EFI trustees: Piggys at the trough?
September 5, 2008
By KAREN VELIE and DANIEL BLACKBURN
Trustees working the Estate Financial Inc. (EFI) collapse – including a pair retained by the failed lender – want nearly a quarter-million dollars for their efforts during the past month and a half.
That includes $10,400 for two round trips by car from San Francisco to Paso Robles.
Creditors and investors in the bankrupt Paso Robles firm are disputing a significant portion of trustees’ initial charges, which now total $243,000, to a federal judge. If there is a piece of the EFI pie left, it’s rapidly disappearing.
More than 3,000 investors, primarily seniors, trusted their nest eggs with EFI.
Formal objections to the ejected trustees’ requests for compensation have been filed with the court. U.S. Bankruptcy Judge Robin Riblet who must approve charges prior to the disbursement of funds
FTI Senior Managing Director Freddie Reiss, FTI, and Reiss’ attorneys want the largest serving of the current bill. Appointed by EFI principal Karen Guth and subsequently dismissed by the U.S. court, Reiss submitted personal bills of $35,953. Accountants at FTI want more than $114,000. And attorneys Beall and Burkhardt of Santa Barbara have their eye on $23,947.
Reiss’s crew charged $15,315 for preparing and submitting their bills. FTI Managing Director Michele Lee claims travel time and mileage costs of more than $5,000 for each of two round trip drives from the Bay Area.
“She could have flown for a fraction of the cost,” EFI investor Sherri Bell said in a formal objection to the bankruptcy court.
Reiss claimed in his billing request that his hourly rate of $715 is “ordinary compensation for a person acting as a court appointed trustee.”
Nevertheless, former EFI Mortgage Fund trustee David Gould, current EFI trustee Thomas Jeremiassen, and EFI Mortgage Fund Trustee Bradley Sharp list charges of between $450 and $495 an hour.
In June, creditors forced EFI into Chapter 11 bankruptcy and asked the courts to appoint a receiver in an attempt to protect their investments. About a week later, EFI owners Karen Guth and Joshua Yaguda voluntarily placed EFI Mortgage Fund into Chapter 11. They then assigned Reiss to manage EFI, and Gould to oversee the mortgage fund.
Judge Riblet rejected Guth’s appointments, citing allegations of fraud and mismanagement made by the California Department of Real Estate against EFI as compelling reasons to prohibit those “tainted” by Guth from having authority over EFI. Riblet then appointed Jeremiassen as the EFI trustee, and Sharp to watch over the EFI Mortgage Fund.
At the onset of the bankruptcy, EFI’s portfolio consisted of 500 active loans and more than $317 million in unpaid principle. Only $21,000 was held free and clear, according to court documents.
Jeremiassen and Sharp lead a small army of accountants, attorneys, and assistants. The group continues to pore over EFI records in an attempt to trace the money trail, analyze investments, and help creditors and investors to recover monies. The process is expected to take many months.
Due to the lack of available revenue, the trustees and their staff are considered “at risk.” This means they may not be compensated for their work. EFI Mortgage Fund’s current trustee, Sharp, leads the top 20 unsecured creditors’ list with a claim of at least $39 million, according to court records.
Tags:, district attorney, EFI, Estate Financial, Paso Robles