U.S. trustee objects to EFI fees
March 25, 2009
By KAREN VELIE and DANIEL BLACKBURN
A federal bankruptcy judge overseeing the division of assets of failed North County hard money lender Estate Financial Inc. (EFI) balked Wednesday at professional fee requests totaling nearly $4 million and said she will examine those claims more closely.
Trustees of EFI’s funds sought the court’s approval of the fees for themselves, attorneys, and others working on EFI’s bankruptcy proceedings during a hearing in a Santa Barbara U.S. bankruptcy court so that they could start dispersing funds monthly to professionals working on the bankruptcy.
Judge Robin Riblet agreed with U.S. trustee Brian Fittipaldi’s objection to the proposed charges.
Fittipaldi told the court that some of the professionals’ request for fees presented appeared to be cross-billing and double-billing.
Riblet then said she would not grant any fee request above the amount of unencumbered funds in the EFI accounts.
“I will determine how much is paid to the professionals. I am not allowing all the millions of dollars in fees,” she said. “I am only allowing what is appropriate to ask for now. Some of the professionals crossed the line.”
EFI trustee Thomas Jeremiassen explained that eight properties had been sold and $1 million had been dolled out to investors. Approximately $760,000 remains unencumbered. Of that he wanted $600,000 to go to professional fees.
Riblet asked if the part of money belonged to “one of the estates.”
“Kind of,” Jeremiassen responded. “The fund didn’t get assigned deeds of trust.”
Riblet continued to question the trustee on how monies would be split between the two separate bankruptcies – EFI and the EFI Fund.]
“So your position is I should just take $600,000 and allocate it to the professionals discounting that $100,000 may belong to the fund and $500,000 to EFI,” Riblet said.
Jeremiassen responded, “Yes, that is what we are suggesting.”
Riblit temporarily tabled the claims and informed the professionals she requires written responses to Fittipaldi’s fee objections prior to the next hearing on April 22, or those requests will be waved.
One of the creditor’s responsible for EFI’s bankruptcy filing, developer Ron Cooper, asked the judge why the trustees were not communicating upcoming court dates with the public as previously stated in court. The trustees agreed to start posting hearing dates on their web site.
In addition, Cooper voiced his dismay at the lack of construction and real estate experience held by the professionals. He noted that approximately $60 million had been lost due to the speed of the trustees and their crews.
“The slowness in the disposition of the assets is causing the estate harm,” Cooper added. “There will be a motion to transfer to Chapter 7 before there are more losses.”