Syntax-Brillian U.S. Trustee calls for appointment of examiner to investigate laundry list of accusations

By Caroline Salls

Pittsburgh, July 28 - Syntax-Brillian Corp.'s U.S. Trustee has requested court approval to appoint an examiner for the company's Chapter 11 bankruptcy case, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the motion, the company's assets declined by $375 million between Sept. 30, 2007 and July 8, 2008, "and the entire $323.2 million of stockholder equity in SBC has evaporated."

Specifically, U.S. trustee Roberta A. DeAngelis said stockholder equity has suddenly dropped to $83.7 million from $323.2 million.

In addition, DeAngelis said the company's proposed asset sale is likely to result in little or no distribution for general unsecured creditors and no distribution at all for Syntax-Brillian's stockholders.

DeAngelis also said four consolidated class action complaints have been filed against the company and several of its former officers and directors, asserting violations of federal securities laws in connection with allegedly false statements and omissions of material facts in the company's public filings with the SEC.

Also, the motion said a shareholder has filed a derivative complaint against Syntax-Brillian and several of its former officers and directors, claiming that the officers and directors violated their fiduciary duties in connection with alleged accounting deficiencies, using false and misleading statements in public filings with the SEC and with the sale by some former directors of shares of the company's publicly traded stock.

Additionally, DeAngelis said the company's current interim chief executive officer and chief financial officer were appointed by the members of its board of directors who resigned in recent months, and some of those directors appear to be among the targets of the class action and derivative lawsuits.

Since the filing of Syntax-Brillian's bankruptcy case, DeAngelis said a number of shareholders have claimed that the company withheld financial information from shareholders for months before the filing date and that the company's funds were depleted by inappropriate transfers made to its Asian trading partners.

DeAngelis said the shareholders have also alleged "that these bankruptcy cases are being used as a fraudulent vehicle to transfer the intrinsic value of the debtors to third parties for inadequate consideration, and that the proposed asset sale is a sham."

Syntax-Brillian is a Tempe, Ariz.-based designer, developer and distributor of LCD HDTVs, digital cameras and microdisplay entertainment products. The company filed for bankruptcy on July 8. Its Chapter 11 case number is 08-11407.

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