CORPORATE WELFARE: The Megabankruptcies of the 80s and 90s

A consistently overstated, poorly organized, and badly presented case for an intriguing proposition: that the Bankruptcy Reform Act of 1978 has proved unduly advantageous for major US corporations seeking refuge from a variety of problems. Before getting down to business, Kallen (a member of Chicago's bankruptcy bar) attempts to set the scene with short-take audits of yesteryear's oil shocks, economic conditions during the 1970's, and allied background that's notable mainly for simplistic analyses of complex issues, plus an abysmally graceless style. In congruently infelicitious fashion, he finally gets around to reviewing the largish enterprises that chose to reorganize under terms of Chapter 11 of the new bankruptcy code. Their ranks encompass the likes of Continental Airlines, Itel, Jartran, Osborne Computer, Revco, Texaco, Wickes, etc. The author charges that such companies abused Chapter 11, employing it to pick the pockets of suppliers, deny ""just compensation"" to those they have injured with goods or services, abrogate union contracts, trim payrolls, stiff pensioners, evade financial judgments, and otherwise ""run roughshod over everyone in their way."" With casualties of the junk-bond era, EPA-ordered cleanups, and other untoward events probably on the way to court as well, he warns, the situation promises to become a good deal worse in the years ahead. While there's considerable merit in Kallen's critique of the federal bankruptcy system, his accusations are so relentlessly impassioned, exaggerated, and haphazard that they lose much of their force. Lost in the shuffle as well are some down-to-earth proposals for remedial action that oddly couple crowd-pleasing populism with laissez-faire capitalism. For example, the author wonders why hard-pressed for-profit concerns should not be left to sink or swim without government-sanctioned protection from their creditors, actual and prospective. On the other hand, Kallen also argues for the moral equivalent of open-ended liability for corporate directors and officers, a position that could encourage endless litigation and lead to a wealth of other unintended consequences. Despite a few thought-provoking points: a shrill, intemperate screed that ill serves its stated cause.