did not receive email nor regular mail of the purpose of this document. Due to physical, geographical, economical....hardship, we, The TerraStar Common equity holders cannot physically appear in court on Oct 10, 2012, for confirmation hearing; nevertheless, lack of physical presence does not mean we have no interest, we are concerned about this hearing tremendously. We plead your honor to render us the utmost fair, equitable decision in this reorganization planning. 

Please use all options, such as, "Carved Out", "Sharing a Piece of The Bankruptcy Pie", "New Value", "Gift Doctrine" etc. to enable common share holders to participate the Reorganization planning.

We kindly ask Mr. Aldo Ismael Perez to sponsor and present this petition to you.


Why is this important?
 
1. WITHOUT AN EQUITY COMMITTEE-

This is the core issue of this bankruptcy case. An official shareholders’ committee can often extract additional value for the otherwise junior interests of equity. Shareholders were totally overlooked in this bankruptcy proceeding. It overlooked that committee representation can provide shareholders with a vehicle to challenge valuation of the bankrupt debtor, in order to show value for equity at the debtor’s expense. 

In this case, no one is here to look after the best interest of the estate, thus the management, counsel and financial advisor violated their fiduciary duties.
 
2. THE FIDUCIARY EXCEPTION-

Where the attorney-client privilege is established, it is not absolute. It may yield to the fiduciary exception to that privilege. The fiduciary exception bars a fiduciary from asserting the attorney-client privilege against those to whom fiduciary duties are owed. The policy obligating fiduciaries to disclose all relevant information to beneficiaries, shareholders, and others to whom duties are owed. In certain circumstances, the attorney-client privilege must yield to the fiduciary exception.

The debtor's counsel objected to Mr. Swarts requests, based on confidential documents or documents subject to attorney-client privilege or work-product protection.  It violated THE FIDUCIARY EXCEPTION.

Also, we would like to point out that, "The protection of the privilege" extends only to communications and not to facts.

Counsel ignores that he is paid by the estate and he is not looking after the best interests of the estate and maximizing its value, in violation of fiduciary duty.  Please see docket #640.
 
3. IMPROPER VALUATION PROCEEDINGS, REPLACEMENT VALUE APPLIES-

Valuation in a bankruptcy context requires the valuator to comply with ASC 805, a valuator must determine the fair value of the company’s identifiable tangible and intangible assets and allocate the business’s reorganization value among them. Any portion of that value that exceeds the allocated amount must be reported as goodwill. Although, reorganization value is based on fair value — the price a willing buyer would pay for the emerging entity. According to new law - All assets must be valued not at their resale value (what you could sell them for) as was true under the old law, but at their replacement cost.

http://www.ehow.com/about_6562263_assets-valued-bankruptcy-proceedings_.html

Although, estimating an asset’s fair value is challenging in the current depressed environment, nevertheless –

Can you replace assets of the Terrestar Network, satellites, TS-1, TS-2, and the Spectrum 2.0 for 1.375 billion? 

Can you replace all debtors’ assets at the value that is given in this reorganization plan?  

Is this valuation proceeding just, equitable and fair to share holders?

Although strategic bankruptcy is not a criminal act, concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, fraudulent transfers, false statements, declarations, or redistribution arrangements are Bankruptcy fraud, a white-collar crime. Please refer to the following website-

http://en.wikipedia.org/wiki/Bankruptcy

4. The Releases Contained in the Plan Are Consensual and Should Be Approved (see docket #650 D)-

We are objecting to The Releases Contained in the Plan Are Consensual and Should Be Approved. We are objecting to the release and discharge of the released parties (the “Third-Party Releases”) from their fiduciary duties to shareholders.

(a). We objecting to the release of certain causes of action of the TSC Debtors and their estates and the release of certain causes of action by certain holders of Claims and Equity Interests. Please see docket #650 item 82.

(b).  We objecting to the release and discharge of the Released Parties (the “Third-Party Releases”) from all claims that holders of Claims or Equity Interests would have been entitled to assert individually or collectively, except for claims or liabilities arising out of gross negligence, fraud or willful misconduct (the “Third-Party Releases”). Please see docket #650 item 83.

We believe that critical decisions should be driven by the goal of maximizing corporate value and with the good faith belief that the decisions are in the best interests of the corporation.

Officers and directors of a corporation owe fiduciary duties to the corporation and its shareholders, the violation of which may subject directors to personal liability. Under Delaware law, these duties include the duty of care, the duty of loyalty and the related duty of disclosure when seeking shareholder action.

5.  SELF-DEALING, CONFLICTS OF INTEREST, FRAUDULENT TRANSFERS-

On Sep 2008, TerreStar Corporation (NASDAQ: TSTR) announced that it had sold its REMAINING 29,926,074 shares of SkyTerra Communications, Inc. (OTC: SKYT) for a total of approximately $123 million in a series of transactions.

SkyTerra was acquired by Harbinger Capital Partners in March 2010 and became part of LightSquared in July 2010.

We need to point out that SkyTerra is not only a competitor, Harbinger Capital Partners (Phil Falcone), is an insider of TerreStar.

Sold corporate assets to insiders, is self-dealing, conflicts of interest, and fraudulent transfers.

http://www.streetinsider.com/Corporate+News/TerreStar+%28TSTR%29+Sells+Remaining+Shares+in+SkyTerra+for+$123M/3995140.html

http://en.wikipedia.org/wiki/SkyTerra

For all the reasons we have listed above-

WE TERRESTAR SHARE HOLDERS OBJECT TO THE MEMORANDUM OF LAW IN SUPPORT OF CONFIRMATION OF THE THIRD AMENDED JOINT CHAPTER 11 PLAN OF TERRESTAR CORPORATION, MOTIENT COMMUNICATIONS INC., MOTIENT HOLDINGS INC. MOTIENT LICENSE INC., MOTIENT SERVICES INC., MOTIENT VENTURES HOLDING INC., MVH HOLDINGS INC., TERRESTAR HOLDINGS INC. AND TERRESTAR NEW YORK INC.


References

1. "Carved Out"-

http://www.srz.com/files/News/b583335d-63fe-4011-9f6b-72b429db3424/Presentation/NewsAttachment/52804788-ee4f-4dfa-90a4-bb1a7947f8ce/filesfilesClientAlert071706.pdf

http://bankruptcy.morrisjames.com/2006/07/articles/senior-lenders-carve-out-for-benefit-of-general-unsecured-creditors-does-not-violate-absolute-priority-rule/

2. "Sharing a Piece of the Bankruptcy Pie: Asset and Plan Distribution Sharing & Reallocation" –

http://www.arentfox.com/publications/index.cfm?content_id=1077&fa=legalUpdateDisp

http://www.weil.com/news/pubdetail.aspx?pub=8617

3. “New Value”- Loan or claim, credit repay from TerreStar Network to TerreStar Corporation-

http://definitions.uslegal.com/s/subsequent-new-value-defense-bankruptcy/

http://www.weil.com/news/pubdetail.aspx?pub=3145 

4. "The Gift Doctrine"-

http://www.slideshare.net/pattonboggs/bankruptcy-alert-gifting02102011

http://www.cov.com/files/Publication/585868b1-0fa8-4493-8e89-8dc703a08647/Presentation/PublicationAttachment/fbae5511-8752-45ac-808f-92d0f092b26f/In%20re%20DBSD%20North%20America,%20Inc.%20-%20Congress%20Meant%20What%20It%20Said%20and%20Said%20What%20It%20Meant%20-%20Absolu.pdf

5. In June 2011 ICO Global Communications (ICOG) was renamed to Pendrell Corporation (NASDAQ: PCO). ICOG was never removed from NASDAQ and was trading over $1.00 when its subsidiaries filed for bankruptcy.

http://en.wikipedia.org/wiki/ICO_Global_Communications

http://finance.yahoo.com/q/pr?s=PCO+Profile

Sponsor

Aldo Ismael Perez aldo_nury@msn.com

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