Supply chain finance platform PrimeRevenue has asked a Texas court to strike out or seal documents filed as part of First Brands’ bankruptcy proceedings, describing allegations made by other parties in the case as “scandalous and defamatory”.
Before its infamous collapse in September last year, First Brands had used PrimeRevenue’s software platform as part of its financing arrangements, including by uploading receivables data in order to obtain finance from third-party lenders. First Brands was later accused of fabricating invoices and defrauding lenders out of billions of dollars.
First Brands’ court-appointed managers had proposed in June to pursue litigation against several companies involved in the company’s financing arrangements, including PrimeRevenue, suggesting more than US$25bn was “potentially available” by accusing those companies of involvement in a fraud scheme.
The proposal was dismissed on several grounds by the court last month, with Judge Christopher Lopez ruling it was “not feasible” and would result in a breach of bankruptcy rules. The plan was also criticised by several of the other companies named.
US-headquartered PrimeRevenue has now filed a motion to remove the statements addressing its operations from the record, saying they are “impinging the credibility of PrimeRevenue in the eyes of its financial institution lending partners and the marketplace”.
David Quillian, the company’s chief legal officer, said he has seen no evidence supporting the proposed litigation, but that “at least one financial institution partner stated to me directly that it views PrimeRevenue’s credibility as being called into question by the statements”.
The plan to litigate against PrimeRevenue, among several others, was detailedby bankruptcy lawyer and consultant Marc Kirschner, who was appointed by First Brands’ counsel to provide expert testimony.
He argued that a lawsuit could establish First Brands was fabricating invoices to obtain finance from third-party lenders – allegations its founder has denied – and that PrimeRevenue was aware of this activity, therefore giving litigators “colourable claims”.
The plan was also backed by a declaration from First Brands interim chief executive Charles Moore, a managing director at Alvarez & Marsal.
But PrimeRevenue noted in last week’s filings that Kirschner and Moore’s declarations were ruled inadmissible by the court.
In late July, legal representatives for one of First Brands’ creditors described the statements – which originated from a third party who interviewed a First Brands employee and subsequently contacted Moore – as “hearsay within hearsay”, transcripts show.
As a result, the court prevented Moore from facing questions on the subject.
PrimeRevenue also argued that Moore, along with First Brands’ legal counsel, “fundamentally misunderstood and did not conduct reasonable due diligence into PrimeRevenue’s business and the services it provided to First Brands”.
The company’s software platform connected First Brands debtors with supply chain finance providers, “who transacted with each other and transmitted payments directly to each other without any funds passing through PrimeRevenue”.
“PrimeRevenue is not a transferee of any potential fraudulent transfers,” it said. That would mean any claim related to parties’ involvement in a fraud scheme would be “entirely irrelevant” to its business, it argued.
“Yet, the statements live on in the record of the bankruptcy case,” PrimeRevenue said. As of press time, the court has not responded to the motion to strike out or seal the statements filed.
PrimeRevenue did not comment when contacted.
