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Texas-based InverWorld andrelated companies in Cayman Court

From the San Antonio, Texas Express-News

The people who investedwith San Antonio-based InverWorld and its related companies, miredin bankruptcy proceedings, already have to worry they might havelost their money forever.
Most of them are in Mexico, though the bankruptcy proceedingsare taking place in Texas and the Cayman Islands. The investorsdidn't want to fret about remembering court dates in both locationsand shelling out pesos for airline tickets.
They got good news last Monday when U.S. Bankruptcy Court JudgeLeif Clark approved a blueprint that outlines which courts willhandle which aspects of the case.
The plan, called the "first amended stipulation regardingcross-border insolvency protocol," has already been approvedby U.S. District Court Judge Fred Biery.
Biery's court is handling civil complaints against InverWorldInc. and InverWorld Securities Inc.
The protocol will be reviewed Wednesday by a judge in the CaymanIslands.
It was developed in the absence of international guidelines regardinghow courts in different countries handle bankruptcy cases involvingmultinational companies.
"This protocol is an extraordinary piece of work," Clarksaid at Monday's hearing. "We're literally making it up aswe go."
The InverWorld case popped up nearly a year ago and has been growingin complexity ever since. InverWorld Inc. and InverWorld SecuritiesInc. were headquartered in San Antonio and catered to wealthyMexican individual investors and Mexican institutions. InverWorldhad counterparts, IWG Services Ltd. in England and I.G. Serviceson Grand Cayman.
All started unraveling last July in a tangle of bankruptcy, civiland criminal litigation.
The bankruptcy proceedings in Britain were eventually dismissed,but InverWorld executives Jose Zollino and George Fahey are stillunder investigation in the United States for civil and criminalfraud complaints.
And the agreement signed Monday links the bankruptcy proceedingsin Texas and the Cayman Islands.
"The purpose for the protocol is, in a cost-effective andtime- efficient manner, to address issues that have come up andwill come up in this case," said Nick Foley, a lawyer representingInverWorld's court-appointed receiver. "And to do so, hopefully,without using up all the assets of this estate."
It's the goal of Len Blackwell, the receiver, to return as muchof InverWorld's assets to its creditors and investors as possible.He has filed an $86 million suit against Zollino and Fahey inbankruptcy
court, alleging that the pair misappropriated company funds fortheir personal use.
He also presided over the sale of the InverWorld building for$5.4 million and the auction of InverWorld's furniture and artworkfor more than $165,000.
That doesn't approach the $425 million investors say they've lost,but Blackwell said Monday's decision could speed the recoveryprocess.
"This is one of the largest milestones of the case,"he said. "Without this, we'd have no foundation. In the past,we've had to get both courts to get approval on things one courtcould do."
Assuming the protocol is put into effect, those decisions willbe made much more quickly.
Because the entity with the most assets, I.G. Services, is a CaymanIslands company, the Cayman courts will have jurisdiction oversale of assets there. It will also distribute assets to creditorsonce the case is resolved.
The U.S. bankruptcy court will handle the sale of assets everywherebesides the Cayman] Islands, and will oversee processing of anyproprietary claims investors might file.
It also was designated the court where disputes over who is responsiblefor what will be settled.
In the absence of an international treaty, Blackwell said, theInverWorld protocol could be a model for similar internationalcases.
"Without a protocol, can you see how these proceedings wouldspiral out of control?" he said. "We believe this couldbe an excellent framework for other cases to use."

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