updated 06:25 pm EDT, Wed July 27, 2011
Ultimate Electronics wants money refunded
Ultimate Electronics, a consumer technology chain that shuttered its stores and went out of business in April, is in court trying to recover money it paid Apple for products it received and re-sold -- a technique known as "preferential transfers" that could see the defunct chain recover as much as $420,000 from Apple, AppleInsider reports. It is normally used only to try and recover the last payments a company sent its suppliers.
The concept of "preferential transfers" itself comes from a loophole in the bankruptcy law, where companies that file for bankruptcy can try to claim "preferential" status on money sent to suppliers up to 90 days before before the company actually files for bankruptcy -- even though the company received the goods or services it bought and presumably re-sold them. Ultimate Electronics filed for bankruptcy in January, and its trustee is claiming all monies sent to Apple between November 1st, 2010 and January 24th, 2011.
Bankruptcy attorney and author Robert S. Bornstein refers to this technique as the "double whammy," according to the AppleInsider report. He describes the technique, where a company with an ongoing credit arrangement with a supplier such as Apple orders merchandise and then files for bankruptcy, forcing the supplier to write-off any outstanding debt -- but then at some point (even years) later, gets a threatening letter from the Bankruptcy Trustee demanding full refund of the last payments the now-defunct company made to the supplier.
Such claims are usually settled for less than 100 percent of the money requested, even if the supplier is still owed money from the bankrupt company -- the additional refund may be added to the list of debts owed and considered under the bankruptcy filing. The total amount sought by Ultimate Electronics against Apple is $420,104, including a series of checks written on the day of the bankruptcy filing totalling $181,242, presumably to pay off its outstanding balance.
In a final twist, some 25 percent of Ultimate Electronics was owned by Apple manufacturing rival Hewlett-Packard. [via AppleInsider]