Barnett Capital Advisors Joins Legal Action; Jackson Walker Faces Lawsuit for Alleged Misappropriation of Billions in the JCPenney Bankruptcy

CORPUS CHRISTI, Texas, April 21, 2025 /PRNewswire/ -- Jackson Walker LLP and former Bankruptcy Judge David R. Jones are expected to be named as defendants in a lawsuit alleging severe misconduct, according to a recent bankruptcy court filing (Adv. Case No.24-02006, Dkt. 22). Barnett Capital Advisors, a secured creditor holding over $330 million in first and second lien bonds, and Eric Lyndell Moore, who filed the notice on April 15, 2025, are seeking to withdraw the reference of their case involving Jones, Freeman, and Jackson Walker from the U.S. Bankruptcy Court to the U.S. District Court for the Southern District of Texas. This action aligns with Chief U.S. District Judge Alia Moses' determination that cases involving potential misconduct by Judge Jones should not be adjudicated by his former colleagues in the bankruptcy court.

The notice alleges that the Jones-Freeman-Jackson Walker triad caused billions in damages to secured bondholders in the J.C. Penney bankruptcy by transferring $5 billion in assets to unsecured creditors Simon Property Group and Brookfield Properties, a subsidiary of Brookfield Asset Management without consideration or benefit to the estate.

Judge Moses' April 9, 2025 order withdraws 34 bankruptcy cases—including J.C. Penney—from the bankruptcy court due to ethical breaches and compromised impartiality stemming from the undisclosed live-in relationship between Judge Jones and former Jackson Walker attorney Elizabeth Freeman. Moore and Barnett Capital Advisors assert that rulings by Jones' former colleague, Bankruptcy Court Judge Christopher M. Lopez, have not only failed to address critical legal issues, but have also disregarded established Supreme Court precedent, including Czyzewski v. Jevic Holding Corp. and In re AWECO, Inc. They further contend that the non-pro rata distribution of proceeds violated key bankruptcy protections, including 11 U.S.C. § 506(a), and that the concealment of J.C. Penney's $1.93 billion PropCo real estate valuation undermined the integrity of the proceedings.

On July 15, 2024, The Wall Street Journal reported that federal prosecutors were criminally investigating Judge Jones and his undisclosed relationship with attorney Elizabeth Freeman.

Key Allegations Against Jackson Walker Include:

• Concealment of Assets: Misrepresenting the debtor's cash position, violating 18 U.S.C. § 152, and failing to conduct a liquidation analysis under 11 U.S.C. § 1129(a)(7).
• Unpaid Assets: Transferring $5 billion in assets to Simon and Brookfield, both unsecured creditors, without consideration, violating 11 U.S.C. § 1123(a)(4).
• Undisclosed Overpayments: Steering over $3 billion to DIP Lenders, including H/2 Capital and Brigade Capital, among others, who were owed only $900 million, without disclosure to the U.S. Trustee, the IRS, or affected creditors.
• Judge Shopping: Selecting Judge Jones to exploit his compromised impartiality, with Judge Lopez's rulings failing to uphold creditor protections.

Barnett Capital Advisors claims these actions, enabled by Jackson Walker's breaches and the Jones-Freeman relationship, caused billions in damages to bondholders, shareholders, and the Pension Benefit Guaranty Corporation (PBGC). The U.S.

Trustee's Office is pursuing the return of millions in legal fees from Jackson Walker across the 34 affected bankruptcy cases.

Moore stated, "We have written confirmation from attorneys at Milbank LLP that some first lien bondholders owed $1,000 received payouts of $5,000 to $6,000, while others in the same class—also owed $1,000—received as little as $80. Jackson Walker concealed this fact."

"Jackson Walker breached its fiduciary duty and violated bankruptcy law," said Andrew Carrillo, President and CEO of Barnett Capital Advisors. "The $5 billion transfer to Simon and Brookfield stole assets on which secured creditors still hold liens, and the concealment of billions demands district court review to ensure justice."

Investor Raul Ferrer added, "Simon Property Group's publicly available, audited financials clearly show that neither Simon nor Brookfield paid any outside consideration for the $5 billion in assets they received. It's outrageous."

Moore and Barnett Capital Advisors urge the District Court to withdraw the reference, as

J.C. Penney is among the cases cited in Judge Moses' order, to guarantee impartial adjudication. The case, part of the J.C. Penney Direct Marketing Services, LLC bankruptcy (Case No. 20-20184), highlights critical issues threatening creditor rights and judicial integrity.

About Barnett Capital Advisors
Barnett Capital Advisors is a wealth management and retirement planning firm dedicated to empowering retirees worldwide through personalized advice, strategic planning, and intelligent investments. Visit www.barnettcapitaladvisors.com for more information.

Contact:
Andrew Carrillo President and CEO Barnett Capital Advisors
(305) 328-8538
[email protected] 

SOURCE Barnett Capital Advisors