- Kevin Padrick Alleged Perjury
- Obsidian Finance Group v. Crystal Cox Case Details
- Eric P. Robinson CUNY Graduate School Rebuttal
- Judge Randall Dunn
- Obsidian Finance Group
- Kevin Padrick
- Homestreet Bank Files Objection to Conflicts of Interest and Fees of Kevin Padrick, Obsidian Finance Group
- Summit Insiders File Objection to Fees of Kevin Padrick and Tonkon Torp
- Stephanie DeYoung, CPA Video Deposition Summit Bankruptcy
- Mark Neuman Deposition Summit
- Video of Obsidian Meeting with Client Summit BEFORE they Were the Debtor
Saturday, October 27, 2012
Six Days AFTER This Presentation, Kevin Padrick Was APPOINTED Trustee: "The shareholders had been in the dark so long, they were growing concerned with the lack of action and communications from Summit’s Bankruptcy attorneys, Sussman Shank." "The principals of Summit contracted with Kevin Padrick and Obsidian Finance in December of 2008"
Six Days AFTER This Presentation,
Kevin Padrick Was APPOINTED Trustee
The people present at the meeting were as follows….
ME (Stephanie Studebaker-DeYoung) - Daughter, and one of the many LLC members being drawn into the Summit BK court.
Terry Vance – At this time was the Chief Restructuring Officer (CRO) for the Summit BK court.
Mark Neuman (My Dad) – Principal of Summit Accommodators Inc.
Jan Neuman (My Step-Mom, Dad’s Wife) – Substitute Teacher/Home-maker
Tim Larkin – Principal of Summit Accommodators Inc.
Lane Lyons – Principal of Summit Accommodators Inc.
Brian Stevens – Principal of Summit Accommodators Inc.
Kevin Padrick – Current Trustee for Summit & senior principal and cofounder of Obsidian
Ewan Rose – Employed by Obsidian Finance
Tension was palpable as we all sat down at the Summit conference table. The atmosphere of the place was sullen, quiet, empty, and sad. This used to be a prosperous business with a “family” of employees made up of many talented individuals working hard but having lots of good “family” fun. Not anymore. Now it was just four frustrated principals, Vance, Padrick, Rose, Norwood, Jan and I here to have a meeting to discuss Padrick’s plan to get the exchangers paid off. Instead of asking to see his presentation, Tim addressed Kevin Padrick with his concerns…
Tim: My concern, is that when we originally met back in December, there were several things that Obsidian put forward that they could do for us…move quickly, engage the insurance companies almost immediately, work fast enough perhaps so we could preserve some exchanges. At that time, the 45-day date had not passed. That was something that you, Kevin, put forth and there was a reason to engage you in the process. So we spent a week or so putting together all of the information that we could with our hopes that this thing was going to move forward quickly. And that, in fact, this thing was going to move forward quickly and that, in fact, because Obsidian was being retained by us in the process that we would be getting some communication from you.
And in the process, at least from my perception, you guys are doing an end around us…selling yourself to the creditors’ committee. We are getting absolutely no feedback. We’re seeing absolutely no results that you put forth you were going to bring to the table. And so, obviously, we start getting concerned. We’re concerned because we start hearing things that perhaps at the presentation to the creditors’ committee you are presenting what we felt was a more complex position and structure than what we have going here.
The things like the Three Sisters Development LLC were very complex when truly they don’t even come into play, or minimally, in this whole thing. That’s when I think all of us became concerned about what we have done here. We have put out $100,000 of exchanger money, essentially, and we’re seeing nothing from it and we’re getting no communication from this firm that we retained to help us with that. If you could, kind of respond to what it is you have been doing and why none of the communication is coming to us.
Kevin: OK, then, that sounds more like…umm…an interview and if you want to know what we’ve done….we started day one…
Stephanie: Yes, we would like to know what you’ve done.
Mark: Hey just answer the question. I don’t know what the problem is here. That’s a fair question. Just answer it Kevin. I want to hear it.
Kevin: Well that’s fine. I’m glad that you want to hear it. That’s not a question. It’s a question of whether it is appropriate to have Terry here when we are going through these questions.
Stephanie: I don’t see that if you don’t have anything to hide here…
Kevin: It’s not hiding anything.
Stephanie: Ok, can you give us the information that you can give us in front of Terry regarding this question?
Tim: Let me just say one other thing. In this engagement letter that you sent to us, you basically said you were working for the company under the direction of the CRO, who is Terry. So I don’t know when that changed or why now that is different and why you care if Terry is here or not.
Mark: Right. As far as I’m concerned, you’re still working for Terry. Why wouldn’t he be in on this meeting?
Kevin: Well, again, Terry knows what we are doing. I mean that’s not the issue.
Stephanie: Terry, do you know everything?
Terry: Not everything…absolutely not.
Stephanie: We are all actually not quite sure what you are doing.
Mark: Because there’s been no communication. So we’re just asking what happened here.
Kevin: Well, uh, we’ll start and answer a few of your questions, but if we’re going to move on…
Stephanie: We would like to move on, but we would like you to answer the question.
Kevin: I understand. If, uh, if we’re going to do all this…
Stephanie: Just answer.
Kevin: Ok…we started the very first night, the very first night with exactly what needed to be done in this case. We started moving the next day as to what needed to be done. We had a communication where we were told we were moving too fast and Sunday…that very first weekend. K. Just so you know what was going on.
Tim: That communication was from…
Kevin: It was from counsel and from Terry. And, ummm, we said there are issues with the bonds, issues with the insurance polices. Can we figure out how to mitigate our two jobs, that are to figure out how to maximize the value of the assets and look, if this is going to be a deposition, we’re going to stop. If you’re going to take notes here of everything I’m saying, we’re going to stop.
Mark: But, why…
Kevin: If you want your attorneys to depose me, then set up a …………
Mark: You can take notes on everything I say. I just want to know what’s going on…. Because you know frankly, you know you’ve had this thing…you came in just exactly how Tim put it and basically sold the job and as soon as you sold the job the communications stopped. And it is just very interesting here how scared you are to talk about this and say this is what’s going on. Just put everything on the table and let’s get a working relationship and an understanding going
Kevin. This reaction you’ve got here isn’t going to take anything anywhere to getting a trusting relationship where we go, “Wow, we feel good about what these guys are going to do.” I mean, you haven’t told me what you do to bring value to this. I have no idea. Apparently, other than listing stuff with realtors. Let’s say you’ve got 6% commission with realtors. Whatever the proceeds are….. Let’s just throw out a number….. $10 million….. just by getting this job alone and listing this stuff with realtors, you get $900k on the table for your company. So that doesn’t motivate me to do anything other than just land the job. It’s kind of like a realtor…. They’re going to get a commission if they just land the listing and they don’t have to do much else. These are fair questions. I don’t understand why you seem to be hesitant to answer any questions and just have an open discussion about this.
Kevin: I’m happy to have an open discussion, but if you’re going to take down verbatim what I…
Mark: You thought that you were going to come over here and have a meeting and we weren’t going to take notes?
Kevin: No, I uh. As I’m speaking you’re typing.
Mark: That’s right. Cuz we want to take notes on what you’re saying Kevin. And I’m seeing you having a fear to being held to what you said.
Kevin: Well, look…I don’t want to have this thing blow up and then have a situation where you’re sitting there taking notes and this and this…and have you say, “Kevin said this…” That doesn’t promote an open discussion. If you want to have a deposition, that’s fine, we’ll have a deposition. If you want to have an open discussion, then let’s have an open discussion.
Mark: You write notes of everything we say, and we’ll write notes of everything you say, and that’s how we’ll get a working relationship. It will just be fair for both…
Stephanie: You guys, you know what, we’re just going to pass on the notes. OK.
Tim: I think that at the end of the day, our desire is to get as much value as possible as quickly as possible to the creditors. We have no other agenda.
Kevin: But that’s our agenda. That’s exactly our agenda.
Tim: We may not agree on everything that is discussed here at this table and there may be some tension that arises over that. I will say that we come to this meeting with a bit of a defensive stance because we feel like you did an end-around on us. Rightly or wrongly, lack of communication has put us in this position. Let’s get that communication out. Let’s talk about why Obsidian would be the best solution to this. So that we can evaluate that, and determine whether that is the best solution. I don’t know how to emphasize this enough. We just want to move as quickly as possible with the greatest value as possible for the creditors. That is all that we want. But there has to be this trust. Whether you’re talking about marriage, kids or whatever… if there’s not communication, you can’t have trust.
Kevin: That’s fine. We immediately started to analyze all the exchange transactions and started researching immediately how do we mitigate damages. Our view was that the exchange transactions needed to go forward as soon as possible. We needed to authorize them in blanket, because it is critical that we not have damages accruing because those damages are difficult to measure. As you know, because you’re experts in this. The damages are difficult to measure because could be taxed and normally you present value it back at some point in time. It’s hard to determine exactly when, because someone could say, look, I was going to die and get a stepped-up basis and I was never going to pay tax. It is a complicated matter, so our view was, let’s avoid the damages however we can. So we started on all the mitigation strategies and then we were told “stop, don’t do that”. Kevin said why. They said because we (Sussman), Terry and the law firm will handle it. Okay. That’s what we understood we were supposed to be doing. Okay, we’ll stop. And we tried to get involved a little bit again, and we were told send all of the files they had on exchanges to SussmanShank. And we did. K. So we no longer had the files. So we couldn’t do anything. We then went to the creditors’ committee. I’m just going to take the mitigation first and then the real estate. We met with the creditors’ committee and we were instructed to…. Initially we were all going to meet with the creditors and wanted to have an open meeting with them and present the information that you had presented to us and that we had supplemented. We were told we couldn’t present that information to the creditors, so we didn’t.
Mark: Did you understand why?
Kevin: It’s a confidential communication. The creditors’ committee has to keep it confidential and ultimately signed a confidentiality agreement, we were sent back. So remember the creditors’ committee at the request of Terry, we met with the creditors’ committee. We didn’t do any end-run. We were told to go to the creditors committee and work out an agreement with them. Okay. We then did that. Sat and we had hours of meetings, then we had phone calls and on and on and on and on.
Terry: Excuse me Kevin, hold it right there. Let me correct you. I never instructed you specifically to go to the creditors’ committee.
Kevin: Uhhh….. That’s what we were told, that you had instructed us. We were supposed to go meet with the creditors…
Terry: Did I say that to you? Did I say that to you?
Kevin: I don’t know whether you said it to me or Sussman said it to me.
Terry: Who the hell said it to you? That’s what I’m asking.
Kevin: We can go back and look through the emails and figure it out. I don’t know why it is important to know whether it was Sussman that said it to us or somebody else.
Terry: Don’t say that I’m saying things if I did not personally say them to you.
Kevin: I’m assuming if I was told by Sussman that you said it, that it was said….. But I don’t know.
Stephanie: Well, we would like to know who said this.
Mark: I know you don’t think it is important, but maybe it is important to us.
Mark: We really do need to know who said this. Anyway, go on….
Kevin: So we went to the creditors and we spent those hours. At the very first meeting we had with the creditors they said, we’re very concerned about mitigation. We said we completely agree. The mitigation damages are stacking up and it is to everybody’s disadvantage and something needs to be done. And they said, well we’ve got some ideas, and we listened to some of their ideas. Some of them were kind of off the wall and some of them showed some creativity. So they said please go and see what you can research. So with that, we went back and focused on how to mitigate. By the next day we came up with a strategy that we thought worked. And we went back to the creditors and to Sussman and said here’s our idea. This is how we think these damages can be mitigated. And they said, okay. We want to have our 1031 attorneys, creditors and Sussman talk about it. Right, but I said then let’s do it, let’s not wait. And they said okay, we’ll discuss it. And we were told that it was going to be handled by Sussman and the creditors’ committee. Okay? But you guys have a melting ice cube here and you need to do something about it. And, today we sit where we are and we are only handling certain 1031 exchanges on an individual basis and no blanket order. And the damages are stacking up in the millions of dollars. Now they could be present valued back and argue it was less. Somebody could argue that they are stacking up into the millions of dollars. Ummm, it’s clearly not our deal. Literally, on the second day we were drawing up an engagement letter. We think that it is crucial to mitigate these damages. We talked again to Sussman and said we’ve got to have a blanket order. Sussman said we’ll get to work on it right away. So I am expecting and I hope to have a blanket order one of our people talk to Sussman and try to get a blanket order going right away. Specifically for the forward exchanges.
Terry: Lane, how long have I been talking to you about a blanket order?
Lane: Since about right when we got here. Once he figured out what a reverse was, and we’ve been harping on it for six weeks but the communications with Sussman have been difficult. You send anything over to Sussman and it just dies. You get a bunch of explanations about how bankruptcy is complicated and Three Sisters isn’t under the jurisdiction and blah, blah, blah. And it’s just much to do about nothing. Like you said, damages have been stacking up and for no f-ing reason whatsoever…. none. Unless the creditors’ committee is off in left field and thinks that they should get these properties.
Kevin: No, they want damages mitigated, let me tell you.
Mark: Let me ask one question. Why did you choose to not communicate with us since early January?
Kevin: Because we weren’t in a position to communicate with you. What we were doing was to be responsive to doing what we were asked to do.
Mark: By who?
Kevin: We were asked to do so, specifically by Terry and Sussman. And honestly we didn’t even contemplate that we were supposed to come back and talk to you. We thought we had two jobs. That’s what we thought our two jobs were. And we embarked on both those jobs.
Terry: How much time did you spend with the creditors’ committee?
Kevin: I don’t know how many hours…I don’t know.
Terry: Because I’ve gotten communications back through the creditors’ committee regarding your guys’ work rather than getting it directly from you. I have a problem with that.
Kevin: Terry, if you felt that there wasn’t communication, all you had to do was talk to us.
Brian: On the initial meeting I was really excited because we were hiring someone who can help understand properties, run the exchanges and talk to the bonding people. You kind of answered the first two. I just want to know about the bonding.
Kevin: You want to know about the bonding. I was told on Sunday, that first Sunday meeting….. Stand down on the bond. Don’t do any more research and stop.
Lane: Sussman told you that or something?
Kevin: And Terry on the phone.
Brian: From our very minimal discussions with Sussman, Sussman said there wasn’t much communication from Obsidian. After you gave your presentation to the creditors’ committee, someone sent us a power point. And that was kind of an overall….I was still on the….. It’s like, gosh, what’s being done other than than selling this thing to the creditors? I think that’s what our mistrust was…. It felt like, you know, you guys were hired…. We had a little bit of relationship established and then it disappeared. It felt like everything was towards the creditors. We felt we had a…. really our motivation is the same as yours which is to get money to the creditors. Why aren’t we being used in any way while like, hey, we’re looking,at this property. We offered up our assistance. I totally realize the creditors don’t trust us, but it seems like you guys could have used us in some way throughout this. That was, I guess, the frustrating thing so that the farther this went along the more I felt that there was almost like a plot. Like there was a plot all along to… okay, we’ve got the money from them these guys, and here’s our plot. And then, and not working out a solution with lots of players involved.
Kevin: That is not the case. From day one we identified that we have to have a control mechanism over these properties. And we need to immediately start to act on the properties. ‘Cause as you know, in the format they’re in, it’s virtually impossible. Because you guys control them. They’re not controlled by….
Mark: We don’t control anything right now Kevin. We have these properties, if they’re listed for sale, if they get a buyer; the money goes to the bankruptcy estate. If they want it out of our control, and we’ve been told don’t transfer anything.
Kevin: But those are different issues. And can I walk through those separately for you?
Kevin: There’s different reasons for that. From our stand point, it’s a control issue. It’s not a…… because of the litigation, I understand that you guys have been told not to transfer anything. But that’s not us. You have to understand, that’s not us. We’re trying to get control so we can put the creditors, the people that are stopping the action, and calm them down. Does that make sense what they want?
Mark: No, it doesn’t make any sense. If the creditors were concerned about it, they would stop their actions so we could move on, but they’re not. They just keep going.
Kevin: Guys. Let’s start at the very beginning. There is a perception by the creditors…..K…. and you have to deal with reality on this……
Mark: We’ve got a perception here and you’ve got to deal with that, too. But go ahead.
Kevin: I understand. I’m willing to be open, but we’ve got to go all the way back to the beginning and then work our way back through. Because, you’re right, this is a lack of communication and I think you’re getting a very incorrect impression. And so I want to go back to the beginning and explain what’s going on and what we are having to deal with. The creditors’ perception is that you took their money. Okay. That’s how they think.
Mark: We understand that.
Kevin: I understand, but we have to go back to the beginning, we’ve got to work through it. Okay. So their perception is that they need to get control over your assets because they have a lack of trust. Okay. So that’s their perception. So some of those creditors go out and hire attorneys to essentially make sure that nothing gets done and in my view, this isn’t a very practical way of doing things. Which I think was your point, it’s not a practical way of doing things, but legally, that’s what they’re doing. So, as I understand it, and I’m not asking you what your attorneys told you, but as I understand it, your attorneys said, guys, stand down on that stuff. Ummmmm, so what our goal was, literally on that Friday night and that Saturday, was to come up with an overall control solution that would put the creditors in a position where they would be comfortable enough to adopt a practical approach. A practical approach is, let’s get this stuff….look, you got claims here. You don’t want to add anything to those. You’ve got assets. You want to maximize the value of these and apply them over here…. That’s your goal. That’s their goal. That’s our goal. We don’t have a different goal. K…So…. To do that, it’s not just practical, right? We’ve still gotta do it in a legal format whether we like it or not. We know we’ve go to do it in a legal format. So we need to get control over those properties. So what we proposed day one, day two actually, was an assignment for the benefit of creditors. We said, look, why don’t we do an assignment for the benefit of creditors? And we said here’s how it would work and we started to talk about it, and again, it kinda of got tabled. And we said, well, what do you want us to do? Because we got to have control. We can’t do anything, we can’t do anything, you can’t do anything until we have control.
Lane: Since we have to go back to the beginning, who are you communicating with? Is it Sussman…that’s your primary go between? Cuz I understand what your strategy is there. That all makes sense and it is where I thought you guys were going. Are you talking with the creditors’ committee or are your working this up and presenting it to Tom and Susan and getting told to stand down, hold off, blah, blah, blah.
Kevin: Again a combination. I didn’t come to – I didn’t go through all my emails and go through all the time. And it’s like this happened on this day and this happened on this day. We presented it….a lot of issues were raised…we can’t do it this way…we’re concerned about that…I said we’ve just got to get over these issues. Present the issues. Let’s get over the issues. And then…
Ewan: And that was first week…I mean that was before I was down here certainly.
Kevin: So then we when we met with the creditors for the very first time, and we said to them, look…guys this is a melting ice cube…damages go up…asset values go down…you’ve gotta get control of the situation. And that’s when they said, well, the assignment for the benefit of creditors sounds interesting. Yeah, we think we should be willing to move forward with that. Ummm. But you’ve gotta come back and do a presentation for us and explain to us how it would work and what you are going to do and what 15%? Wow, that sounds really high. You know, so, umm. So come back. So we did and that is when we worked out the arrangement with the creditors. Ummm and then -
Ewan: From a timeline standpoint, during that period…so we’re probably weeks 2-3 we had been told to stand down also on the real property and bill no further hours.
Lane: Sussman told you that?
Ewan: I know Sussman told us that. Whether it was from Sussman or Terry, I don’t recall.
Kevin: Again, I didn’t come…
Mark: You are telling us about stuff that we don’t know anything about.
Kevin: K, well let me just keep going through the timeline. Then we meet with the creditors and they say OK. Assignment for the benefit of creditors…that sounds like a good idea so we say great…so we proposed a structure. And then we had a meeting with Bob Vanden Bos and David Foracker, and a group of people, K. But only two of your attorneys. David said, yeah, assignment for the benefit of creditors sounds a little bit interesting. Bob said, ooo, I’m a little bit concerned about that. A bigger group of creditors potentially because an assignment for the benefit of creditors is all your creditors and I don’t know if that is a good idea or not. I understand, but we still have to move forward on this, guys. So then they said, OK, what do you want? Bob said, well, I think that we assign just for the benefit of the exchangers as the primary group. K. So we can’t do an assignment for the benefit of creditors because creditors is general, right? I said, OK, we can’t do that. Ummmm, and then, so then, ummm, we went back to the drawing board within two days after that meeting. And came up with an idea…brainstormed an idea to come up with a trust, umm, that, that where we would…the beneficiaries would be only be the exchangers plus the minor trade creditors of Summit and so there wasn’t a conflict situation.
Tim: You said Vanden Bos said all the general creditors he didn’t think that was a good idea, but isn’t that just under $4400 or is there other?
Kevin: No all your guarantors your guarantee bank debt. And he was concerned that all of a sudden you’d have all this bank debt and would be competing and he wanted to insure…at first David wasn’t sure but then he came around and said yes. We met, we talked about it. That makes sense to us. K. Ummm, so from that point then we said great. Well let’s do this like, quickly. Now that we have this trust structure that works. And we had a lot of people raise issues about, well…
Mark: This is the diagram that we saw?
Kevin: Yes, that probably was the diagram you saw. Yes, because I sent the diagram to your attorneys. And, ummm, and so they said there are issues about that at the same time. Ummm, uh, Sussman had a different approach. Their approach was, can we do a what’s called a 105 injunction? Ummm, in extraordinary powers of the bankruptcy court to basically take control and actually design and order that would take control and this is all going on simultaneously. Our concern and the creditors’ concern on that was, it’s fine to have the 105 injunction, but that if you go to a title company you can’t say I’ve got a 105 injunction and it says I have control. It doesn’t say that I can sign anything. It just says I have control. Our concern was is that if we ever had to exercise authority? With a blanket you have control.. is way different than you’re in the chain. Does that make sense? And so we said we really need the trust structure. So they came around and they said, yeah, yeah, ok, we can get the trust structure. So then we are almost up to today. We kept trying to work and I kept calling. Specifically I called primarily David Foracker and I said, David, we’ve gotta get this worked out. It’s really important. We’ve got to move this forward quickly. And he says, well I’ve got some issues. So let’s work on your issues really fast cuz we’ve gotta get this done and this really takes us up to the point of, of, ummm, you guys had a meeting, ummm, and then Susan wrote an email and then that caused the creditors to come unglued. So that’s how step by step by step of how we got to the point where the creditors said we want to have Obsidian in the CRO role. And then Stephanie heard this…the Judge came out with his own idea which was we are going to have a chapter 11 trustee. And then they went forward authorizing a chapter 11 trustee.
Lane: What was it about Susan’s summary of that phone conference, because she had a status conference with us and sent off that email which was in advance basically of the preliminary injunction that was supposed to be followed by what was going to be the 105 motion. What was it about that that set the creditors off? What’s the issue there?
Kevin: Well, uh I think that there were a number of things, but I can’t remember, I mean I would have to get the exact detail…again…
Lane: I know what was in the email.
Kevin: I understand, but I’m just telling you that caused them to be very concerned that things weren’t moving in the right direction and fast enough. And so, ummmm, it just is and they were very concerned – very concerned.
Tim: And again, I am probably just repeating myself here, not understanding all the legal positioning that needs to go on and the right channels that need to be followed for this. From the get go, we basically said, here, you guys tell us how to take control. Now when I say you guys I’m talking about Sussman. We said to communicate to anyone who was in a position to tell us how you want to take control and move this forward. A big part of our frustration is that things aren’t moving forward and we can’t figure out why.
Kevin: Nobody has a bigger frustration with this than I do. Let me tell you.
Mark: Wanna bet?
Kevin: Well I…I don’t know.
Mark: Why did you think it was a good strategy just to not say anything to us this whole time? You’re a smart guy. You would think you would want to get everyone involved to say this is the way to do it.
Kevin: I’ve been talking to your attorneys. You guys are represented by your attorneys…I’m talking to your attorneys. And I don’t know what you want from me.
Mark: I guess I’m a little confused. You work for Summit. I look to Terry for communication of whatever, but you won’t communicate like your presentation you won’t give your presentation to Terry. And so I’m not sure why that is…if you work for Summit why that communication wouldn’t come up. We finally said what was going on with Obsidian and they said, well, we think they sent something to somebody so I asked if I could get that or whatever so we’ve just been in the dark this whole time and Ewan…I asked him, when are you guys going to have something in December and he said first week of January we’ll have a proforma. That is really the last communication on when Obsidian is going to have something and he said we will have something fairly quickly here. So everything you described the principals don’t know anything about it. We don’t know who is plugging up the process or whatever. All we know is we want to get moving. We hate this.
Kevin: I hate it more than you do.
Tim: The hold up is doing the very opposite of building credibility and trust between us and the creditors and yet all along all we wanted to do was…you know what….we messed up here in our business plan and our business plan didn’t work as we had intended and now we’ve got to make it right and in the intervening 45 days. 50 days now…that trust….obviously the reaction to Susan’s letter is one of the reasons…what are these guys doing? All we want to do is to figure out the quickest way to make this stuff available and start getting it liquidated. And so that is our frustration with Sussman Shank and our frustration with you guys…you know and I’ll say Terry has communicated what he knows at least he’s communicating with us. I totally understand as frustrating as it is, that if we are represented by legal counsel you’re communicating with them, but the communication that ends up back in this room or with the 4 partners is slim to none.
Kevin: Well I understand, but you’ve got to understand from our perspective, we didn’t perceive that we needed to come and meet with you. If we perceived that we needed to come meet with you we would have requested to come meet with you. We didn’t. We didn’t perceive that. We thought we’d go forward and then we were told stop, we would go forward and then we were told stop. So every time it was like back and forth. We’re in go mode then we’re in hold mode. That is exactly what we were perceiving…K…the whole time this thing occurred. In my view, whatever happened doesn’t make any difference. It’s not really about…. at this point it shouldn’t be about whose fault it is. We have for two months been in this process and we still have damages stacking up and we still don’t have control of the assets. And that just can’t exist because not just from your perspective. You guys have a completely reasonable, rational perspective, but from the creditors’ perspective, right, it’s not like if they thought there’s a hundred million dollars you’d say well maybe they think there’s a hundred million dollars, but we don’t really care so we’ll go waste the money. They don’t think there’s a hundred million dollars. They don’t know if they are going to get paid or not. From their perspective, their interest and your interest are actually completely identical.
Lane: The only disconnect I’ve got in this at all Kevin, I mean I talked to you before any of these other people, Bill Smith referred me over to you and what not and then I presented Sussman and you and Terry were both recommended by outside people. And when Sussman met with you over there, and I think Terry was there, maybe you weren’t, I may be putting people there who weren’t there, but Susan called me afterwards and said, “yeah, I think this is a good idea. I think these guys have a skill set that will be helpful in your situation,” and I said, “well, what is Terry’s reaction?” And this is Susan who may be putting words in your mouth…..what Susan says to me is, “Well, Terry thinks it’s alright too, and they’re going to work for Summit so if Terry doesn’t like it we’ll fire them.” That’s what she says, and the Obsidian engagement in this is that you’re being retained by Summit. And so if I have any frustration….. it’s the legal chain of command I don’t think was followed and makes any sense here it seems to me in hindsight. I wouldn’t expect you to be calling me and I think your guy’s principals, if you’re expecting him to call you, I think you’re laboring under a false assumption because my impression is that you work for SAI and Terry we don’t run it anymore. Terry runs SAI and if anybody is telling you to stop, go, go meet, whatever, then Terry’s your boss and when I go to Terry just because I’m here all the time working, and say, hey, what’s going on and he says, “I don’t know they haven’t met with the creditors yet”, I start to get paranoid. You know it’s real easy in the absence of information to start spinning in really high quality John Grisham-like conspiracy in your head. It’s like, okay, somebody got a big retainer, I haven’t heard from them, the person they work for has not heard from them, they’re talking to the people who want my scalp on a wall, and now I see a motion coming that they’re trying to fire the only person I see on a regular basis who’s trying to work on this, and pretty quick I got a pretty good story running in my head. Now it may be wrong… I’m willing to give people the benefit of the doubt, I have no problem with that, and I have no animosity, but if you look at that communication pattern, I hope you can see how it’s real easy for me to start to get paranoid about what’s going on.
Kevin: Look, lack of communication always creates paranoia. It always does, it doesn’t make a difference this situation or any situation, lack of communication creates that issue. Especially…you guys are under stress, umm, and so it always does that..umm… I agree with that. And you’re correct, we thought that as we do things that we’re communicating and that Terry is communicating to you what we’re doing. If Terry thought we weren’t communicating with him Terry should have picked up the phone and said, “Kevin, I need to have this, this, and this from you”.
Lane: Well I think that’s a major…and I brought this up to Terry a couple of times and I’m going to bring it up real pointedly right now. I don’t want anybody to labor under the assumption that I think Sussmen is doing a good job. I think Sussmen is driving this case, and what pisses me off is that Sussmen is a lawyer and the client is SAI and Terry runs SAI and if Sussmen is telling you to do something and Terry doesn’t know about it, the last time I checked, the lawyer is supposed to check with their f-in principal before they take action on… And Sussmen signing onto a friggin’ motion to effectively fire the president of the client, just boggles my mind, boggles my attorney’s mind too, and Bob Vanden Bos as well as David Foracker are scratching their heads. How the hell did we get here? So that just kinda added fuel to the paranoia fire. What the hell is going on? It’s like there’s this dead carcass and we’ve got all these professionals circling around it, they’ve all got retainers and the only person I see every day, and again so I communicate with Terry, I see what he’s doing, I hear his frustration, I keep pushing on this reverse issue. We need to get these dang things assigned, we need to get this done, and Sussmen doesn’t seem to want to do a damn thing. Their self-proclaimed 1031 expert Jeff Tarr doesn’t even know what the hell a lease-hold improvement exchange is. If he’s a friggin’ expert, he oughta have an opinion on whether they work or not, but not be asking Susan to send him pages out of a treatison 1031′s that show him the private letter rules. So I think we’ve got some people over there that have some book knowledge, a little bit, enough to be dangerous on 1031′s, but they don’t know s— from shinola on how to get any of this done. This idea of a trust and what not, hell, we were talking about that three months ago. I mean, we talked about that with Susan when we met with her. We said, “We can put all these things to an LLC or a trust… ” let’s get them in there, let’s put the trust, let’s make our own little mini resolution trust. I mean the ideas that you’re working on and the plan, they don’t come as a surprise, because we’ve been thinking about it, but I keep hearing that work keeps getting stopped and I keep seeing things that Sussmen are doing, and to me, the people who should be driving this are these two organizations (points to Terry and Kevin). He’s on the ground here (points to Terry), I don’t run this place, Mark you don’t run it, Tim you don’t have any say in it. I’ve tried to make that as clear as possible and my attorney has as well. I don’t want to be perceived by the creditors as controlling anything. If Terry needs help with something, I want to help to move it forward, other than that every time I offer anything, say anything about anything, I get Susan Ford crawling up my ass with a microscope and threatening to sue me for being in control, she’s done that twice. And I don’t know what the hell I did to deserve that and my attorney doesn’t know what the hell I did to deserve that. Anytime we advocate to get the reverses done, so my frustration isn’t nearly as much with you, you’re here so I’m thanking you, it’s with Sussmen. This s— isn’t going to get done, period, with them at the helm. I may be completely off base on my interpretation of their confidence in how they handle this, but as far as I’m concerned, its been a three-star mess. You may not share that. We want to move forward.
Kevin: I…I…I…no, I what I’m saying is I don’t actually know how every decision gets made. We know what the result of the decisions are, which is, for example, go deliver all the exchange files over, umm stop doing this stuff, we know that okay? You know. And we see an email Susan – one of the things the creditors did react to that you remind me of, and this is one of the emails – is it says “And Kevin is not doing this”, and I can’t remember how it was but we’re not doing something, we’re not doing exchanges or we’re not doing something, something, anyway it was in there, and of course the creditors are thinking “no we want this stuff to be done, I mean why nobody’s doing this stuff, somebody’s gotta be doing it”. So, that’s their perception, so their perception and your perception are very close. Now, you’re an attorney (talking to Lane) and you also know that attorneys, that clients, remember I’m on both sides because I’m an attorney but I’m also, I don’t practice, I do business stuff. I’ve been doing that for fifteen, sixteen years, and as a client you want things to move and sometimes they can’t move as fast as you think. It just seems like there’s a practical solution that’s where you were a second ago (talking to Mark). There’s a practical solution, d–n it… why can’t we have a practical solution tomorrow? I’m usually with you, I’m on that side. Usually I’m going get this done, I mean that’s literally we spent, I spent Friday night after that first meeting coming up with outlining that complete strategy…. I got Ewan on the phone Friday night at eight or nine-o-clock at night and I said ”I gotta look at this and I want the bond looked at and I want this and we’re going to have this mitigation strategy and we got this and here’s what we gotta do and we gotta get these assets transferred and we gotta go go on this stuff because damages are going to build up and we gotta get control of the assets because otherwise there’s no cash coming in, so we gotta do it”. I have him call them Sunday, stand down so…..
Lane: That call should have come from you (points to Terry)
Kevin: He was on the phone.
Stephanie: So is there a way that we could, I don’t know, somehow figure out a way to work together to move this forward quickly rather than having all of the professionals get in the way? Is there a way you can consult with Terry or consult with us?
Kevin: Well there’s going to be a Chapter 11 Trustee appointed, so that’s going to happen.
Lane: Is that….you guys know more about this process than I do, you certainly (Kevin). That was kind of a motion out of the blue that I’m thinking we saw coming. Might the judge change his mind on that or once that goes….
Kevin: He’s entered the order.
Lane: Okay. So what does that mean?
Mark: What does that mean now?
Tim: What role could you guys (Pointing to Kevin) then have in that situation, I don’t understand if a Trustee is appointed is there still a role for Obsidian in that?
Stephanie: Well, what they’re saying is that you (Kevin) are the Trustee.
Kevin: Proposed….We’re proposed as being the Trustee, whether it’s Obsidian or whether it’s me individually or whether it’s me individually through an amenity, that’s what they’re proposing.
Tim: That you be the Trustee?
Kevin: That we be the Trustee.
Kevin: Okay? And when I talked to Sussman yesterday he said that if we get appointed Trustee, we don’t know if we will or not, it’s not our decision, umm, we have to move forward on this stuff. And I…and I had Martin, and I said, “Martin we have to have a blanket on this, we just have to have a blanket” and I intend to have Patty Whittington now re-engage with Martin and if we get appointed and get a blanket order.
Tim: Who’s Patty Whittington?
Kevin: She’s our..our tax person.
Jan: Why wouldn’t Terry be entered into the picture because he has been here for as long as he has and since you guys haven’t been communicating with people?
Mark: Well, he’d still be the CRO.
Kevin: A Trustee replaces the current management.
Lane: If….If for example Michael Batlin got appointed, I mean he’s the one that serves this area and I know Mike, pretty good guy, if we had a Chapter 11 Trustee other than Obsidian, or say Terry, if you guys weren’t it, would the Trustee potentially turn to an organization like yours to assist? Because the Trustee is limited by the statute, what they can earn, blah, blah, blah, but do they have the ability to retain outside advisors if they think that they can generate more fees…well, more assets for the estate by using an outside party. Is that how it plays out?
Kevin: Yes, I mean, you’re asking can they do it or do they do it?
Lane: Well, okay, can they, yes, will they?
Kevin: And it depends it’s in the discretion of the Trustee.
Lane: Do they? Probably not very often..
Kevin: It depends. Oregon hasn’t had a lot of major cases until just really recently. And so if you go back and look, I mean, it …you can’t really use the last six years, the last six years are just…they’re an abberation in terms of the economic situation.
Stephanie: So, what are your feelings about being the Trustee?
Kevin: What are our feelings? I mean, we’ve told the U.S. Trustees that we’re willing to serve as Trustees and the creditors want us to serve as Trustees.
Mark: So is there any….what’s the compensation arrangement with someone that’s appointed Trustee?
Lane: Statutory, it’s like one percent or something.
Kevin: Well, it’s a scale that starts and goes down.
Lane: Well, and I guess the question that I have is doing what your proposal was before this Trustee thing came up, I was ….you make fifteen percent to one….well, why is the case still interesting to you?
Kevin: It’s exactly what you said, there’s no….the limitation….what doesn’t apply to the other services you provide…you can provide services on an hourly basis, you can provide them on a percentage basis, you can provide them however’s approved by the public…..But as Trustee your Trustee role has this…
Lane: So if Kevin Padrick, an individual, gets appointed, can Kevin Padrick retain Obsidian?
Kevin: Mmhhmm, in fact, it’s most commonly done .
Kevin: If you’re an accountant you’d retain your accounting firm, if you’re a lawyer you’d retain your law firm, it’s the most common way. Especially on the east coast, not as common on the west coast, but really common on the east coast.
Lane: Really? That’s wierd. Then again, that’s just my ignorance in the bankruptcy process. I thought that the interest in the company that you’re referring to would have some issues with the Trustee role.
Kevin: No, and actually the code specifically says…it’s in the code.
Lane: Oh okay.
Mark: Kevin, what I have a hard time getting past is your proposal of fifteen percent just like I threw it out there…. let’s say there’s ten million dollars of proceeds in there and I can’t say in your agreement that it was clear that you’re excluding debt even though Susan Ford goes, “Oh yeah, I think that was the thing all around,” and I’m going, “Read the damn thing”. You tell me where it excludes it.
Kevin: Third party non-Inland debt.
Tim: I read that it …
Mark: I don’t think it’s totally clear.
Stephanie: It’s the cash proceeds on non-Inland debt.
Mark: It should just be more specific. But anyway, let’s just say it’s ten million dollars, okay? What is it that you can show me that…so let’s just say you go out and list all that stuff with realtors at a six percent commission. That’s all you do, you do nothing else, because you sit here and you go “my goal is the same as yours, okay” but if I really….let’s shake that down. You could say, “Yeah, there’s 10 million easy here, we don’t have to do anything but list this with realtors, okay, we get $900,000 dollars of income from Obsidian, pretty good job we’re landing here, it’s in our best interest to land this, and we don’t even have to do that much, you know, that motivation to get more…you know, we’re going to get this much no matter what”. So tell me what is it that you guys do that brings more than that much money to the creditors, because if it doesn’t, we’re wasting our time.
Lane: And I would assume the creditors would ask the same question.
Kevin: Of course they are.
Lane: It’s like, if it’s 10 million, and if you did nothing, your fees would be $900,000, then you need to get 11 million out of it to make it worth while…I guess is the gist of it, and we don’t know what you do.
Mark: The other question is, you know I’ve got this paragraph here that to me this just opens up you know, the whole world for you billing the bankruptcy estate. This paragraph right here.
Kevin: I can’t see it….
Mark: Well, you know what it is.
Kevin: For all I know it’s just a paragraph!
Mark: “…..choose rights to be paid for the Summit estate for all matters not directly related to the assets which is general services, tax related services…claims litigations and claims, distributions….further not directly related to the collection of the assets….” (keeps reading from the paragraph) The first question I have is show me your budget for what you anticipate, because I can see this being a whole hell of a lot of money here, and that’s like the gaping hole to me.
Lane: Before you get there, I think just….the big question is that’s an issue, true, but if there’s value added that outweighs that, then that becomes moot. If we’re taking the approach that let’s say we think there’s 10 million of equity in the property if you just listed it and waited and watched it sell. The question that I would assume the creditors’ committee would ask you and.. and that…and our interest with them are aligned on this because I want them satisfied because I don’t want them trying to put my scalp on their lunch bowl. What is it about what you guys do, how are you going to get more value out of it? I mean, where’s the juice? We don’t know?
Mark: We haven’t heard a thing about that. We don’t know. All we know is you gave us a sales pitch. That’s it. And you said things like, “We can bring capital to this, we have all sorts of these partners and everything”. We don’t know a thing about what you bring to the table. I mean, it’s just an honest question and we’re really concerned.
Kevin: I can tell you to start with an open mind…okay…so ummm….look….you’re….the way that you own these entities…the way that…you get to the bottom of the actual assets right? It’s through a variety of entities. Sometimes multiple layers.
Mark: There’s hardly any multiple layers. I mean, VSN owns some properties that are in LLC’s, and that’s it. If you’re making it more complicated than that, it’s not.
Kevin: Ehh, look, ha, I…uh, I’m…at this point the information that we were provided was not completely accurate. Okay? Things that you thought you owned in a certain format as we go through the documents you don’t own exactly in that format, okay? You own them in different format or there’s a different agreement, umm…that controls that. Ummm, so the first thing that we have to do is to drill down on each of these entities to see who in fact has the actual control over the underlying assets and what role if any the non-principle third party…..investor members have. Okay? We have to do that. Now that’s not as simple as listing the properties. The other thing is is that if you’re listing the properties for six percent…you….that realtor’s being paid on that entirety of the property. They don’t ask, they don’t say, “Well by the way, you’ve got a mortgage on that? Oh, that’s no problem I won’t charge you six percent on your mortgage. Oh, you got a…you got somebody else who has an interest in that? Oh, don’t worry I won’t charge six percent on that either”. I mean, we gotta be realistic. I mean, if..if you wanted to say, “Hey guys you know what? Let’s just take the gross amount here and you guys can have X percent of the gross amount,” that’s fine, we proposed that to the creditors’ committee, we said, “that’s fine we’re willing to do it that way”. We…we wanted, we thought it would be better, frankly… they did too, to completely align our interests. Hey guys, if you only get what pays the mortgage, guess what you got out of that property? Squat. Ummm….the realtor would say, “Thank you for my six percent…glad to pay your mortgage for ya.”
Mark: So why…why would you waste your time with those properties? I mean, there’s properties out there that had no value, nothing.
Kevin: But, you…we’re not going to waste our time….the..the point is it doesn’t make any difference if it has…if, if the piece of property is 50,000 dollars of value that has a 2 million dollar mortgage on it we’ll realize the 50,000 dollar balance…. My point is you still gotta take the fact that it’s fifteen percent of the net that either gets paid to Inland or gets paid through the principals back in, either way that’s what we’re taking fifteen percent of. We’re not taking fifteen percent of the gross.
Mark: Okay, my question is: Why would you waste your time on property that….
Kevin: I’m not saying we would…Mark…..I’m not saying we would. I don’t know….you’re asking me what…I can’t tell you today which properties we would and which properties we wouldn’t spend the time on. If we think that there is value in a piece of property, if we have a strategy to derive value from these properties, we’ll spend the time on it, you know what? It doesn’t cost you a penny.
Mark: Okay, here, I’ll tell you one of my concerns is we have all these third parties that really have nothing to do with this. We have third parties that have loans for 100 percent on this piece of property that are out there that are upside down, they’re trying to save their credit record making their payments and everything and one of my concerns is, okay just make it, transfer this property make it as difficult for them to try to move on. I thought one of the things you were going to do was make an assessment of these properties and go, these things just, you know, these properties are garbage because there’s some of them in there that are just garbage.
Kevin: I…I….I’m sure there are….
Mark: And so that was one of…what is your plan for those? I mean, transfer them in here and make these other people go through hell?
Kevin: Can I answer the question?
Mark: Yeah, go ahead.
Kevin: Okay….you gotta give me the chance.
Mark: I am, I’m just trying to get the question out because I’ve been asking these questions and I just don’t get any response, I don’t know. Well give us some information, it’s like you know, with Obsidian I thought you were assessing the properties. I thought you already would have known that you had a list of these aren’t worth spending any time on and these are the guys that have some.
Kevin: If we could have had our way we would be well into this process.
Mark: I’m assuming you have that list.
Kevin: But…but the..the point….but let me go back to just an underlying..umm…point that you made and…and ummm and put on the table because it’s definitely going to get looked at. The creditors want us to look at all the third party interests. They want to know. Whether it’s legitimate that they put their money in, whether they get their money, you know did they…is it…are they legitimate third party interests. So, they’ll want us to do that. We’ll have to go back to them and say, “This is a legitimate third party interest, don’t see any excess value in there if there’s something….” That’s what they want us to do. I know that you know, okay, and you perceive it and you know it, but they don’t.
Mark: Okay, so, you’re wanting my cooperation and I’m sitting here and just reading everything over and I’m very hesitant that you….you know, I just think about these third parties that are getting hurt and when I don’t trust someone I’m leaving it to, which, right now I don’t have a high degree of trust because of how this all kind of, you know, has gone along, I am very, you know, I’m scared to subject those guys to this. You know, you’re asking me to deed it over and I’ve already impacted their lives, you know, they’re already putting money out of their pockets to feed these things to keep them going, and then you’re asking me, “Oh just throw it into this thing when there’s no value,” and now I gotta trust that Kevin Padrick isn’t going to run through them and make them miserable and deal with them in a way that just isn’t fair, I mean that’s…I have that fear.
Kevin: Okay but…but that’s….but…on two levels, one, it’s a legitimate fear, okay? But…but I gotta, I gotta actually do the analysis, okay? Okay, but just let me finish. I try to stop and let you finish, let me finish. Okay, so it’s a legitimate fear okay because we will have to look at them at every one of those and we don’t have all the documents, we’re trying to get more documents on some of these underlying ones. Umm, and…so…you know, is that a possibility? Absolutely it’s a possibility, I mean I don’t want to tell you it’s not because we’ll have to look at it and if….if our conclusion is, is that there’s an issue, we’ll raise the issue. Okay? Ummm…it’s just part of what we have to do. The..on the…on the, uhhh, flip side is if you decide that you don’t want to contribute the properties, I think that’s completely up to you and then…
Mark: I want to contribute the properties, I want to contribute my interest, I don’t want to cause damages to more people than I’ve already caused damage to. And, I just, I mean our partners in all these things are always, “What’s going on, what’s going on?” and we can’t even tell them. You know they’ve had all this fear. I want whatever I got going to the creditors. My interest in that, I want it going to the creditors and I want them treated fairly and I guess I’d say, well is there a way that, you know, we’re under a court order that we can’t…we can’t transfer anything. So, I mean, unless we’re crazy, we’re not going to transfer anything. And so, is there any, has there been any thought to going, “okay we’re going to do our assessment and upon that assessment we sit down and talk this thing through and bring the partners in and…because they think there’s a lot to be gained by working with these people instead of trying to steamroll them.”
Kevin: I’m not disagreeing with that, but if you want to propose another delay, we can delay it again. I mean, the problem…what we’re having is, is that everybody can raise a roadblock for every step, I mean let me tell ya. Every single step, everybody has got a reason why they don’t want to do it. And at some point if we don’t just do it, there’s not going to be anything left to do.
Mark: Okay, so, I’ll just….like a specific example, you know there’s LLC agreements that say if you assign, if you assign your interest in this LLC, you lose your interest. And so you’re just going to have us assign it, and put that in danger.
Kevin: That’s a different issue.
Stephanie: Can I do one example?
Kevin: No, no, it…it…I….you know…I know what the….I understand…..yeah…
Lane: We’re lost in the trees.
Lane: I think we’re lost in the trees.
Kevin: Yeah, I….I….I ..I…look guys…I understand, I’ve specifically asked both law firms… guys you gotta look at this issue you’ve gotta come back to me with if..if we’re going to just take a position that we’re going to do a complete transfer now and deal with whatever happens later, that’s okay. I just need to know that from the law firms, that that’s their best thinking on this.
Mark: Why would that be the best, I mean I know at least two of them without even trying that you put, you put them in jeopardy just like that. And just say, well we’re just going to ignore that and do it.
Kevin: There are times when…you, you…because of the difficult situation here it may be better to put them in and deal with somebody, a third party that says “You know what, we think your…you lost your economic interest”. I don’t think that’s what Oregon law says but if you think it does, that’s okay. But the lawyers are going to have to figure that out. Okay, I told them, like… Right now I don’t have an answer on this question.
Mark: So you’re going to voluntarily deed this over, err….. voluntarily assign this. I’m….I’m opening myself up for a lawsuit from the partner that’s left after doing something that I’m not allowed to do in the agreement. And putting them at, ya know, all in danger.
Lane: Well wouldn’t it, wouldn’t it make…. And I think you’d probably go in this direction…. Kevin… You’ve got to drill down and get an understanding. You’ve got to get a list of all the properties, and you can figure out…. Okay this one’s in an LLC…. What happens…..and this one’s got an operating agreement. What happens if you take Mark and Brian’s LLC interest and put it in this trust. If that’s going to screw things up, then maybe those don’t go in and and set that assets over here….. you say this one’s got equity in it and we’ve gotta get consent from the members to put this thing in…. or are you saying once you’ve done your drill down and you find assets like that….
Kevin: Well here’s what we’re saying… here’s what we’ve asked the lawyers to do. We said, can we take an economic interest assignment and a power of attorney, or have we so closely aligned the two that we’ve effectively created a transfer in any event? Okay? Umm…Soo… I don’t know the answer maybe you know the answer off the top of your head…I don’t know the answer. But it’s an obvious question. So I’ve said I’ve got to have an answer to that…okay? If that, if that is a, if that constitutes an.. an effective transfer. A (unintelligible) transfer, then what about having something slightly less than that? So we talk to the creditors. Well, what if the principals still agree to do certain things? Well, David Foracker likes that idea and says yea, ya know, we’ll do that. But, but that doesn’t necessarily mean the creditors are going to get comfortable with the, with having to depend on the principals to do something. Does that make….
Mark: What if we sign…. What if we sign an agreement that just says, here’s our agreement…. I mean, I want to protect these interests for the creditors. That’s what I care about. And I don’t want to steamroll anybody else that was there. So.. so we sign an agreement that’s….. hey, we realize that we can’t , ya know.. that assigning these there’s some dangers in that… so we agree to list it… to do everything in our power to work with whoever is trying to liquidate this and with those other partners to get it done and we’ve got a certain amount of time to get that done. And at that point, if it isn’t done, then we assign it. Whether the LLC agreement says we can or not.
Kevin: I think that’s a good idea. Look… our ummm… If we can handle it one of these other ways that we propose…. We’ve given them a bunch of ideas and said “Tell us…ummmm… what do you want? Do you want to take all the risk? Do you want to mitigate the risk? Do you want to go out here and we mitigated the risk and haven’t created any additional risk”. They, the creditors, perceive that if they have to rely upon the principals then they’re taking a risk. I..I know that’s not your perception, but that’s their perception.
Mark: But….at the end of a certain period of time…
Kevin: I’m not saying your idea isn’t a good idea…. You’re trying to argue with me and I’m not trying to argue with you! I’m just try to say… I’m saying I agree it’s a problem. We’re trying to figure out…
Mark: We’re trying to give them control with the idea….. if they say, we’re not cooperating then, bam… we have to do this anyway. I mean, that’s the ultimate result if we can’t get the thing done.
Kevin: I understand… and I’m not…. But it’s legally, if they have to depend upon an agreement, an executory contract that causes you to do that, that may or may not be sufficient in their minds.
Mark: Do you tell them that they’re risking this if we……
Kevin: Absolutely! Not only that, your attorneys have told them. Everybody’s told them. But I mean, that doesn’t mean…
Tim: Is it necessarily an all or nothing next week type of thing? I mean… what there is..it’s called low hanging fruit… that is simple ownership … ummm… nothing but Inland debt on it…zoom… just move that over there. We’ll do that tomorrow. And then…. Then you’ve got some of these that have complexity that maybe in doing some of the things that Mark’s saying could be violating the operating agreement takes value away from that particular asset because now you have an uncooperative partner. So we.. we take what we can and put it all into this trust. The only reason we wouldn’t put something into the trust immediately would be because there was potentially higher value for those assets working it through in a different way, shape or form. Maybe it’s…. maybe it’s naming Obsidian or whoever as the manager with full rights to operate the property of that particular LLC. And…aaa..ya know maybe that’s the case with Smith Brothers or something like that. So you move what you can into the trust. You give the Trustee control over the perhaps in a different way that doesn’t include a transfer but you communicate to the creditors. Here’s why. We think that there’s an extra $100,000 or an extra $150,000 by not going through this path that could cause people to have harm.
Kevin: I understand….. they really do perceive the issue. I mean…… they really perceive the issue. I guarantee you that they’re focused on it. They just may have a different conclusion as to how to get there. But we’ve raised the issue…. I raised with them…..please come back with three ideas…… I gave them three ideas…..I said which of these three? I’ll give them Mark’s idea, I mean I’m happy to convey that.
Mark: I just seems to me…. If we get Susan Ford.. you get all the parties in one room and say, let’s resolve this thing. Let’s move forward. ‘Cause all I hear is… there’s this communication thing going on and everybody says this person did this and whatever. I can’t sort it out. We’re the only ones that aren’t in the middle of the communication. And…. Then, ya know, they ask us to bless all these things and are you good with this and everything?…. Well, how can you be good with this when you’re not privy to anything. I mean.. ummm… so it seems like.. I don’t know how quickly you could do that but, you know….. ya know, our point is to all the attorneys…. Let’s quit arguing about this. What’s a practical solution that works for everybody that we can present? I mean.. that’s what we should have done a long time ago and and while all this arguing is going on around us…. We don’t understand.
Kevin: The problem is…. We are where we are today. If we all could go back with 20/20 hindsight two months ago…. Ummm, we might all have done something very differently, who knows. Ummm, but we are where we are today.
Kevin: The US Trustee is gonna appoint a Chapter 11 Trustee.
Stephanie: Is there a way to have Terry.. umm…offer to be a Trustee?
Kevin: Terry can make his own decision. Terry
Stephanie: Well, then…then again… using your services to assist with the plan.. with the certain properties than can go over right away.. go over and… umm… what you need to do for the exchanges
Kevin: I know but you’re… you’re…. again, we’ve got to operate within the legal construct we have. There’s going to be a Chapter 11 Trustee… ummm.. and the US Trustee is gonna to pick that Chapter 11 Trustee… and ummm… and so..and, and the creditors….. if the US Trustee doesn’t pick a Chapter 11 Trustee that they want, then the creditors can vote in their own Trustee.
Stephanie: Okay…. So if.. for instance.. ummm.. we present reason why there’s not an ability… there’s a huge loss in value to the creditors by assigning these interests over..
Kevin: But.. but, but you guys are focused on an issue that is being researched, hopefully, right as we’re sitting here. I mean, I really made this issue and said you gotta resolve this issue.. ummmm… because..
Stephanie: But I’m not…. But I’m not hearing what if there is no answer.
Kevin: Well there’s always an answer. The answer is either you take the risk or you do an economic assignment combined with a power of attorney or you just do an economic assignment combined with, like Mark said, some kind of an executory contract. Or you hold these assets in some other form to…. I mean we’ve presented all those kinds of concepts to the attorneys and said which ones works. So.. I, I..
Stephanie: You said… it seems to me that the.. the creditors’ committee likes you… and the judge likes you and.. umm.. we like… I mean we don’t have much experience with you because of the lack of communication… except for today. Ummm… working as far as a team on it would seem to make more sense..
Jan: Why can’t you present that?
Kevin: Well, its not…. I don’t present it…. It’s the US Trustee.. Terry knows, he can tell you. The US Trustee picks the Trustee… its not.. there’s no..
Jan: Nothing can be presented or an idea..
Kevin: No….you can present anything you want
Mark: Kevin, can you just go back.. ummm … kind of the basic question that really never got answered and, it sounds like you get paid.. ya know… you can be the Trustee and then you engage Obsidian and then you pay Obsidian, ya know…whatever this fee is, but… I haven’t heard you tell me what you bring to the table. I just haven’t heard. Just convince me that you guys are the ones that should be doing this.
Mark: How are you going to bring more than it’s going to cost? That’s what I’m… that’s just the straight out question.
Kevin: Mark, what we bring is the ability to take what you perceived as simple and what other people with perceive as more complex .. ummm…. Structures and assets that aren’t in readily savable form… cause not all your assets are in readily savable form, right… maximize the value.
Kevin: They aren’t. And so..
Mark: You talking about LLC’s and…
Kevin: LLC’s and when…. Then you even get down to the underlying real property…. Some of that property is either better deferred in terms of sale…. Some of it…. some of it could be taken down the value chain…. Some of it maybe should be improved… some of it should not be improved…. There’s just a variety of things…the..
Mark: Okay, so how long… how long do you perceive that this obligation will take?
Kevin: So…so what we do.. just so you…. I’m talking about how we think about this. We went to the creditors and said….. What’s your discount rate? That’s how we look at everything. We look at everything in terms of net present value. We said…what’s your discount rate? Okay? They said…. Geez, no one has ever asked us that kind of question before. We said….. well, we need to know that. Because…. If you say your discount rate is 3%, you’re gonna… we’re gonna hold a lot more stuff for a lot longer period. You tell me your discount rate is 48%, we’re gonna move a lot more stuff out pretty quickly. So if you say to me…. Kevin, how long does it take? I say…. Some people would answer that question, but in my view, if they answer the question they don’t understand economics. Because… the economics of the situation are… you’ve gotta figure out what the net present value is… because that’s really what everybody’s got to come down to. And so… if they… if if…. I’ve asked them and they’re supposed to get back to me.
Tim: They haven’t given you that answer yet?
Kevin: Haven’t given me that answer because they understand that it’s a difficult question… because we’re gonna use that to make a determination… and we literally build models…. And on every one of your properties we’ll build a model and we’ll present value them back… the cash flows. And we’ll say… here’s what we think we can sell…. Here’s what it is…. Here’s what it’s gonna cost to keep it…ya know.. to keep that mortgage in place… Here’s what it’s gonna cost to improve it…here’s… ya know… should we take it value chain…. Should we not take it down the value chain. Okay…ummm…. Now…. Are we unique in doing that? Probably not…. But in large groups of properties, not many people have that kind of ability and skill and experience doing that. Ummm, ya know, we just got done doing a…. second largest medical equipment finance company…. I think told you guys probably this to start with but.. but we just got done doing that. We brought in $100 million dollars more than what three… very prominent national firms said the property was worth. We doubled the result. Okay? I don’t know if we can double the result here… I don’t know if we’ll get 50% of what you perceive it to be. But I don’t… I can’t tell you.. I can just tell you that we’re really good at this. Now, if you say… well, Kevin… how, what do you want… I… you don’t… other than telling..
Mark: Do we just believe you?
Kevin: Well, but there is no…how else do ya…. It is belief. I mean, there is nothing better.
Tim: Well, how long… this plan that you’re talking about…. Getting the discount rate… doing the net present value…putting together a plan… what do you perceive… how long does that take?
Kevin: Well it’s an …. Thing, so
Tim: to begin moving forward on stuff
Kevin: to begin moving forward is like right away. Obviously, see we are, we started again. We’ve been off and on but we started again to put everything together and that’s one of the reasons Ewan and Ryan are over, not only so you guys can ask them questions, but also so that they can put together additional information. So I don’t, I mean, how long before we get to a first step on a cash flow type plan, in your mind?
Ewan: for every property? I mean, well I think going back to what Mark said a couple of minutes ago, I mean I think he’s right, we do have to put things into different tiers, and some of them, you know, we have your estimates, we have your estimated value and, you were telling us it’s clearly underwater. Obviously we have to do our do diligence there and confirm that that’s the case or that it’s not but, um. But certainly the ones that you’ve identified as having a lot of value, we’re going to focus on those first and I think could expect to have a plan on those within days. And obviously that will evolve over time as we…
Tim: Absolutely. You start with the traunch that’s the most obvious that we think there’s value in and you kinda work your way down. And then it is..
Kevin: no, I mean some of this
Tim: I understand. I just, you know being from this place of inability to actually get some inertia going forward that’s
Kevin: I agree
Tim: but you’re saying you have a plan within days on some of those properties that you can begin to move forward on is what-
Ewan: No, I think that’s right, and I think that that plan will evolve over time but yeah. No, I would love to sit down and um, sit down as soon as possible with the other parties on some of these properties
Stephanie: So, by you being a trustee, would that automatically, we can’t, would that…why would you need to get assignments, the economic benefits or the rights, right away?
Kevin: It’s completely different issues. Look the um, the assignment is the stop the litigation that’s ongoing. That’s what the assignment is. The assignment is two things. One, get in a position where you can start doing something on these properties, and, you know when a mortgagee calls you up you can actually say I can talk to ya, as opposed to I’m not in a position where I can really talk to you now because we really don’t have yet a, a technical role. And, um, you know so it’s a, we have to get into a position where we have that, and that stops the litigation that the creditors know. And the majority of the creditors are completely behind this and I think you will get a unanimous behind this, that they will stop everything. Um, now, your attorneys have asked does that mean they’ll dismiss everything, and probably not. They’ll probably hold it in the ???, for their ligation in the ??? to find out what happens through the whole process. Um, but that’s, so those are the steps, but if you say, well couldn’t we assign part of it but not all of it? If it doesn’t satisfy the creditors and we don’t stop the litigation, then we don’t, that doesn’t, it didn’t accomplish what we needed to accomplish
Stephanie: Were the, were the, there’s only, I believe, a couple properties that have issues there, um
Tim: that are subjects of litigation?
Stephanie: No, that have issues of signing rights
Mark: I would have thought that you guys had a list in there that identified them right now. That you know you’ve got all the paperwork and you identify those and that there’s this list of properties that there’s some issues with just assigning it, you know?
Ewan: ok. Well, I don’t know if we have a list, but
Kevin: no, we don’t have that list
Mark: You don’t? What, what did you guys do the last, I’m just confused over what you’ve done. You came and copied stuff is that what. It’s 60-80 thousand dollars of cost here, you just copied stuff, it sounds like you did no analysis on any value of any property. And, you know someone says well they have a spreadsheet, and I go, well they had our spreadsheet-that’s what they started with. So, what exactly did
Ewan: well, did you not want us to start with your spreadsheet?
Mark: no I did, but, um they
Ewan: We did start with your spreadsheet and then we added quite a bit of additional amount of information.
Mark: So, what was the additional information that was added to the spreadsheet? I don’t know what you’ve done. I don’t understand it.
Mark: Did you guys do all the work or, just tell me what you did, I don’t know
Ewan: No, um Ryan spent that ah, that week down
Ryan: For example, I copied all those files. In those files you talk about LLC operating roots. They’re not in most of those files
Mark: Ok, so you copied it all, so there’s a whole lot of copying
Ryan: so as we’re reading through every one of these files that are this thick, we have to verify the ownership structure that you put on the spreadsheet, and look through all the exchanges, and look through all the deeds, and look through all the mortgages that are in there. We have to do that to get an idea of what we’re doing for each property. And, for example, so when I talk to Jeff and Tammy, I can’t necessarily tell them yes we’re going to deed this back to you. We’re not, as Kevin said, we’re not in a position to do that. I’m familiar with the property, I’ve read through everything in there, I know what we would probably do, but we’re not in a position to do that right now.
Ewan: No, I think that’s absolutely right. So, we’ve done a tremendous amount of reviewing of the materials that you guys brought in to us.
Mark: But you don’t, you haven’t done any work on what any property’s worth
Ewan: We have ah, just started into that process. I mean it’s frustrating. We’ve been told to go, told to stop, told to go, told to stop. So, while we’ve, while we’ve spent quite a bit of time, we haven’t spent near as much time as we’d like to. Um, and, so we’re, we’re just starting into the process of going through and evaluating all the properties, um, we’re going about that in the same way that I assume you would, you would expect. Um, you know, pulling comparative market analyses, and then ultimately we’ll have to look at, probably, every single one of them.
Jan: How many have been looked at, I mean, do you have a number like of how many you’ve looked at, or…
Ewan: In terms of…in terms of physical inspection? Uh, I drove around with Mark the first day, and we probably looked at 10 properties or so, maybe slightly less. Um, I’ve also looked at the Sister’s Mobile Home Park, um and I will, I’m familiar with the McKenzie Bridge Property. Um, other than that we have not done any physical inspections. If we had been given the green light a month ago, we would have seen, ah, we would have seen many more. I mean I, probably a month ago we were ah, we were on the verge of buying, ah, buying plane tickets to go look at some of the properties out of state and setting up a, a work plan for the, ah, for next week in terms of seeing all the properties in the state of Oregon, and were told to stop.
Brian: When you go through like files and stuff do you ever have a question or something like
Ewan: Absolutely, and
Brian: I mean don’t think I’ve gotten one email or something like gosh, this was kinda, you know, um, is there I have a question on this property and, gosh I mean I think we presented ourselves-we’re here to be your worker bees you know, and um, anyway, that’s just a
Ewan: No, and so in terms of the review of the files, we have finished our first pass through. Obviously we’re going to have questions for people who are involved in these properties. So, on some of the properties, the most appropriate person might be, ah, might be one of you four. Um, you know, I spoke to Rich and Dan when I was down here, down here the last time, I think they know more about some of these properties and functioned as your property managers on a number of them. Um, it’s, no yeah, that’s absolutely one of the areas that, that’s on our agenda going forward, now that we are now going forward again. I mean that’s…
Brain: kay. Well…
Kevin: Well, you sent out emails requesting values, requesting additional values
Ewan: No, and that’s another, that’s another part of the ah, part of the equation that as we go through the files, um, obviously some of the files aren’t complete and we have, Ryan has a number of spreadsheets of what I’d sorta call, call an exceptions list, and the principle reason that he is here today is to go back to the files here and see, and frankly, most of the files that are back in that, in that office in the back there, I understand that we’ve copied all of them so it’s faired out where those other documents might be. Operating agreements or something, where we do frankly have a hole in terms of documentation.
Mark: So, instead of Ryan coming down here and walking in that room and looking for stuff, I mean, why wouldn’t you go gee, um I’ve got this, I’ve got this property here that I don’t get. Could you, is there anything you could tell me that will help me figure this thing out? Instead of we’ll just, we’ll just not communicate with these guys and we’ll just do everything on our own-it’s more expensive, but we’ll just keep working away without, without ever asking a question. That’s what you’ve been doing, cause I haven’t gotten a question from either one of you.
Ewan: No you haven’t. And
Mark: And if that’s the most efficient way to do it, then I, I start going, I start going, you know, is this the best outfit, because their interest is running up their bill, their hourly bill. How much are you guys an hour?
Kevin: Well, and exactly why, since we’re proposing to do everything on the??? of this real estate on a percentage-feed basis, why do you perceive that we want to run up a bill? Why do you perceive that we want to waste time?
Mark: Well, you’ve got, that doesn’t cover it
Tim: We’re talking about real estate directly, which is part of the percentage
Kevin: Right. But we have no reasons, we have absolutely no reasons. We want to do it as efficiently as possible. There are a couple issues, Mark, with that. Number one, is that, once we got started again, we put together a list of thing that we need, kay? You guys are here-great! Ryan’s happy to ask you questions, that’s not an issue, kay. But let me
Mark: are you just saying that cause we’re bringing it up, cause he hasn’t done it voluntarily
Kevin: He just got, he just got here, ok? We did, as a result of the hearing yesterday, things changed, right? They did, and so, we have debated about whether to have Ryan and Ewan even come over, but we decided that since you guys wanted to talk to us, that we would have them both here, ok. But, we don’t know. I, I think your trustee’s going to appoint somebody today or tomorrow. So I think it’ll be quick, but we don’t know. You don’t know. Cause that will change, that will change the landscape, depending on who gets appointed.
Kevin: But we’re happy to ask questions.
Mark: Starts to speak. Mark in interrupted by Kevin Padrick
Kevin: Bbbb, let me, let me go through, happy to ask questions # 1 okay. Um, # 2 we have to have some independent verification of answers.
Mark: I understand that.
Kevin: That’s good, —————— please?
Kevin: So were happy to ask questions, independent verification of answers.
Tim: What about the trustees? Does that affect Sussman and Shank’s role? Are they less involved now that the trustee really has the ability to move forward and do what they have to do? I don’t really understand, does it affect their role to move forward?
Kevin: Um, it…it as a practical matter it doesn’t probably…um, as a legal matter, the trustee can select whoever the trustee wants, so.
Brian: Listening to what I’ve heard so far, it sounds like we’re frustrated with this process, you guys are frustrated with this process and um of course the big part of it is not here, Sussman and Shank, need to get some of the blame and stuff at least inside me um- with this past process with the trustee appointed, will, does Sussman and Shank, will their role go down, which I think would be a good thing, but, I mean.
Kevin: We need to get legal work done no matter what, right? They clearly are the most knowledgeable firm. They are and um once part of this problem, because of the intense distrust of the creditors, you get a lot of duplication, it doesn’t matter, and um…and I think once we get the trustee in place, I think everybody will stop the duplication because then the creditors will feel like, okay, they got their guy in place, they don’t need to duplicate, um…and that’s part of the role of the trustee is to say, you know, okay, creditor’s attorney, you research this issue, Sussman and Shank, you research this issue um……and we move forward on this, this and this…..so.
Stephanie: It seems to me that they’re going to appoint a trustee and then the trustee, I mean, if it’s you, then when does the settlement of interest happen?
Kevin: Well, that’s dependent on the four principals deciding that they want to do it o don’t. Other than a court, no one can force you to do anything.
Mark: Is there, so, is there a…I mean does it make sense that we say, here are these assets we’re ready to gin right now.
Kevin: No, it’s not, sorry.
Mark: Okay, here are these assets we’re ready to transfer or whatever or sign or whatever and then we have these others we’re really, really concerned about. We want some kind of different agreement to get those? I mean, is that unreasonable?
Kevin: I…I…I’m not saying it’s unreasonable but Mark, you’ve asked me the same question five different times, and my answer is the same. You’re asking for an answer I’m telling ya, people are literally researching that question today.
Stephanie: But you also just said that until there
Mark: I’m just saying quit researching it. I’ll agree to get this over to you, let’s do this in a different way. This is a personal, this is an asset that has nothing to do with Inland, I will give it to the bankruptcy estate, this is how I want to do it, in a way that doesn’t endanger them. I don’t need the attorneys to tell me, oh, well we’re going to take this risk or whatever, this is me and I’m subjecting you know, so I’m asking you, are the attorneys going to say, you have to do it, you don’t have a choice?
Kevin: They might! They might say, if you want the cooperation of the creditors, this is what you need to do. They can’t say to you, you have to do it, only a judge can say you have to do it. But they can say, if you want the cooperation of the creditors, this is what we want you to do. That’s why they want to research it, so they can figure out what they, what exactly they want you to do, and, and, asking me again and again isn’t gong to help because I don’t have an answer for you today on that issue, it’s been raised. The initial reaction was let’s put all the assets in and take the risk. That was the initial reaction, then Dave Foriker and others said, come on guys, think about this. Let’s, let’s, make sure this is the right way to go and so people said okay you’re right, we should go back and revisit this and that’s what they are doing, they are revisiting that exact issue. But I can’t tell you Mark, I understand your agreement, it’s a good idea, it’s a creative idea, but I can’t tell you whether that’s people are going to agree to that or not, cause I don’t know. I don’t control the creditors. I don’t know what they’ll agree to.
Jan: But if you could voice your opinion on that……
Mark: If you have influence with the creditors, I mean…..
Jan: That’s right…
Kevin: Laughing: I influenced them by saying you gotta go research this. Don’t just do it this one way, let’s go research the issue. Let’s, let’s you know, let’s figure out if there is another way to do this, and then we talked about all the different ideas which I’ve gone through.
Stephanie: And what about you presenting this idea to the creditors?
Mark: He says he already has.
Kevin: I just did.
Stephanie: Oh, this one with him signing Summit’s?
Kevin: No, I didn’t submit exactly that idea…
Mark: Just, just, there’s problems with blanket assignments, just assigning everything cause there’s issues there. You told the creditors that?
Kevin: Yes, and not only that, I told them what about doing it with a, with a um, sign of economic interest with a power of attorney, what about doing it with a sign of economic interest and a cooperation agreement you’re purposing something kind of like my third offer.
Mark: Right, right, that’s kind of it.
Kevin: It’s kind of a third offer and, and, I said, analyze these ideas.
Tim: And they wouldn’t make sense if some assets go one way and some go another because of this?
Kevin: It might.
Mark: Can you, can you keep a just a court order in place on the specific assets on transferring those assets, like the court order s there under this agreement or cooperation or whatever so they have assurance that, you know, there is a court order given assurance it’s not going anywhere.
Kevin: Um…you’re asking me to interpret the court order (laughing).
Mark: I, I don’t know.
Kevin: I mean, I don’t know.
Mark: I’m asking, I’m do you think the creditors would look at that as a strong enough thing to give them assurance that…
Kevin: I don’t think so, I don’t thing that existing court order is enough to give them that assurance. I am told that some of those creditors are going to pursue their actions you know, assuming unless the assignment is done, but again, not my decision. I’m just telling you what they tell me. And I said, let’s think about these other ideas, as a way of still getting everybody in the same page
Stephanie: Could you um…email me the three ideas that you have, just word by word so we understand what they are, or are able to know, are able to talk to the attorneys that we have to deal with in order to.
Kevin: I, I’m, I tried calling Dave ??? on the way down and couldn’t call him because I had three other phone calls at the same time. I’m going to call him on the way back because he’s asked me to specifically call him and talk to him not only about this issue but about all the ideas you have.
Brian: It’s just I mean I know this is the true source but one specific one ???? told me for Brian and I could sign… Mark could sign an interest for the mortgage owner to take the property back. It’s just an example and that’s one that’s kinda and Stephanie’s involved in that and there’s lots of people get hurt and it’s just an example.
Mark: Well it’s not one that we’re
Stephanie: It’s not one where there’s any value because um
Mark: Well we’re, we have it listed and I mean we’re, we got it out there it’s listed at a price that we’ll get some money to the creditors if we can find some, I mean We kinda want to leave it out there listed and the only way to make the claim work for now is that we’re going to have to do the management and without a manager I mean you’ve got to pay the manager…, you can feed that type of money all you want. So I mean it’s just a real specific one that we want to try to, we want to try to get some value out of it if we possibly can and so.
Tim: Well we are getting… and that’s just an example of there, there’s a property that’s screwed up and set down as you guys as your evaluation have talked about that what we know about the property and what work we’ve done on it because that is, we’re talking about Century drive mobile home park, ten acres of RH property in Westside Bend.
Stephanie: It’s RN
Tim: It’s RN… but the point is that may be one who at the discount rate may be very well one to say ok we’re going to come in and we’ll do, agree to this trust and we’ll fund this as is necessary but we don’t, we don’t want to sell this as ???, we want to well this in I don’t mean don’t. But there’s a huge upside on that property. One is our current situation change. It’s just, but right now, there’s probably no value in that property, and so it’s just one of those. We just want to make sure that there will be, I want to make sure that there’s…
Mark: We don’t care about our, we want all our interest to go to the creditors
Mark: And, ah, but there’s also some other people in there that could potentially, if we sign and put in???, we would just screw them over.
Ryan: These are conversations we know we have to have but when you asked why I haven’t asked you questions or why Ewan hasn’t been asking you questions it’s cause we haven’t been in a position to do that. We’ve been looking through all the files, we haven’t, I mean that’s what Kevin’s saying things are changed a little bit but more on that position as a trustee or whatever else. I have tons of questions for you, but we’re not in a position to make decisions on any of the properties. So if I do ask you why you ask questions, I mean I’ll answer those questions for you, but I wasn’t in a position to specifically go property by property and ask you those questions. I have a laundry list of questions on every single one of those. And that’s what we want to do. We just haven’t been in that spot to do it yet. It’s not a matter of not wanting to ask you, I mean we know that the people in this room can explain that file better than anyone else or whoever else is involved.
Mark: Well, that’s not necessarily true either….
Ryan: Well right…
Mark: Oh these guys think they own this and if you discover it’s not, you know,
Mark: It’s not surprising it’s a normal thing, but it’s not, it’s um, gah, you know, what we’re saying is there are a number of things that we have ownership interest or properties that we are really concerned not only about the partners getting screwed, but about getting the most value, and if I could hear, I want to hear that someone’s going we know that, we need to figure out solutions that would work with it instead. It’s just this general assignment just do it is to me a scary thing. I don’t know that it’s the best for the creditors.
Kevin: I know that Mark
Mark: You guys got to do a property by property analysis and go there’s these properties that…
Kevin: until we have the operating agreements we can’t, we can’t read something we don’t have.
Mark: Right. Well I know you have some of them
Kevin: We’ve got some of them but we don’t have, you’d be surprised at how many we don’t have.
Stephanie: So am I hearing that, um, with all the information, you guys will do the do diligence work, um
Kevin: We have to, its our job
Stephanie: Right, ok. And then, you know your guys’ intention here is to get the most back to the creditors but,
Kevin: Not only that, it’s our economic incentive.
Stephanie: Right, right, and then the only concern I have is this mobile home park, there was a 74 year old man who has to go back and work at this park and he did an exchange and exchanged into this park and the money from that exchange went to Inland, so that’s why we’re hurting so bad on this park and he has nothing. If, if that one goes into default and we’re not able to get it, he will lose the 900,000 he put in there, and that was his wealth.
Mark: I mean, that’s a real personal thing for us to go, transfer funds in by default and, will let this guy just suffer the consequences. It’s not morally right for-
Kevin: I hear you. I don’t know how to say it. I hear you. I’m going to talk to David for you. He’s got some ideas to discuss with me, I’ve got some ideas to discuss with him, he’s got some other things he wants to talk about. I’m happy to do that.
Stephanie: Is there a way that you could communicate what your um, what your discussions are around those items with us afterwards?
Kevin: You mean the property?
Stephanie: Or just with a blanket assignment versus getting almost everything assigned except for one problem property.
Kevin: Yes, I’m happy to do that, and we just need to make sure your attorneys are comfortable with me doing that. They have to actually be comfortable with that.
Mark: The other one is Smith Brothers. Dennis, don’t underestimate him. He will hire attorneys, he’ll fight you like hell. I mean, and that one just says you can’t just specifically assign it. You know, he doesn’t even know what he’s going to talk about with anyone else
Mark: He will fight like hell and it’s going to cost a whole bunch of money and, you know, the way to, the way to resolve with Dennis is just to work with him, and figure out a solution, and you’ll get, and that has a whole bunch of value there. You know, you can argue about the business and the value of the business, but, if you can’t do a deal with him and get to do lease on that building, that’s where you just lost a whole bunch of money.
Mark: Ok. He’s a neat guy. He’s getting money to the creditors, and I just think he’s one of the guys you’d be better being careful about. He is nervous. I mean he wants to move on now.
Tim: well I forwarded his email to Kevin the other day
Kevin: I forwarded it to Brian
Ewan: And you had also told us that you have a packet from him, or a business evaluation.
Ewan: I’d like to see that
Mark: yeah but I mean those are two, and I haven’t sat there and spent time looking at the other things but those two right off the bat make me incredibly nervous, and so.
Brian: It sounds like Obsidian really doesn’t have the authority yet.
Kevin: We can’t
Brian: To negotiate or do that and
Stephanie: And once you’re a trustee
Kevin: We won’t until we get the assignments. It’s a two step process
Stephanie: You won’t get to be a trustee and then slowly get the assignments
Brian: Hopefully the attorneys are going to say assignment of… rather than the actual assignments. We’re hoping that that’s going to work out but we don’t know till we hear back from the attorneys.
Kevin: Right, but, like I said, I intend to call them today and say where are we on this issue?
Stephanie: I think that’s one of the biggest issues, obviously
Kevin: I’ve only asked, now I think seven times. I’ve got
Mark: Kevin, so
Kevin: I’ve got a phone call in three minutes just so you know.
Mark: Ok I just want a real precise answer. Just looking at this and what you know about it, how long do you think, you know, depending on what they come back with if they come back with a reasonable discount rate, how long do you think this liquidation should take to get the value?
Kevin: Give me the discount rate
Mark: Let’s say it’s 4 percent
Kevin: Ok, I think your discount rate and their discount rate are different. I think their discount rate will be higher.
Mark: let’s say it’s 15 percent
Kevin: If it was 15
Kevin: my gut feel is three years
Mark: ok so you don’t think the best yield is liquidating all the stuff right away. You don’t think that’s going to be the best
Kevin: at 15 percent discount
Mark: I know at 15 percent discount
Kevin: right. If you told me it was at 45, I’d say that’s a different situation. And at 4 percent, it might take five years
Mark: ok, cause my concern all along is that all you’re going to do, cause this is all I’ve ever heard, is that you’re just going to liquidate these assets. I mean I hadn’t heard anything different from anybody else, and I haven’t, I haven’t seen you performing.
Kevin: look, these guys have spent 4 years?
Ryan: 5 years
Kevin: 5 years. Got 180 dollars more. It’s great, but you can’t-you say you don’t want to believe me, I don’t want, I mean, I can’t just tell you what we do. You know, we don’t, we take a tremendous amount of pride in what we do, ok, because when we’re done, we want people to say that was a damn good job, not they screwed us over, we didn’t get a damn thing. You know, that doesn’t help. So I mean, we’ve only had people be happy before, even when we’re done. They may not be happy in the interim, but when we’re done. You know, I mean, we do the best job we can do, and we do a good job. You know, I don’t know how else to do it Mark, other than to just tell you the answer to the specific question how do I think about the discount rate, how long is this going to take. I can answer those questions for you
Mark: No, you answered my question, I mean
Kevin: do we think we’re blowing it out? No we don’t think we’re blowing it out. In fact, if we were just blowing it out, you wouldn’t need us.
Mark: well that’s…
Kevin: that’s not what we do
Mark: I haven’t been told anything other than that’s how you work with this stuff
Kevin: well I don’t know who’s told you that
Stephanie: so is there a way that we can, um we could get the attorneys to pass a way so you could communicate directly to us? Communication’s critical
Brian: well it sounds like he can, sounds like Ryan whenever he has a question, he’s not going to go through Susan, who’s going to go through my attorney, who’s going to
Ryan: Well it’s kinda why I’ve been asking Susan a question. I haven’t been asking you questions cause I’m not in any position to do that. That’s just all there is to it.
Kevin: But we still need to clear it through your attorneys. We just have to ask, we just have to do that. Because if they thought that we would learn something that could hurt you, they would be concerned about that
Stephanie: So do you have to ask for that, or do we have to ask for that?
Kevin: you do
Brian: Shoot I’m doing that right now, cause that’s locking communication and I need a different attorney, so. I mean I’ll communicate with mine
Kevin: I understand. I’m not saying your attorney said don’t communicate with me
Brian: right ok
Kevin: That’s not what I said. I said Kevin said that you need to ask before he can start asking you questions about the properties. That’s what you can say cause that’s the case.
Six Days AFTER This Presentation,
Kevin Padrick Was APPOINTED Trustee
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