Wednesday, July 25, 2012

Bankruptcy Judge Rejects Fair Finance Trustee's Proposed Contingency Fee Agreement

A federal bankruptcy judge overseeing the bankruptcy estate for Fair Finance has rejected an attempt by the law firm serving as bankruptcy trustee to convert its compensation agreement with the court from an hourly rate to a contingency fee agreement. Judge Marilyn Shea-Stonum was highly critical of Baker & Hostetler's Brian Bash, the trustee, for proposing the change 27 months into the case and his failure to pay out any money to the creditors. Bash has recovered more than $6 million from various businesses and individuals who received funds Durham and his business partner, James Cochran, diverted from the Ohio-based factoring company before it went bankrupt. The firm, however, had billed about $3.5 million for its services through the end of 2011. Bash had proposed allowing his law firm to keep 30% of the first $50 million he recovered, reduced on a sliding scale to 15% for more than $50 up to $100 million and to 10% for any amounts collected above $100 million. Judge Shea-Stonum criticized the plan as “heads we win, tails you lose” approach.

In an astonishing move, Bash got the bankruptcy court to approve the sale of United Express, Inc. to former business associates of Tim Durham for a paltry sum of $600,000. The Durham-controlled company had drained millions of dollars from Fair Finance over a several year period. Under the favorable terms of the sale signed off on by Bash, a former Durham business associate, Terry Whitesell and several other individuals, will be allowed to pay the purchase price over a three-year period in monthly installments ranging from $11,666 to $18,333. A knowledgeable source says Bash blinked when Whitesell and his associates threatened to close the company and walk off if he didn't approve the sale of the company on their terms. The source says other businesses in the truck trailer industry were willing to pay a far greater sum for the company when they learned how cheaply Bash was going to sell it to Whitesell and his business associates but were rebuffed by the trustee.


Unknown said...

Great post. We have to find one bankruptcy trustee.

Anonymous said...

I know a few bankruptcy trustees who are really good. Luckily I have never had to use them.