Willis Carto archive

Including information about his associates

Liberty Lobby Bankruptcy — 341 meeting of creditors (6/19/1998)

In re Liberty Lobby, Inc., Case no. 98-01046, United States Bankruptcy Court for the District of Columbia (Chapter 11).

Creditors Meeting


DC = Darrell Clark, Attorney
FB = Frank Bove, United States Trustee’s Office
CN = Cara Nebeker, United States Trustee’s Office
PP = Paul Pearlstein, Attorney for Liberty Lobby
BH = Blayne Hutzel, Comptroller, Liberty Lobby
OS = Olive Snead
WC = Willis Carto
ML = Mark Lane, Attorney for Liberty Lobby
PN = Phil Nanzabet, Signature Book Rental

Speaker Dialogue

Good morning, ladies and gentlemen. We’re now on the record, It’s about 10:50 am. On June 19, 1998. My name is Frank Bove. I am an attorney in the U.S. Trustee’s Office in Alexandria. We’re assembled today to conduct the required first meeting of creditors in a recently filed Chapter 11 case involving a debtor known as Liberty Lobby, Inc. I have passed around a sign-in sheet for the creditors to sign in and give us your names, addresses, phone numbers and who you represent, if someone other than yourself so that we can contact you, if necessary, and as I mentioned before we got on the record, after the meeting is over, we’ll discuss with any interested parties the formation of an unsecured creditors’ committee. I’m going to ask some general questions and then I’ll open up the floor for creditors to ask questions if they like concerning the financial affairs of the debtor.

The case number is 98-01046, it was filed May 13, 1998, in the District of Columbia. The debtor is represented today by Attorney Paul Pearlstein and here to testify, as I understand it, for the debtor, Mr. Blayne Hutzel. Mr. Hutzel, would you please raise your right hand and would you swear or affirm that the testimony you are about to give in this proceeding is the truth, the whole truth and nothing but the truth?

BH I do.
FB OK, thank you. The first thing I want to do, first of all let’s make sure we have the right information for correspondence purposes. The Petition shows the address of the debtor as 300 Independence Avenue SE, Washington, DC 20003.
BH That is correct.
FB Thanks. And, also, you listed a business phone number of (202) 546-5611?
BH Correct.
FB Yeah, and your position with the debtor is what, sir?
BH I’m the comptroller for Liberty Lobby.
FB OK. I’m going to show you some of the documents that were filed in this case and ask you if you recognize them. Ah, I understand you did not sign them but you are, I assume, familiar with the documents and the signatures that on are them. This is the Petition I’m showing you now. It appears to be signed by Willis A. Carto, Treasurer. Do you recognize that signature?
BH Yes.
FB OK. And, I’m going to ask you the same thing with respect to the list of creditors, that’s Mr. Carto’s signature to the best of your knowledge?
BH [unintelligible]
FB Same thing I’m going to ask you with respect to the Schedules and the Statement of Financial Affairs. I believe they’re also signed by Mr. … no, they’re signed by Olive. Snead. Do you recognize that as Olive Snead’s signature?
BH Yes, I do.
FB OK. Now, I assume and correct me if I’m wrong, that the way these documents were prepared is that you or other people at Liberty Lobby, Inc. accumulated the information and gave it to Mr. Pearlstein and the people in his office and then Mr. Pearlstein actually prepared the documents and then you and the other people who signed these documents had an opportunity to review the information before they were, the documents were signed and before they were submitted?
BH [unintelligible]
FB And, to the best of your knowledge, at the time the documents were executed and filed with the Court, the information was correct to the best of your knowledge?
BH There are some corrections; there are some errors.
FB Keep your voice up, so that you can be heard on the tape, sir.
BH There are some corrections that need to be made.
FB OK. Cause I’m going to go over them with you briefly anyway so we’ll get to those as we go along. And, I also assume you had ah, an initial debtor interview, was that what, with Ms. Nebeker?
BH That’s correct.
FB OK. So, she, I assume, has explained to you that unfortunately when a debtor is in Chapter 11 you have these reporting requirements that are necessary. First and foremost being that you have to do this monthly operating report, which is due by the 15th day of the month of the month following the month to which it applies?
BH Yes.
FB And then unfortunately, as long as you’re in Chapter 11, you have to pay us money. That’s the way the game is played, and at the end of each calendar quarter, by the end of the month following the end of the quarter, you have to pay the U.S. Trustee System a fee which depends on the disbursement of the, of the debtor during that quarter and it’s very important that you keep with those things because, unfortunately, we have an obligation to report it to the Court if they’re not done. Now, the type, how would you describe the type of business that Liberty Lobby, Inc. engaged in?
BH We’re a citizens action group and a publisher. A weekly newspaper.
FB OK. And I also notice, by the way, before we came today that the necessary proof of insurance has been filed. We have it in the file, uh, for the assets of the corporation and that you have opened a debtor-in-possession account. Where is that account?
BH It’s the National Capital Bank of Washington.
FB OK. Could you tell us approximately how many employees in the business, employees?
BH 25.
FB All full time?
BH That’s correct.
FB No part time?
BH No. Part-time.
FB OK. And the business is operating as we speak?
BH It is.
FB OK. And, is the debtor corporation current with its payment of wages to its employees?
BH Yes.
FB So, there are no, in the schedules there are no wage claims listed?
BH That’s correct.
FB Both pre-Petition and post-Petition?
BH True.
FB How about withholding taxes that are required to be paid by the debtor for their employees?
BH All current.
FB Current? Both pre- and post-Petition?
BH Right.
FB And the corporation as I saw from the Petition is actually a District of Columbia corporation?
BH Right.
FB And its charter is current with the District of Columbia?
BH Yes.
FB And I did see Mr. Pearlstein was kind enough to fax to us a copy of the corporate resolute authorizing the filing of the Petition. We have that. Uh, what I’d like to show you now, sir, or actually ask you some questions concerning some of the schedules that were filed with the Petition. Do you have a copy with you, by any chance?
BH I do.
BH Yeah. It is here.
FB Oh, you have one?
BH Here.
FB If you would turn to Schedule B, that’s the personal property. That’s the listing for the corporation. Want to ask you explain, if you would, Item 10. It lists some two different annuities, um, one is monthly benefits voided as Godlove’s Annuity, $3,438 and the other is the Murray Trust, $568. Uh, could you explain to us what they are and how you arrived at those values?
BH OK. The Godlove Annuity is a contribution from the Godlove will and the payments that we get is the [unintelligible] thing that he was getting. And, as far as the Murray Trust …
FB How did the debtor get to claim that as an asset, that’s what I don’t understand? Was it a donation or something?
BH It was a donation. Yes, it’s a continuous thing.
FB I understand.
BH It’s not a annuity in the traditional sense.
FB I understand. OK, and the Murray Trust you were about to say?
BH It’s just saying that they, it’s a trust, on-going old time trust, which Liberty Lobby is the beneficiary, and they get paid $500 and something quarterly on that. I think last year we got a little over $2000.
FB OK. Next, I’d like you to address Item 13, which lists interest in partnerships or joint ventures. You list three of those there and with, I guess, just guesstimate values of a $100 each. Could you explain to us what these interests, consist of they …
BH They are, they were each $5,000 investments, mutually, and they were general partnerships in a project and all of these projects are, in our opinion, no good.
FB In other words, what you’re saying, is that the debtor of Liberty Lobby, Inc. invested $5,000 in each of these ventures?
BH That’s correct.
FB But, at this point, you don’t think they have any value?
BH That’s correct.
FB I want to ask you the same question with respect to Item 14 where you list government and corporate bonds and other negotiable and non-negotiable interests, instruments. You list four different items there, could you explain what each of those are and how you arrived at those values?
BH OK. The [unintelligible] that’s listed there for $18,000 should really be about $1800.
BH And that is a, a receivable that we gave this guy a loan and he paid a portion that back and the remainder of 18 we still have to collect.
FB So, it’s in the nature of an accounts receivable, or a note receivable.
BH That’s correct.
FB OK. And the Kayla Satellite Broadcasting Network?
BH OK. That’s just a, that was a radio, satellite radio network which we invested in and, um, lent them some money.
FB How much was the loan?
BH The loan is a little over a million dollars. No. [unintelligible] $119, 773.
FB So, it was a million dollar loan. Approximately when was that made?
BH It was over a period time.
BH From May of ’88 to June of ’92.
FB And, how do you arrive at a value for that, of a thousand dollars?
BH That has to be corrected.
FB Are you in a position to give us an approximate value now?
BH I’ll tell you the value right now is zero because Kayla is no longer operating and we don’t feel that we’ll get a penny for them.
? I chose a thousand dollars.
? Because I didn’t want to put zero …
FB Basically, you think it’s a worthless loan. That’s correct? And Robert Brock, you have a $1500 value on some …
BH Right. I think that’s good. He’s a black guy, activist.
FB Is that a loan also?
BH It’s a loan. We have two notes.
FB How much was that loan for?
BH 1500
FB Oh, so, this … That’s just the face value? OK.
BH That’s correct.
FB And, the last one under No. 14 is Willis A. Carto, c/o Liberty Lobby. You have the value of about $5550.
BH That’s a good one.
FB That’s a loan also?
BH That’s correct.
FB What was the face value of that loan?
BH I think it was 10,000 and he paid a portion of it back.
BH The remainder.
FB Ah, the next item is No. 15 where you list accounts receivable and you give a guesstimate value of about $43,575 and there’s an attached list to the schedule. Can you give us some idea of how old those accounts receivable are and how collectible you think they are?
FB You don’t have to go over it one by one, but you know …
BH I understand. I think that these are good receivables. Uh, a portion of them do not go over 60 days, uh, we’re talking about advertisers who give, uh, this figure is as of March, the quarter ending March 31, ’98 and it’ll be adjusted quarterly and I think it’s a good figure.
FB But you think, are you saying you think they’re all collectible?
BH Uh, 95%.
FB OK. Are any of them older than 60 days?
BH Uh, not listed here.
FB OK. Now, Item 17 of Schedule B lists other liquidated debts owing debtor including tax refunds. Um, you list three items here. Could you address each of them and tell us what they are and why it is that the debtor is owed this money. The first one is Government Education Foundation, GEF, $38,102.
BH Right. This organization pays Liberty Lobby for support services, personnel, rent, office supplies and it’s based on revenue brought in by each of the organizations and that could be said for each of these, Foundation to Defend the First Amendment, The Foundation for Economic Liberty. They’re all the same. Similar support services.
FB Services rendered by the debtor for these entities?
BH That’s correct.
FB OK. Item No. 20 of Schedule B lists other contingent and unliquidated claims. In there you list a lawsuit, Liberty Lobby v. Mark Weber, et al., in the District of Columbia and you have a value of $7,500,000 on it. Could you tell us a little bit about that lawsuit, the status of it, for example, before you filed the Petition?
BH Uh, I don’t know the status. I only know that it was filed and …
FB Mr. Pearlstein, do you know anything about that?
PP Yeah, this is a case that is being prosecuted kind of in response to the California case, and it’s being prosecuted by a gentleman, Mark Lane, who we have an application in for, uh, employment. He was here earlier.
FB Right.
PP Uh, and the $7,500,000 is simply the addendum clause. We have no idea what it’s worth.
FB OK. OK. I’m sorry. Did you say what status the case was in?
PP Um, I believe the Complaint has been filed. I think it’s been, I have not seen an Answer. I have a copy of the Complaint.
FB Early stage?
PP Early stage, yeah. I don’t even …
FB Perhaps an Answer, maybe not even an Answer.
PP I don’t even think there’s been an initial conference, but, scheduling conference, but I don’t know.
PP I can find out.
FB Uh …
PP And, it’s in this court, here with Judge, District Court, I think it’s with Judge Kennedy.
FB OK. Uh, next item, sir, I’d like you to address is Item No. 33 of Schedule B where you list other personal property of any kind not previously mentioned in this schedule. Could you go down those items one by one and give us some idea of what those assets are and how you tried to place a value on them starting on subscription income?
BH Well, each of these is the actual revenue brought in by the listed items. Mailing list rental, that’s renting our mailing list. Circulation incomes for sales of the newspaper outside of subscribers domain. Advertising income is advertising. Commission is commissions we give to our distributors. Royalties, every once in a while we get a royalty for copying our newspapers, a company will copy our newspaper, and because they do that they give us a royalty. A small amount. Receipt book sales are in-house book sales at the office.
BH Uh, non-taxable receipts are contributions that we receive.
FB If you would now, sir, can we page back a few pages to Schedule F, the list of unsecured non-priority claims. I wanted to ask you some explanation about a few of the larger ones there. Uh, starting with No. 8, uh, where you list a note owing to a Walter G. Boll in the amount of $127,000. Could you give us some explanation of what that debt is about.
BH Yes, Mr. Boll lent us some money, and it’s over a period of time, several years, uh, with a stipulated interest rate which I forget what it is, and it’s a good figure.
FB OK. How about No. 26, Legion for the Survival of Freedom, Inc.? Well, this is a lawsuit. Could you just tell us a little bit about this lawsuit that’s in dispute where you’ve put a, a disputed amount of $10,000,000 on it.
BH Yes, I think that figure is inflated. We have to change that. I think it was for $2,650,000 and that was the judgment. It’s with interest since the …
FB So, there was a judgment in that case?
PP Yes, that’s correct.
FB And, is that the immediate trigger for the filing of this Petition?
PP Yes.
FB That would cause you to have to file.
PP That judgment created a receivership as we understand it the receiver came in and seized the United States mail and, um, we had to stop it.
PP We’re not sure what the figure is right now. We had a $4,000,000 figure plus running interest. The case is on appeal. There is no stay other than here the case is on appeal.
FB OK. I next wanted, just wanted to ask you a question or two about No. 34, Montifiori Medical Center, medical bills disputed in the approximate amount of $60,576. Could you give some idea what that’s about?
BH Yes, that’s for one of our people who had some services rendered at the medical center, and we had a third-party administrator taking care of our insurance and in the latter part of December we were notified that they weren’t going to renew our medical plan, and that all bills that we hadn’t paid prior to the end of December, they weren’t going to stand liable. So, it’s in dispute as well as the Mt. Vernon Hospital.
FB That’s the next one, No. 35? I was going to ask you about that, it involves the same treatment basically?
BH Yes.
FB For the same employee?
BH All that’s going to be resolved is to be seen.
FB OK. The last one I was going to ask you about in Schedule F was No. 61, uh, is it Vebit or Vibet?
BH Vibet.
FB Vibet Limited note payable in the amount of $2,450,000. What is that about?
BH Okay, that’s several notes that were for funds that Vibet gave Liberty Lobby over a period of time.
FB Loans, would you say that? Would you categorize them as loans?
BH Notes, yeah. And, the last I heard, that won’t be, that should be taken out of the schedule here, uh, and it’s not a good note payable.
PP The thought is that the company is willing to waive the note but we don’t have any proof of that. In the meantime, it’s on the books as a loan and there are loan documents.
PP Be nice if it went away.
FB OK. Uh, the next item I wanted to ask you a few questions about, sir, is the last part of your Petition which is the Statement of Financial Affairs. Uh, I think it’s the last part of your attachments there. Item No. 3 is payment to creditors. The question specifically asked about any payments made within 90 days immediately preceding the commencement of the case, uh, and again I wanted to ask you, uh, about a few of these, the first one being the payment to Mr. Lane, Mark Lane, Esq., of $73,000 and change from March 2 through April 30. These were legal fees?
PP That’s correct.
FB And the next one Medallic Art Company Limited, about $43,000 between February 13, 1998 and May 7, 1998.
BH That was paid for uh …
FB What was the purpose of that?
BH That was for minting of silver coins; they are a minting outfit.
BH That’s a continuous operation they have of selling these clients pictures of Jefferson coin.
BH Yes we have a Jefferson coin and Jackson coin.
FB Next one I was going to ask you about was the one on page 4 of your statement - Forms Plus, Inc. — $20,385 on March 19, 1998. What was that for?
BH That’s for printing, I believe …
FB For the weekly newspaper?
BH Yeah it was for the newspaper and I believe it was for the fold-in cards.
FB Is the newspaper a weekly?
BH It’s a weekly.
FB The next one I was going to ask you is on page 6 - U.S. Post Office: $150,000 paid to them between February 27, 1998 and April 28, 1998. What was that for?
BH We gave them a bulk payment at that time and that’s since been all years, to mail the paper.
FB Next on item 4 you list some litigation. I think you have already addressed Liberty Lobby v. Mark Weber and the second one Legion for Survival of Freedom v. Willis Carto, is that the $10,000,000 litigation?
BH Yes
FB We have already discussed that one.
BH Yes, 4-10,000,000 or whatever it is the, California litigation.
FB And how about the third one, Liberty Lobby, Inc. v. U.S. Postal Service.
PP That was, it happened to be continuing at that time. That was the attempt to go in for a TRO to stop the seizure of the mail, and the TRO was denied and that’s when we came into bankruptcy.
FB Okay.
? But it’s still sort of open except it’s not gonna go anyplace.
FB Okay. Part B of Item IV mentions the receiver, Thomas F. Lennon and wanted to know whether - first of all can you explain to me why he was appointed?
BH I have no idea.
FB Can you address this Mr. Pearlstein?
PP My understanding of it is and I’m — don’t know — they’ve got separate counsel out in California but my understanding of it is that they obtained a judgment against Liberty Lobby along with several other people and there were different amounts. Personal judgments against, I think, Mr. Carto, a portion against Liberty Lobby and some other defendants and after the judgment was in place somebody came in for execution purposes and the appeal had been filed but no stay was granted. I assume one was asked for but I have no idea and they went in for execution purposes and a Judge of the Circuit Court in California, whatever name you call the trial Court signed off on a receivership and I believe Mr. Lennon was appointed the receiver and then retained counsel and amongst the powers written into a receivership was the power to seize the U.S. mail. I don’t know how they have the authority to do that but at any rate they did it and they came over to Washington, D.C. and he asked for the mail and they gave it to him. We were all kind of like, what?
FB That was my next question was going to be - does the receiver … do we know, does he still have assets of the debtor in his possession?
PP Not to best of my knowledge. But we’re not sure of that.
FB So, the only thing he seized was mail and does he still have that mail?
PP No. He returned some of it. We think he returned it all but we are not sure.
PP Bone of contention - took him about thirty days to get it back but something came back and it was unopened and we think that’s all there was to it.
FB OK, next, Item 16 - in this case since the debtor is a corporation list for the names of any businesses that the debtor has an interest in and you list there Kayla Satellite Broadcasting Network. Could you explain what that is and what the nature of Liberty Lobby’s interest in that corporation is?
BH Yeah, that is the same organization that we had the note receivable from. It’s in my opinion, I think it was … It was a radio station which we initially brought some shares in.
FB What percentage interest in the corporation?
BH I think it was about 54%-55%, something like that.
FB So to the extent that it is worth anything, Liberty owns 54% of Kayla but you think it’s worthless?
BH That’s correct.
FB OK, you have any questions that you want to ask?
CN Just as to whether any of the unsecured debt is from affiliates?
FB Ms. Nebeker raises a good point, is any of the unsecured debt payable to affiliates? Is it owed to any of the affiliates of the debtor? Okay. That’s the only questions that I have at this time so I was going to turn it over to the creditors to ask questions and I’m just trying to think if there is a way to go about doing this. I want to give everybody a chance. Is there someone here in particular wants to go first or should go first? Anybody who has to leave for any reason. If there answer is no then we will start with you sir. Tell us who you are and who you represent. You want to come up this way.
DC Good Morning Mr. Hutzel, I’m Darrell Clark, law firm of Morrison & Hecker, representing LSF, Inc. Is the debtor a profit, for profit or non-profit?
BH Not for profit.
DC Is the employee I.D. number listed on the schedules, the employee I.D. number of Liberty Lobby?
BH Right.
DC 52-0789502?
BH Correct.
DC Are there any subsidiaries of Liberty Lobby?
BH No.
DC You mentioned before that there were some other organizations, Government Education Foundation, Foundation for First Amendment something like that?
BH To Defend the First Amendment
DC To Defend the First Amendment. You said they pay Liberty Lobby for personnel.
BH Right. We share office space. We share staff and we share office supplies.
DC Do Liberty Lobby employees work for these organizations?
BH The portion of the time that I was there, salaries were based on revenues.
DC The motion that was filed in the Bankruptcy Court to pay employee payroll then included paying employees for working on non debtor related tasks, is that correct?
BH Could be, yes. Twenty-five people that we had on staff could work on or more of these jobs but we have one payroll.
DC You have one payroll?
BH One payroll.
DC That pays employees for working for Liberty Lobby, Government Education Foundation, Foundation to Defend the First Amendment?
BH Yes.
DC So the debtors then is paying salaries for employees from working for non-debtor companies?
BH Right, then it’s reimbursed by these companies. If they do the work.
DC How do the employees allocate their time?
BH I base that on the revenue of the companies.
DC So, if one of the companies is not making money, then they’re not paid by that company?
BH That’s correct.
DC And Liberty Lobby makes up the payment for them?
BH That’s correct. Based on, yes, the revenue. There are some direct staff … just Liberty Lobby staff. They do not share in direct staff.
DC Are there any Liberty Lobby employees who work more than 50% of the time for any of these organizations?
BH Yes.
DC And, yet, Liberty Lobby is paying them?
BH And, then, they are reimbursed, provided …
DC Provided that there’s money to reimburse them? Who are the directors of Liberty Lobby?
BH Uh, I don’t have the list. There’s a long list that’s on the schedule. Did you see it?
DC No.
BH Yes. It’s on the Statement of Financial Affairs.
DC And the officers of Liberty Lobby?
BH As well. We have a list of some of them, somewhere.
DC What role does Willis Carto play?
BH He’s the treasurer and the founder of Liberty Lobby. Chief Executive Officer.
DC So he’s CEO, treasurer, and founder of Liberty Lobby?
BH Yes
DC Does he play a role on the Board of Directors?
BH He was on the board, but I’m not sure.
DC Are their any criminal actions pending against Mr. Carto?
PP I would object to that. I don’t see any relevance.
DC If the president of the debtor, the CEO, the treasurer’s debtor, is involved in criminal actions?
PP As a result of something regarding Liberty Lobby, or something else?
DC I just asked if there is any …
PP Well, I object on re record - go ahead and ask.
DC Is Liberty Lobby involved in any criminal actions at this point?
BH No.
DC Is Liberty Lobby involved in any ongoing criminal investigations?
BH No.
DC What’s the paid circulation of The Spotlight?
BH I think the last press run was 81,000 and that includes everything, paid and non-paid and papers for distributors.
DC Can you break it up between paid and non-paid?
BH I think we can, yes. I may even have it here.
PP You had given that to me a long time ago and I don’t have it with me.
BH I have it here. Paid is around 65,000, that is plus or minus.
DC That is 65,000 paid and approximately 16,000 that are comps. Is that correct?
BH There’s some comps and then there’s some … these are issues for the distributors, 13,603 copies printed for 1248 distributors.
BH And these are the office copies.
DC Are there waste copies?
BH [unintelligible]
DC OK, so from a total press run of about 81,000, how many do you think is covered by subscriptions?
BH About 64,573.
DC How often does The Spotlight come out?
BH Weekly.
DC Comes out by the United States mail?
BH Correct.
DC You mentioned that the debtor-in-possession accounts were located at National Capital Bank. Are there any other bank accounts?
BH There is one small account in Dauphin, Alabama that is not listed. That’s in the other …
DC You say you’re not using it, there’s money in the account … you still have access?
BH About $200. It’s just a …
DC And there are no other …?
BH [unintelligible]
DC Is there any other litigation that Liberty Lobby is involved with?
PP You mean other than what was mentioned?
BH No.
DC Is there any litigation in which Liberty Lobby’s involved with with respect to actions brought by the Government Education Foundation, Foundation to Defend the First Amendment?
BH [unintelligible]
DC Who is Liberty Lobby’s California counsel?
BH I’m not sure, that could be Brian Urtnowski.
DC Has he been appointed by the court, do you know?
PP No. I mean, we have an application pending and we’re waiting for the Affidavit to come back. But no, not at this time.
DC Are there any other attorneys that are employed by Liberty Lobby, other than Mr. Pearlstein, and Mr. Lane, and California counsel?
BH I don’t think so.
DC That’s all the questions I have right now.
FB Mr. Hutzel, there’s something I should have asked you before. Question 19 of your Statement of Financial Affairs B lists all the different directors of the debtor corporation. Can you tell me whether any of them were on the payroll of the debtor?
BH No directors on it.
PP Sorry, I think Elisabeth is, isn’t she? Isn’t she a director?
BH She’s a director. I’m not sure. Is she a director?
PP There were three …
FB Elisabeth Carto?
BH Yeah.
FB She’s listed as a director?
BH Yes, she’s on the payroll.
PP There were three people that were receiving pay for work.
FB But she’s the only one on the payroll? And, is she a full-time employee?
BH Uh, I think she was like 80% to 90%.
PP In answer to question No. 21, I think Willis also receives something. Is Mr. Reiner a director?
BH Yes.
PP All three …?
BH But not on payroll.
PP Well, there’s …
FB That was the question.
BH OK, but however they do get fees, writing fees, expenses, uh …
FB They’re not salaried employees, is that what you’re saying?
BH That is correct. Only Elisabeth.
PP Elisabeth is. The others are 1099, depending on [unintelligible].
FB OK, so none of them are salaried employees but Question 21 on the Statement of Financial Affairs lists the withdrawals of any kind to any of the directors, is that correct?
BH This is correct.
FB And, just so it’s on the record, Mr. Carto has received during 1997 and ’98, $31,348, and that’s for what?
BH Uh, that’s for expenses, and per diem.
FB Per diem for consulting work or what?
BH Well, he’s, he submits a expense report periodically.
BH He’s paid that way.
FB And how about Vincent Ryan?
BH He’s, uh, he does some writing for the paper.
FB So, the $51,550 that he received during ’97 and ’98 was for writing?
BH That’s correct.
FB And, Elisabeth Carto, during ’97 and ’98, received $36,225 and that would be for what?
BH Salary.
PP That is [unintelligible].
FB OK. Do any of these directors receive any, what we would call perks from the corporation, company cars, life insurance, anything like that?
BH No.
BH Other than Elisabeth, and since she’s on the payroll, she gets employee benefits.
FB OK. Back amongst the other creditors who are in attendance, sir, you want to come up. Maybe it would be easier for you to be heard if you’d bring your chair up to the table here. OK. And, you are?
PN Phil Nanzabet from Signature Book Rental.
PN On May 21, you filed a motion with the Bankruptcy Court for permission to pay trade creditors such as Signature Book Rental? I wonder what the status is of that?
PP I’m sorry, I can answer that because that I withdrew it subject to, number one, we did in a very rushed manner, and Mr. Early, who normally has handled this case in the U.S. Trustee’s office, indicated he would object to it and we didn’t have everything in order in terms of what our information was regarding the budget and the answer is, it’s been withdrawn, and, uh, it’s our intention to renew it and to file something else but on a smaller scale, probably closer to $30,000 or $40,000, rather than the total amount, within the next 30 days. But, at the moment, nothing’s happened to it.
PN Well, shouldn’t we receive some notice that you withdraw this? We received a copy of the notice that it was filed and have been acting under the assumption that we were going to be paid shortly.
PP Well, I don’t think I’m obliged to do that, but there, it was done in a verbal conference with the court, that’s the way he handled it, on the telephone, and normally what the court would do in a situation like that is to issue an order indicating that it has been withdrawn, which would be distributed, if necessary. I apologize if you haven’t been notified. That would be the normal course. I haven’t seen that come out of Court.
PN What are the current plans for paying trade creditors such as us?
PP Well, there’s two answers to that. One is that the hope is that through the plan, you’ll be paid, at least a significant percentage. But, as to the normal day-to-day operation, it’s going to be subject to court review. It’s my understanding that the debtor’s plan is to file and make some partial payment on the amounts that are due.
PN OK. Will we be informed of that?
PP Yeah, I mean, if another motion goes in, you’ll be informed.
FB You are listed as a creditor so the court will send … You got notice of this meeting today, right? So, you will get notice of anything that’s … any proceeding that takes place in court.
PP I’d like to tell you you’ll be paid 100%, but I can’t do that at this time. I know that’s what you’re worried about, I understand that. Everything post-Petition, in an administrative proceeding and everything from the moment of May 13 forward, they may pay. Pre-Petition items, that they can’t pay at this time without the court’s permission.
PN Do you know when there’s going to be another filing with the court for permission?
PP Well, I’m hoping within the next 30 days. And, it will only be a partial amount. But. that’s aspiration. I’m not sure. I don’t mean to mislead you.
FB Any other creditors want to ask any questions?
? Not at this time.
FB Sir, Ma’am, any questions?
? No. [unintelligible]
FB That may be all the questions. Uh, one other thing which I probably should put on the record, just, you may not be in a position to answer it, but, uh, I always like to ask at the first meeting of creditors of the debtor and debtor’s counsel, when they think they might be filing a plan of reorganization. Mr. Pearlstein probably told you that the way the Bankruptcy Code is set up for the first 120 days after the case is filed, it’s called the period of exclusivity and during that period no one except the debtor is allowed to file a plan of reorganization. Now the court could conceivably shorten that, terminate the period of exclusivity and then any interested party could file a plan. That’s unusual. Sometimes more often, the court extends the period of exclusivity but, if it’s not extended, uh, it expires after 120 days, so we, I like to get a feel from the debtor if there’s any way that they can know at this point whether you think you’re going to be able to file such a plan within that first 120 days.
PP Again, aspirational. I may be the only lawyer in the world who doesn’t like continuances and I’ve got on my books to try to get the disclosure statement and at least a tentative plan in within the 120 days.
FB Thank you.
PP The problem in the case, as you can see, is the 800 lb. Gorilla is Mr. Clark’s client and that situation is subject to the Court of Appeals.
FB Right.
PP Which I doubt is going to be resolved within the next two or three months, and I’m not sure how to prepare a plan like that.
FB Right.
PP You know, clearly if they win, we’ve got some type of repayment schedule. In other words, I think the corporation wants to be reorganized. They are functioning and, unless all contributions dry up, there was a suggestion of that right at the beginning. If that does it, God help us, and it’s in Chapter 7. But, if not, they’re hoping to continue and believe that they can continue and see three or four million dollars worth of receivables. Uh, but the provision for that judgment is the hard questions. If it doesn’t exist, it’s probably business as usual. And, if it does exist, then we’re trying to get the evaluator, Doug Richmond, a request for him to come in and I don’t have any valuations of the assets, but the significant valuation is the name and the phone number and the mailing list and, uh, he will respond as soon as the court gives him permission to do so.
FB Right. Any other questions from any other creditors? Ms. Nebeker, did you want to ask anything else? Uh, then, it looks like we’re done. It’s about 11:35 a.m. I thank you all for attending. We apologize for the mechanical difficulties. It delayed our start but I think it worked out okay. Thanks for attending. I wish you luck. Thank you.
BH Thank you very much.