Comstock Financial Services, the Universal City-based investment company accused by federal authorities last month of fraud, is being forced into liquidation by the Office of the U. S. Trustee, a bankruptcy analyst with the office said Tuesday.
Comstock Financial filed Oct. 29 for protection from creditors under Chapter 11 of the U. S. Bankruptcy Code, which allows financially troubled companies to reorganize. The company is being forced to liquidate because it failed to file any of the documents required for a Chapter 11 filing, such as a schedule of payments to creditors and lists of assets and liabilities, analyst Jessee Warren said.
Warren said Comstock's attorneys have indicated that they will cooperate with the office in putting the company into liquidation under Chapter 7 of the Bankruptcy Code. The Office of the U. S. Trustee is part of the Department of Justice that oversees bankruptcy cases.
Larry Meyerson, Comstock's bankruptcy attorney, confirmed that the company has agreed to enter Chapter 7 proceedings.
Creditors are expected to be informed of the decision at a meeting of creditors at the trustees' office in Los Angeles today, Warren said. A hearing on converting Comstock's original filing into a Chapter 7 filing is scheduled for Feb. 6. in Los Angeles, he said.
Disbursement by Trustee
Once the firm enters Chapter 7, Warren said, a trustee will be appointed to liquidate Comstock Financial's assets and disburse available money to creditors.
U. S. Securities and Exchange officials in Texas are suing Comstock and Preferred Financial Consultants of Irving, Tex., alleging fraud and illegal sale of unregistered securities. The SEC is alleging that the firms raised at least $9 million from about 600 investors, many of them fundamentalist Christians, by promising returns of 15% to 36%.