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UNITED STATES BANKRUPTCY COURTDISTRICT OF DELAWARE
IN RE: ) Case No. 07-10416 (KJC)) Chapter 11
NEW CENTURY TRS HOLDINGS, INC., )et al., ) Courtroom No. 5
Debtors. ) 824 Market Street) Wilmington, DE 19801))) June 20, 2013) 1:30 P.M.
TRANSCRIPT OF HEARINGBEFORE HONORABLE KEVIN J. CAREYUNITED STATES BANKRUPTCY JUDGE
APPEARANCES:
For the LiquidatingTrustee: Hahn & Hessen LLP
By: MARK INDELICATO, ESQUIREEDWARD SCHNITZER, ESQUIRE
488 Madison Avenue, 15th FloorNew York, New York 10022
For the U.S. Trustee: United States Dept. of JusticeBy: MARK KENNEY, ESQUIRE
844 King Street, Suite 2207Wilmington, DE 19801
ECRO: AL LUGANO
Transcription Service: Reliable1007 N. Orange StreetWilmington, Delaware 19801Telephone: (302) 654-8080E-Mail: [email protected]
Proceedings recorded by electronic sound recording:
transcript produced by transcription service.
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Telephonic Appearance:
Creditor, Helen Galope: By: HELEN GALOPE(818)355-7061
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THE CLERK: All rise. Please be seated.
THE COURT: Good afternoon, everyone.
MR. INDELICATO: Good afternoon, Your Honor, Mark
Indelicato from Hahn & Hessen on behalf of Alan M. Jacobs
Liquidating Trustee of New Century. Your Honor, this is a
non-omnibus hearing. It was a special hearing scheduled by
Your Honor to deal with a number of matters that had been
pending.
The first matter thats before Your Honor is the
motion by Ms. Galope to impeach and remove the Trustee. Your
Honor, if you will recall you entered a scheduling order
which required among other things in paragraph 4, of that
order if Ms. Galope intended, well she could appear by phone
to present legal arguments on the removal and the second
motion for reconsideration. But if she wished to testify,
examine any witness or present any other evidence that must
be done in person.
I dont believe Ms. Galope is here. It is her
motion and I would normally turn it over to her to present
her case in chief, but if she is not here to present her
evidence I would request that we have the ability to present
the testimony of Mr. Jacobs to refute some of the allegations
contained in her motion, and then we then move to arguments
and then I would let Mr. Galope go first and we would
respond. Since shes not here I think we should be allowed
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to permit our evidence first.
THE COURT: All right, thank you. Let me ask a
couple things. First, Mr. Galope, are you on the telephone
connection?
MS. GALOPE: Yes, Your Honor, Im here.
THE COURT: All right, good afternoon. Stand by for
just a moment.
MS. GALOPE: Okay.
THE COURT: I note that #4 and #5 on todays agenda
are motions by El Veasta Lampley. Is Ms. Lampley either on
the phone or in the Courtroom?
MS. GALOPE: Your Honor, may I speak. This is Helen
Galope.
THE COURT: No, you may not. All right, Ms. Lampley
is not on the phone sign-up sheet. Shes apparently not on
the phone connection. Mr. Indelicato, what can you tell me
about what notice Ms. Lampley may have gotten about todays
scheduled hearing on her motions?
MR. INDELICATO: I believe, Your Honor, she received
a copy of the agenda and she received our responses to her
motion.
THE COURT: And did notice of the hearing go out?
Did the clerks office do that here, do you know?
MR. INDELICATO: I do not, Your Honor. I have been
informed that KCC our claims and noticing agent served her by
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overnight mail.
THE COURT: When?
MR. INDELICATO: When the agenda was filed two days
ago, Your Honor.
THE COURT: So she would of only had a couple days
notice of this hearing?
MR. INDELICATO: No, Your Honor. I believe she knew
about the hearing. Your Honor, and I believe the way we got
to todays hearing was when Ms. Lampley filed her motion the
clerk scheduled it for the hearing for today.
THE COURT: And thats what I figured. I just
wanted to confirm that.
MR. INDELICATO: Thats our understanding, Your
Honor.
THE COURT: Okay, now let me just turn for a minute.
Ms. Galope, did you have some light to shed on the Lampley
matters?
MS. GALOPE: Yes, Your Honor, she called me
yesterday to say that she wont be able to come because for
your information, Your Honor, Ms. Lampley is now homeless.
And she has no means of paying for the Court fees. And I
asked her if she could fax something to the Court to let them
know of her situation.
THE COURT: So far as I know she has not contacted
the Court to tell us that she couldnt be here or any reason
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why she might not be here.
MS. GALOPE: Yes, Your Honor, the situation of Ms.
Lampley is really in dire fates.
THE COURT: All right, well unfortunately that
doesnt really give the Court very much help. And it doesnt
give me a way to make it any easier for Ms. Lampley to assert
her positions. All right, well thank you, Ms. Galope.
Let me just say this with respect to the Lampley
motions; as the Trustee correctly points out in his response
there are several forms of relief that are requested in the
motions, all of which are designed to advance her position
that this Court should have no involvement in her matters, to
put it plainly. But specifically one of the requests is to
move her adversarys to the District Court.
Typically the form of that request should be made in
the form of a motion to withdraw the reference which would be
filed here and then sent over to the District Court. I felt
I was unable to do that at least as the pleadings came to the
Court and I was hoping to resolve that issue today at the
scheduled hearing, but am now unable to do so.
What I will do is direct counsel for the Trustee to
prepare forms of order which dismiss the motions for Ms.
Lampleys failure to appear and prosecute them. Now,
normally such a dismissal for that reason would be with
prejudice; however, specifically the form of order should be
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that its without prejudice. Ill take just for the moment
Ms. Galopes word about Ms. Lampleys situation.
MR. INDELICATO: Your Honor, might it be easier, and
Im just trying to, we do have another hearing scheduled, an
omnibus hearing scheduled for next week. Would it be easier
for the Court if we at least adjourn those two matters until
next week to see, and we can send her a notice to make her
appear? My fear is if we enter an order even without
prejudice it will create more litigation related to the order
then is necessary.
THE COURT: All right, well aim obviously is not to
create more time or expense for anybody.
MR. INDELICATO: Yeah, Im sorry, Your Honor, as
usual I was mistaken about dates. Next week is a pre-trial,
not an omnibus, but we do have a short period of time I
believe scheduled for the 26th
.
THE COURT: That hearing has been marked as moved.
Im sorry. Bear with me for a minute.
MR. INDELICATO: And I believe its the Lampley
motion for the pre-trial.
THE COURT: Well, I will tell you the hearing has
been marked as moved, but moved at the request of counsel to
June 20th. So I dont recall what happened here. But there
is now not presently a hearing scheduled for the 26 th of June
I will tell you.
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MR. INDELICATO: Then I guess, Your Honor, we will
settle the orders as directed without prejudice.
THE COURT: The next hearing is July 24th, but again
thats just a pre-trial day basically. And there wouldnt be
really time for very much of a substantive hearing.
MR. INDELICATO: Your Honor, to move it along if you
want us to submit the orders dismissing without prejudice we
will do that and then deal with it going forward.
THE COURT: Heres what Id like you to do, submit
them in hard copy, but either electronically or with a disc
so that I can add further provisions a kin to the comments I
made today on the record, maybe that would be helpful to Ms.
Lampley. But send her copies of what you send me when you
send them to me.
MR. INDELICATO: We will do that, Your Honor.
THE COURT: All right, thank you, Mr. Indelicato.
MR. INDELICATO: Youre welcome. Now how would you
like to proceed with the Galope motions?
THE COURT: All right, Ms. Galope?
MS. GALOPE: Yes, Your Honor.
THE COURT: What Mr. Indelicato has suggested is
that since you will be presenting no evidence today that he
be permitted to present his evidence and then would be
argument following that both by you as the Movant and by him
on behalf of the Trustee. Is this manner of proceeding
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acceptable to you?
MS. GALOPE: For the record, Your Honor, I would
like the Court to know that I have filed some exhibits, filed
it today, this morning. And I would also like to let the
Court know that I have let counsel that I will be using the
exhibits for the hearing. And I am unable to come to the
hearing, you know, for personal reasons. And if the Court
would allow my exhibits to be used for today I would really
appreciate it, Your Honor.
THE COURT: Well, Ms. Galope, those documents to
which you refer came to the Court only today. The order that
I signed on April 29th provides that any exhibits that were to
be used should be exchanged no later than Thursday, June 13 th.
So first let me ask -
MS. GALOPE: Your Honor, okay, go ahead.
THE COURT: First let me ask why you did not comply
with my order?
MS. GALOPE: The reason for that, Your Honor, is
because it was voluminous and I understand the CD came from
the Trustee and I let them know that this one Im going to be
using that CD. Its even difficult for me to send it to
them. Its a 25 megabyte file, a huge file. They know that
they have this information. They gave this to me and its
just a matter of them looking at their copies. They already
have those copies, Your Honor. Its like referring them for
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whats been docketed. I got it up right the same way here.
In order to, you know, make formal or the make-up for that
transgression I did send those copies today, this morning.
THE COURT: Well as I understand it, well let me
tell you what I received. What Ive received is something
that was clocked in, in the clerks office just after noon
today and the first page says Exhibit A, is that what youre
talking about?
MS. GALOPE: Thats the one, Your Honor. It was
more than 200 pages is supposed to have come with it.
THE COURT: I dont have that many pages.
MS. GALOPE: Yeah, its only about 20 or less than
20 pages, Your Honor.
THE COURT: Yeah, that seems about right. I didnt
count them, but that seems about right. Okay, let me ask,
Mr. Indelicato, do you have that submission?
MR. INDELICATO: Were trying to figure out, Your
Honor, we have what she sent us. We did not get this morning
what she sent to the Court.
THE COURT: Okay, well let me hand you what I have
and maybe that will help you determine whether you have that
already and whether you have any objection to its use. You
may not, but I leave that for you to tell me.
Ms. Galope, so that you know whats happening Mr.
Indelicato and his colleagues are trying to see whether what
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you submitted to the Court today consists of things that they
already have from you. So there will be a couple minutes of
silence till theyre able to make that determination, okay?
MS. GALOPE: I understand, Your Honor. Thank you.
MR. INDELICATO: Your Honor, we do have at least the
pages here. She did provide it to us. Your Honor, we do
have a binder, although, I only have one of what she sent. I
dont know the best way to proceed. I would not have an
objection to move this along to allowing her or allowing the
Court to utilize these documents. Again would could make
arguments of relevance, but for example, I mean she wants to,
part of it relates to the American Home Mortgage Bankruptcy
proceeding pending forward.
THE COURT: Let me ask you to pause for a moment.
Ms. Galope, is what you want to have admitted into evidence
all of the things that you sent to Trustees counsel or just
those pages that you sent to the Court today?
MS. GALOPE: Your Honor, in addition to what I sent
to the Court today I have sent them some documents meeting
the deadline of June 13th. And I would like for that -
THE COURT: Ms. Galope?
MS. GALOPE: Yes, Your Honor.
THE COURT: Are you saying that you want whatever
you sent to the Trustees counsel to be admitted into
evidence in its entirety?
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MS. GALOPE: Yes, Your Honor.
THE COURT: Okay, Mr. Indelicato, do you have any
objection to that?
MR. INDELICATO: Your Honor, again we dont have
objections to move this along to the documents being admitted
into evidence, but we would object strenuously to any
testimony of Ms. Galope over the phone. The order provided
that if she was going to testify she needed to be here in
person. We are willing to allow the documents into evidence
to move this along, but we are not willing to waive any of
the other provisions of the scheduled order.
THE COURT: But she first could make argument about
the documents?
MR. INDELICATO: She could absolutely make arguments
about the documents, Your Honor.
THE COURT: Okay, I dont have a set. Maybe before
the end of the hearing if the Trustee has a set you could
leave one with the Court or if I need to look at something as
we argue you could provide a copy, but at least for the
record, Ms. Galope, I will admit into evidence those
documents that you sent to the Trustee which he says he has
with them and has no objection to their admission, okay?
MS. GALOPE: Yes, Your Honor. And for the record
also, Your Honor, the Trustee has provided me some documents
by e-mail and I am assuming that those are the same documents
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that they are going to present to the Court today.
THE COURT: I dont know what the Trustee intends to
present today, but well find out as we go along. Okay, now,
Mr. Indelicato although youre not the Movant, let me ask
there are three motions before the Court that Ms. Galope has
filed do you have any suggestion about how we might proceed
in connection with one at a time or all three together?
MR. INDELICATO: Your Honor, I think because of the
nature of the motions I would normally have suggested that we
do them globally, but I think because of the nature of the
motions and the seriousness of some of the allegations in the
particular motions I think we need to deal with them one at a
time.
I will be in my presentations referring back to
them. Im going to try not to duplicate in each instance a
lot of the arguments and facts that I deal with in each of
the motions, but I do think we need to deal with each of the
motions individually.
THE COURT: All right, I understand and thats fine.
Well proceed on that basis. Ms. Galope, let me ask for the
record the exhibits that weve admitted into evidence, do you
intend that they are relevant to all of the motions that you
filed or some to one and not to the other.
MS. GALOPE: They are relevant to my motions.
THE COURT: To all of the motions, okay. Well then
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since that as I take it concludes your evidentiary
presentation Ill turn to the Trustee and ask for his.
MR. INDELICATO: Yes, Your Honor, before we do that
may I return to the Court the documents that were filed with
the clerks office?
THE COURT: You may.
MR. INDELICATO: Thank you.
THE COURT: Thank you.
MR. INDELICATO: Your Honor, for the testimony of
Mr. Jacobs Ill turn it over to my partner Ed Schnitzer.
THE COURT: All right, thank you.
MR. SCHNITZER: Your Honor, I have exhibit binders.
May I approach?
THE COURT: You may. All right, everything youre
handing the Court, Mr. Schnitzer, I take it you have
previously forwarded to Ms. Galope?
MR. SCHNITZER: Yes, Your Honor.
THE COURT: Understanding that shes on the phone I
would just ask that you take care to identify the documents
in such a way that she can refer to them as the testimony
goes on.
MR. SCHNITZER: Understood, Your Honor, and Ill
make clear now for the record the binder weve just handed
out has three tabs and it has three exhibits. The first is
the modified plan of New Century, the second is the
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confirmation order of the modified plan and the third is the
New Century Liquidating Trust agreement. Yes, all three of
these as well as this list, were provided to Ms. Galope in
accordance with your scheduling order.
THE COURT: Okay, thank you. So well proceed first
on the motion to impeach remove the Trustee which Ms. Galope
has filed.
MR. SCHNITZER: Thank you, Your Honor. The Trust
would like to call Mr. Alan Jacobs.
THE COURT: As Mr. Jacobs is walking to the stand
let me just note I do hear sounds coming from the telephone
connection and I ask that until its time for them to be
heard that the telephone participants keep their phones on
mute. Thank you.
ALAN JACOBS, WITNESS, SWORN
THE CLERK: State your full name for the record.
MR. JACOBS: Alan M. Jacobs.
DIRECT EXAMINATION
BY MR. SCHNITZER:
Q. Good morning, Mr. Jacobs.
A. Good afternoon.
Q. Could you describe how you became involved in the New
Century Bankruptcy?
A. Sometime prior to the confirmation hearing for the
Debtors plan of liquidation. I was approached and, frankly,
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I dont recall as I sit here today whether I was approached
by one of the professionals involved with the case, or one of
the Creditors involved with the case, but I was approached to
consider whether I might want to pursue the Trustee role
through a proposal to the Creditors Committee which was
considering various people to potentially serve as the
Trustee.
I made my proposal to that group. I was selected by
that group. And then up to the planned confirmation date I
did preparatory work with the Debtors and its advisors as
well as with the Creditor Committee advisors preparing myself
so that we go affective with the plan. And upon the
confirmation of the plan and shortly thereafter with the
effective date I executed the Trust agreement and became the
Trustee.
Q. Thank you. And is it correct that you were appointed the
Trustee under the first plan that was in the New Century
cases?
A. Thats correct.
Q. And the first confirmation order as well.
A. That is correct.
Q. And then with the modified plan and the modified
confirmation order you remained the Trustee?
A. Yes, I actually prosecuted that modified plan and was
similarly appointed.
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Q. If I can direct your attention to Tab 2 in the binder.
Do you know what Tab 2 is?
A. Its the order confirming the modified second amended
joint Chapter 11 plan.
Q. And if you could flip to paragraph 22, which is on page
24.
A. Yes.
Q. And does that paragraph contain a reference to
appointment as the Trustee in this Bankruptcy case?
A. Yes, that particular paragraph refers to the appointment
of the Trustee and identifies me as being appointed the
Liquidating Trustee in the original affective date and goes
on with respect to modified plan.
Q. Can I direct your attention to Tab 1?
A. Yes.
Q. Can you let me know what Tab 1 is?
A. Its the modified second amended joint Chapter 11 plan.
Q. And can I direct your attention to page 68.
A. Yes.
Q. And do you see paragraph 3 up top?
A. Yes, I do.
Q. And is this the section that refers to your appointment
as Liquidating Trustee pursuant to the plan?
A. Yes, again the paragraph is captioned appointment of the
Liquidating Trustee and I am identified within that
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paragraph.
Q. Let me direct your attention to the last exhibit, Exhibit
3.
A. Yes.
Q. Can you tell me what this exhibit is?
A. This is the notice of filing of the Liquidating Trust
agreement and attached to it is as Exhibit 1 is New Century
Liquidating Trust agreement.
Q. And if you can turn to page 3, Section 1.4.
A. Yes.
Q. And what is that section?
A. Section 1.4 is the appointment of the Liquidating Trustee
and it indicates that I am appointed as the Liquidating
Trustee, and I believe as well, although, this does not have
signatures on it, but if you go to page 24 I can testify that
I actually signed this agreement and became the Liquidating
Trustee.
Q. Thank you. Is your appointment as Liquidating Trustee
subject to removal or replacement?
A. The Liquidating Trust agreement does have provisions for
the removal of the Trustee I believe.
Q. Lets start with the Liquidating Trust agreement, if you
could flip to Section 6.1 which is on page 16.
A. Yes.
Q. And is that the section that your referencing that does
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make your appointment subject to change?
A. That is correct.
Q. And if you can flip to Exhibit 1 which was the plan, page
70.
A. Yes.
Q. Do you see the top paragraph B, does that also reference
that you are subject to removal or replacement?
A. That is correct.
Q. Just to complete this circle if you can turn to Exhibit 2
the confirmation order, page 26, paragraph 28. Does that
section also reference the ability to have the Trustee
removed or replaced?
A. That is correct.
Q. Next, are there provisions in the claim that set forth
your obligations with respect to the Plan Advisory Committee?
A. Yes, it does.
Q. And if you could turn to page 70 of the plan, again the
plan was Tab 1.
A. Yes.
Q. Is that reference in paragraph 5?
A. Yes, liquidation of Liquidating Trust assets,
responsibilities of Liquidating Trustee.
Q. And generally speaking does the Liquidating Trust
agreement also provide or explain your obligations with
respect to recording or getting consent from the Plan
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Advisory Committee?
A. It explains my responsibilities, as well as my duties as
well as how I interface with the Plan Advisory Committee.
Q. And have you complied with all of those obligations?
A. Absolutely.
Q. And as well as any obligations set forth in the plan with
respect to the Plan Advisory Committee?
A. That is correct.
Q. Are you aware does the Plan Advisory Committee have
fiduciary obligations to the estate?
A. Yes, it does.
Q. And as far as you know have they complied with those
obligations?
A. As far as I know, absolutely.
Q. Are you aware were the members of the Plan Advisory
Committee disclosed in the confirmation order?
A. Yes, they were.
Q. If I can direct your attention to Tab 2 which is the
confirmation order. You can flip to paragraph 36 which is on
page 29.
A. Yes.
Q. And is that the paragraph in which the members are
disclosed?
A. Yes, they enumerated within that paragraph.
Q. Were they also enumerated in Section 4.1 of the
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Liquidating Trust agreement which is Tab 3, page 11?
A. I believe so, but let me double check. Yes, they are
listed.
Q. Staying with the Liquidating Trust agreement do you see
Section 4.2?
A. Yes, I do.
Q. And do you see does it state that the Plan Advisory
Committee has an obligation to act in good faith?
A. Yes, I do.
Q. Do you believe theyve acted in good faith throughout
this case?
A. Yes, I do.
Q. To date have you performed all duties required of you
under the Trust agreement, the plan and the confirmation
order?
A. Yes, I have.
Q. To date have you failed to perform any required duties?
A. No.
Q. Have you unreasonably delayed the performance of your
duties as of today?
A. Not in a personal capacity. Obviously, Id like to close
the Trust up quicker then were being able to do so, but
personally Im moving it along as quickly as reasonably
possibly.
Q. And as you just mentioned have there been delays in your
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ability to close the case?
A. Yes, there have been.
Q. And as general or specific as youd like to be could you
explain why there have been delays?
A. Well, basically there are three things that have been
overhanging the closing up of the Trust for the last period
of time. I dont recall how far back it goes.
One is the IRS settlement which is concluded. I got
a significant refund and were trying to just clean up the
claims as they appear in the claims register. So I dont
consider that a delay anymore.
Secondly, is the Carrington asset which has proven
to be a little bit difficult to liquidate? And we continue
to look at that asset and assess the best means of converting
it to cash or otherwise dealing with it.
And the third, and most costly and time consuming is
the resolution of the handful of remaining claims that are
unresolved which I can attribute primarily to borrow claims,
mostly pro say, maybe all pro say at this point. I dont
know if theyre represented or not represented. And trying
to address those claims some of which I actually settled, but
litigation continues both in this Court and in other Courts.
And thats the most costly and time consuming element
affecting my ability to close up this Trust and make final
distributions.
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Q. Have you made every possible effort to litigate all
delays?
A. Well, initially I intended on trying to settle these
claims, but met with only frustration when after a
settlement, the settlement gets, you know, reconsidered by
the parties and we then continue litigation. I obviously
have views with respect to each of the individual claims as
to the bonifides, the issue with respect to notice, as
respect to actual damages if any, etc. But at this point we
are basically simed in terms of trying to resolve those. And
we are waiting for the Courts ruling with respect to the due
process issue.
Q. In addition to the other matters you mentioned is the
Trust also dealing with subpoenas from actions in which New
Century is a third party?
A. Yes, you know, we did come before this Court to tee up
our first of potentially many records destructions, notices
because we know at the end of the day besides the claims
resolution and distributions were going to have to deal with
the final administrative matters affecting the Trust, and
both records destruction and compliance with subpoenas which
continue to burden the estate, you know, is obviously
something that we address on a daily basis. We are fully
complying both in terms of retaining records, which were not
authorized to dispose of, as well as complying with
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subpoenas, and coordinating with the parties and getting them
the information that they seeks.
Q. Thank you. Do you have a fiduciary to the New Century
estates?
A. Yes, I do.
Q. At any time have you violated that duty?
A. No, I have not.
Q. And as the Liquidating Trustee have you ever acted in bad
faith?
A. No, I have not.
Q. Have you reviewed the pleadings that Ms. Galope has filed
with respect to seeking your removal?
A. Yes, I have.
Q. And did you see as one of the matters that she referenced
was with respect to litigations that you brought or not
brought?
A. I believe I did.
Q. As Trustee did you investigate all potential causes of
action belonging to the New Century estate?
A. Yes, I did.
Q. As Trustee did you bring all actions you determined were
appropriate to be brought?
A. Yes, I did.
Q. And in fact did you pursue over 200 actions on behalf of
the estate?
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A. Yes, I did.
Q. Do you know approximately how much money the estate
received from those litigations and/or settlements?
A. I believe somewhere between 75 and $85 million dollars.
Q. And one of the actions specifically Ms. Galope mentions
is actions against what shes characterized as big banks. I
will phrase it this way; did you consider actions against
certain Creditors that had received New Century loans in the
90 days before New Century filed for Bankruptcy?
A. Yes, I did.
Q. And did you elect not to bring such actions?
A. That is correct.
Q. And do you know why?
A. Well, those bodies obviously have their own defenses to
such claims, and the provisions and in discussions with my
various professionals it was the results of such litigation
would not be successful.
Q. And is it fair to say it would not be beneficial to the
estate to bring litigation if the estate could not prevail?
A. That is correct.
Q. One of the other issues mentioned by Ms. Galope is
whether you are disinterested or not. Are you familiar with
the Bankruptcy Code term disinterested?
A. Yes, I am.
Q. Prior to your appointment of Trustee, were you
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disinterested with respect to New Century?
A. Yes.
Q. Are you currently a Creditor of New Century?
A. No, I am not.
Q. Have you ever been a Creditor of New Century?
A. No.
Q. Prior to your appointment as Trustee, were you an equity
security holder of New Century?
A. No.
Q. Prior to your appointment as Trustee were you an insider
of New Century?
A. No.
Q. And prior to your appointment as Trustee were you ever an
employee of New Century?
A. No.
Q. After your appointment as Trustee did you ever determine
that you may hold an interest that was adverse to the
interest of the New Century estates?
A. In one particular instance there was a cause of action
which I was considering along with the oversight committee,
the Plan Advisory Committee against an entity to whom I am a
pensioner. And accordingly at my recommendation the Plan
Advisory Committee retained a conflicts Trustee to pursue
that matter so that I would not be participating in any
determination with respect to that matter.
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Q. So is it fair to say that because you believe there could
be at least an appearance of a conflict you removed yourself
from all determinations on that matter?
A. Absolutely. Im not sure that there was an actual
conflict, but certainly wanted to avoid any appearance.
Q. Other than that one instance have there been any other
matters that have come to your attention in which would
indicate either a conflict or at least an appearance of a
conflict?
A. None.
Q. Do you currently hold any interest materially adverse to
the interest of New Century?
A. None.
Q. If I can direct your attention to Section 3.2 of the
Liquidating Trust agreement, which is Tab 3, page 4.
A. Yes.
Q. And what is that section called?
A. 3.1 is the purpose of the Liquidating Trust, followed by
3.2 the authority of the Liquidating Trustee.
Q. And is it fair to say in Section 3.2 going from subpart A
all the way through subpart EE those are certain things that
you have authority to do?
A. Yes.
Q. And is it fair to say that some of them require you to
report and seek approval from the Plan Advisory Committee?
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A. Yes, either directly within this section it references
that as well as under the duties of the Plan Advisory
Committee it references what kind of oversight they have in
respect to me as Trustee.
Q. And is it fair to say there are some actions you can do
without seeking approval from the Plan Advisory Committee and
there are some which you need their approval?
A. That is correct.
Q. And have you complied in both respects?
A. Absolutely.
Q. And as you probably saw Ms. Galope has stated, I believe
more than once, that you are beholden to the Plan Advisory
Committee, is that true?
A. This is a typical governance structure of a place
reorganization Liquidating Trust arrangement. It is not
dissimilar from any case where I serve as Trustee, nor from
other cases where Im not the Trustee, but I have to be
familiar with it.
Q. Have there been any situations in which you and the Plan
Advisory Committee with respect to a particular act you
wanted to perform in which you disagreed with the Plan
Advisory Committee?
A. I would not use the word disagreement. We obviously
have, you know, I have an opinion. I bring it to the Plan
Advisory Committee. We consider alternatives and we reach a
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conclusion. So whether there was a disagreement along the
way or just different viewpoints which ultimately got
amalgamated into a conclusion as to how we would proceed,
thats how I would describe it.
Q. Understood. One of the other issues Ms. Galope has
mentioned is fees and professionals that work for the Trust
so I want to switch over to that kind of area. As Trustee do
you have the authority to hire counsel for the Trust?
A. Yes, subject to the Plan Advisory Committee approval.
Q. If you could turn to Tab 2 the confirmation order, page
32, paragraph 41.
A. Yes.
Q. Is it correct that this section gives you the authority
to hire such professionals?
A. Just one moment, Im sorry. Let me make sure Im in the
right document. Okay, 32 you said? Im sorry.
Q. Yes, 32, Section 41.
A. Yes, go right ahead.
Q. Does this section give you the authority to hire
professionals on behalf of the Trust?
A. Yes.
Q. And have you used that authority to hire professionals on
behalf of the Trust?
A. Yes, I have.
Q. As Trustee do you also have the authority to pay counsel
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for work done on behalf of the Trust?
A. Yes, I do, again subject to procedures which the Plan
Advisory Committee and I have agreed where I received
invoices from professionals. I reviewed them personally
obviously and discuss any issues with the professionals
directly. I notice them for the Plan Advisory Committee on a
monthly basis. I receive, or if I receive any comments from
members of the Plan Advisory Committee I pursue resolution of
those comments. And I ultimately pay those matters which
remain undisputed to the various professionals.
Q. And is it correct that the professionals fees need to be
reasonable?
A. Absolutely.
Q. And is that one of the determinations that you make when
reviewing the invoices?
A. Yes, actually we have a budgetary process and we monitor
actual versus budget. And we, you know, again discuss areas
where there might be issues of efficiency and what have you,
and address them with the professionals as to how were going
to deal with them.
Q. And is that also a role that the Plan Advisory Committee
has with respect to reviewing invoices to determine if
theyre reasonable?
A. Well again the Plan Advisory Committee has that feedback
to me on the monthly notice and I pursue resolution of
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matters that they bring to my attention.
Q. And pursuant to either the confirmation order, the plan
or the Trust agreement is Court approval necessary before you
pay the Trust and its professionals?
A. No, it is not.
Q. Have all fees that youve paid as Trustee been
reasonable?
A. Yes.
Q. Are you also kept apprise on an ongoing basis as to what
actions the Trust professionals are taking on your behalf?
A. Yes, I am.
Q. Could you explain how that works?
A. Well, Im a bit of a control freak so, at the beginning
of the case we start with a long list of what has to be done
to get to the end of the case. And as we resolve and then
take them off the list gets shorter. And at the moment we
generally have status calls either weekly or bimonthly with
various professionals to see what needs to be done to get the
case closed. So Im very much involved in both what they are
doing, as well as the actual documents, and filings and what
have you that need to be made.
Q. Thank you. Lets switch onto another topic. Ms. Galope
mentions distributions that have been made to Unsecured
Creditors. As the Trustee have you made any distributions to
Unsecured Creditors?
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A. Yes, I have.
Q. How many distributions have been made?
A. Three.
Q. Do you know approximately the total of those three
distributions?
A. I believe somewhere in the neighborhood of $225 million
dollars in the aggregate.
Q. Were all three distributions made in accordance with the
terms of the confirmation order?
A. Yes, they were.
Q. Have you kept appropriate reserves in the event a current
disputed claim becomes an allowed claim?
A. Yes, I have.
Q. Ms. Galope also mentions disgorgement. Are you aware of
any legitimate basis to seek disgorgement from any of the
Creditors that have received a distribution so far?
A. No, I am not.
Q. Lets change to another topic. One of the other topics
mentioned in the motion and/or reply is the treatment of
borrowers. As Trustee have you or your staff received
requests from borrowers for copies of the loan files?
A. Yes, we have.
Q. And what have you generally done in response to those
requests?
A. We have provided them copies of whatever we had in the
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New Century records.
Q. And as part of those responses have you provided
information on the transfer of their loans?
A. Thats success of the servicer, etc, yes.
Q. As you sit here today are you aware of any other
documents that you have relating to a borrower that you have
not been provided, yet been asked for?
A. That I have not been provided?
Q. Sitting here today are you aware of any documents that
New Century possesses that it hasnt provided to a borrower
that a borrower has specifically requested?
A. No, I am not.
Q. As the Trustee do you have an obligation to object to a
claim that you believe should be either disallowed, reduced
or reclassified?
A. Yes.
Q. Have you complied with that obligation?
A. Yes, I have.
Q. And is that obligation regardless of what type of claim
it is?
A. Its regardless of what type of claim it is and the only
other consideration is a business judgment as to the cost
benefit of objecting to claims.
Q. Is it fair to say that the Trust has objected to claims
not only of borrowers, but claims also of corporate entities?
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A. As demonstrated by I believe in excess of 40 claim
objection motions, yes.
Q. And as Trustee do you also have an obligation to object
to adversary proceedings that you believe are unwarranted?
A. Absolutely.
Q. Did you see the response that Ms. Galope filed this
morning with respect to this motion?
A. Yes, I did.
Q. And Ms. Galope made some serious allegations in it. I
wanted to just go through a couple. One of the allegations
concerned fabrication. Have you fabricated any New Century
documents?
A. Absolutely not.
Q. Have any of your professionals fabricated any New Century
documents?
A. Absolutely not.
Q. Theres also an allegation of falsification. Have you
falsified any New Century documents?
A. Absolutely not.
Q. Have your professionals falsified any New Century
documents?
A. Absolutely not.
Q. There are also allegations concerning what happened to
Ms. Galopes loan after it was originated by New Century.
Did you have any role in either the origination or transfer
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be made only in person so I will not afford Ms. Galope the
opportunity to cross examine Mr. Jacobs, but I see that the
U.S. Trustee is present. Mr. Kenney, Ill ask do you have
any cross examination of Mr. Jacobs?
MR. KENNEY: No, I do not.
THE COURT: All right, thank you. Mr. Jacobs, you
may step down.
MR. JACOBS: Thank you, Your Honor. Does the
Trustee have any further evidence in opposition to the
removal motion?
MR. INDELICATO: No, we do not, Your Honor.
THE COURT: Okay, so the evidentiary record is now
concluded on that motion. Ms. Galope, as the Movant I will
give you the opportunity to make whatever argument youd like
in support of that motion.
MS. GALOPE: Yes, Your Honor. First of all I would
like to put on record that a hearing like this had been done
before where you allowed cross examination from the phone.
THE COURT: Ms. Galope, I will tell you I dont
remember that happening and if I did it, it was only under
very rare and unique circumstances, but the order said I
would not permit it and I will not permit it. If you have
argument you may make it now.
MS. GALOPE: All right, I want to remind the Court
that this impeachment motion came about because the
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Liquidating Trustee made hearsay testimony during the
evidentiary hearing on December 13th, 2011 where he asserted
that the Galope loan had been transferred to Barclays PLC
with nothing to offer during that evidentiary hearing. Now,
after more than 18 months and after they were successful at
obtaining an order from this Court; abandon and destroy more
page files and documents.
I received a CD containing supposedly all documents
in their possession related to Galope loan. And this is in
compliance with the destruction motion order. I found the
contents of this CD lacking in any sound authenticity. There
were no signatures. There was nothing that related to my
loans. In essence it is a document that doesnt support what
Alan Jacobs had said during that evidentiary hearing.
They fail to meet the burden of proving the true
sale of that transfer. True sale is defined very clearly in
counsel Indelicatos 2002 article as being necessary if not
perfected the SBE or the associated banks may be subject to
that by the originators Bankruptcy Trustee. Now, I dont
see, Mr. Jacobs admitted that he withheld avoidance actions
because he thought that the Trust will not prevail. How did
he know that?
Now, in the article 2002 authored by counsel
Indelicato its entitled Securitization Provides Means to
Protect Assets. Its a recipe I was obtaining to conspire
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among the Debtor and the SBE, and associated creditor insider
banks to conceal assets in Bankruptcy. It portrays the
counsel as out of character, and those persons with fiduciary
duty as counsel for the Trustee in the liquidation of the
assets.
Counsels interest is for the clashing of all
borrowed Creditor claims in favor of the unsecured creditor
banks in this Bankruptcy case. As we are in the dark as to
how loans are transferred, you know, after 18 months I still
dont know how my loan was transferred. And unquestionably
being the only main party in interest in our own individual
loan transactions we hold secured senior priority claims
against the Debtors, superior over those of the unsecured
creditor banks. And collectively we are the largest
Creditors in this Bankruptcy, but the Trustee and counsel
refuse to acknowledge that fact.
In fact the first borrower creditor filed a claim;
[indiscernible] was immediately expunged and never allowed
representation in the formation of the plan. They were even
successful at obtaining this Courts ordered abandon and
destroy the mortgage files, in clear violation of the New
Century Liquidating Trust Agreement document 6414 that
counsel used here for evidence. There is a Section 3.3 on
page 8 where it says on and after affective dates the
Liquidating Trustee shall not destroy or otherwise abandon
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any documents, and shall maintain the electronic data in the
archives subject before the order by the Bankruptcy Court.
Now, Mr. Jacobs said that he had some disagreements
or some sort of difference on some issues with the Plan
Advisory Committee. I wonder what happened when this order
was being formulated or the motion was being conceptualized.
This is a very important matter that needs to be resolved.
With the money thats gone to interest by counsel and the
Trust, on final representation with the Unsecured Creditors
from this article in 2002 and the Trust being subservient,
having a subservient position against the Plan Advisory
Committee.
Take note that when the Trust said that the plan,
they take much from all the plans that it had been in, this
plan then is flawed because in the Century case it is clearly
stated that the Liquidating Trustee can make decisions
without approval, without consulting with the plan oversight
committee, that is what they call them there and make
decisions on his own. The Liquidating Trustee in this New
Century case does not have that discretion.
So because of that we borrowers are at risk of
losing our right to our rightful position in the distribution
of assets. Right now we continue to be considered below our
proper stature. In this removal motion I am asserting that
Hahn & Hessens counsel are equally liable with the Trustee
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Now, we should be part of those. We should be, like
I said, as the largest Secured Creditors we should have that
status as well. But because only the banks are holding those
positions then it is very clear, Your Honor, where their
interest would lie. It would then be for the borrowers. And
thats how I close this.
THE COURT: All right, anything further, Ms. Galope?
MS. GALOPE: That is all, Your Honor.
THE COURT: Thank you.
MS. GALOPE: Im sorry, and I would like to point
out to my exhibits from the CD. For the record the CD was
delivered to me, it was received by me because of the order
on the destruction motion where we were supposed to get all
of the documents that the Trust has in their possession as to
my loan, as to all of our individual loans.
Now, if this is the only document that they have to
support Mr. Jacobss assertion that my claim had been
properly transferred then it does not support that. They
still carry the burden to prove that assertion. And that
applies to many borrowers I would say. Thank you, Your
Honor.
THE COURT: Thank you. Mr. Indelicato.
MR. INDELICATO: Thank you, Your Honor.
THE COURT: First let me ask you do you move the
admission of the three exhibits in the binder?
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MR. INDELICATO: Yes, Your Honor.
THE COURT: Is there any objection, Ms. Galope, to
the admission of the Trustees three exhibits?
MS. GALOPE: I have no objections, Your Honor.
THE COURT: All right, theyre admitted without
objection. Thank you.
MR. INDELICATO: Thank you, Your Honor, Mark
Indelicato on behalf of the Liquidating Trustee. Your Honor,
Im going to try and be brief, but given the magnitude of
some of the allegations made by Ms. Galope in her pleadings
both against the Trustee, my firm and me personally I think
it really requires some response.
Your Honor, at the outset I think we should outline
for the Court the requirements to remove the Liquidating
Trustee, there are two. One, pursuant to contract between
the terms of the Liquidating Trust Agreement and the other
pursuant to an order of this Court on a motion for course
shown.
I think as is indicated by the testimony of Mr.
Jacobs he does not lack disinterest to this. He has not
failed to perform his duties. His is not engaged in
unreasonable delays or he has not violated his fiduciary
duties to this estate. As indicated by Mr. Jacobs he has
recovered in excess of $225 million dollars to distribute to
Creditors. In fact, the $225 million dollar number, Your
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to the various parties over the course of these proceedings
are the copies. We may have a few originals, but the vast
majority of the documents are copies. In fact in the
documents that Ms. Galope presented to the Court which we
will provide the Court with a binder after the hearing, one
of the documents that the Court does have is marked Galope
376. And that is a letter dated January 18th, 2007 addressed
to Kevin Cloyd from Barclays Bank.
In the course of that document, Your Honor, there is
evidence, I dont know how far the Courts documents go, but
I believe on page 478, I believe, it has, it begins sort of
the settlement notification which indicates the amount of
money that New Century received for the sale of a group of
loans which according to the schedule is attached to that
including Ms. Galopes loan. That does not satisfy her as
evidence of a true transfer of her loan.
I apologize. I am sorry. I dont know what else to
say to her, but those are the documents that we have. If as
a result of the documents that are in the Trusts possession
that gives her rights against third parties as to whether or
not they are the true lawful owner of the asset that they
purchased, thats for a different Court in a different
matter. That does not indicate that anything Mr. Jacobs said
was either hearsay, untruthful, fictitious or in any other
way anything but the truth.
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Your Honor, she raises another objection. She
raises in her argument that the Trustee did not pursue causes
of actions against the big banks. Well, Your Honor, I
believe as then counsel for the Creditors Committee, and this
Court knows that in various points in this case we were at
the inception counsel to the Creditors Committee.
We as counsel for the Creditors Committee looked at
the concept of whether or not we would be able to look back
90 days for all of the transactions that occurred including
all of the parties that seized loans. Unfortunately, because
of the safe harbor provisions of the Bankruptcy Code as this
Court is well aware; those causes of actions do not maintain
liability. Again, Your Honor, there is nothing we can do.
If they want a change in the law, this place and this Court
is not the form in which to seek it.
Your Honor, she fails to note as pointed out by Mr.
Jacobs, he did bring in excess of 200 causes of action
asserting preferences, recovering almost $9 million dollars
for this estate. He also brought various other causes of
action against third parties, brining another in excess of
$70 million dollars into this estate. So any allegation that
the Trustee has done anything other than exercise its
fiduciary duty to liquidate the assets of this estate and
bring the coverage to Creditors cannot be tolerated.
Your Honor, she claims in her pleadings again,
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somewhat pejoratively, that the Trustee is nothing more than
a puppet. And I think as Mr. Jacobs testified to, the
provisions in the Liquidating Trust Agreement are standard in
Liquidating Trust Agreements. And she brings in the American
Home Mortgage Bankruptcy proceeding as well. And Ill get to
that in a moment, Your Honor. But this is a large estate in
which there are large Creditors. Some of the Creditors were
owed in excess of $100 million dollars. Many of them were
owed tens of millions of dollars.
Mr. Jacobs was put into to liquidate the estate. As
part of the negotiation process it was not unreasonable for
the Creditors to have some oversight as to the party whos
liquidating the very assets which are going to provide their
distribution. And thats what this provides. It does not
make Mr. Jacobs a puppet.
Mr. Jacobs exercised his own decisions regarding
potential causes of action, advised by his own counsel, and
informed the Plan Advisory Committee and has kept them up to
date. So I can assure Your Honor that Mr. Jacobs is anything
but a puppet. He is a task master. Hes done the best he
can to bring these cases to a swift and quick conclusion.
There have been a number of very contentious, very
complicated issues. As Mr. Jacob indicated and Im sure Your
Honor is relieved, we brought in tens of millions of dollars
in tax refunds without ever having to involve the Court. We
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did it through pain staking negotiations, and processes and
development by the Trustee. That is not somebody who is
shirking his responsibility to this estate.
Your Honor, I think we need to look at some of the
individual allegations that Ms. Galope is making. Ive gone
over her issues about the preferences, her issues about the
hearsay. She makes an allegation that somehow we
miraculously made a Credit Suisse and Deutsche Bank, the top
two Unsecured Creditors and as a result they got preferential
treatment to anybody else.
Credit Suisse and Deutsche Bank are the largest of
the Creditors because they had the most invested in New
Century. They received the largest distribution because they
are the largest Creditors. There are plenty of distributions
that weve made in this case of less than $1,000 to people
who supplied goods and services to New Century, who have
allowed unsecured claims and have been paid in accordance
with the terms of the plan.
Your Honor, Ms. Galope also makes a statement to
lead this Court to believe that New Century just gave away
loans. In her reply that was filed this morning she
indicates that in some way that her loan with a face amount
of $522,000 was sold for only $25,000. I think if Your Honor
looks at the exhibits attached to the Kevin Cloyd letter, I
believe theyre part of that, but it begins at Galope 486 I
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believe. It would indicate that this pool of loans that sold
actually sold above par, which mean that New Century received
a slight premium on the sale of its loan to Ms. Galope.
So again its not clear to me what she is referring
to. So, all I can tell Your Honor is that no, those loans
were not given away. New Century in fact received a small
premium. Im sure the purchasers are sorry they paid the
premium, but in the fact as the transaction closed there was
a premium.
Your Honor, I now must turn and I dont like the
fact that Im compelled to defend myself, but she has made
allegations against me personally and my firm. First of all,
had I known the article I wrote in 2002 would have changed
the industry or been looked at as a primer of things to come
I might have promoted it a little differently.
Your Honor, that article was written at a different
time, in different facts and if the Court has trouble
sleeping and would like to review the article, what the
article does is establish ways to review and analyze the
special purpose vehicles that were then being developed by
various parties. It is nothing more than that.
There are also allegations, Your Honor, about the
compensation that Hahn & Hessen received, that at some point
we received what she classifies as a Christmas bonus. Im
trying not even to dignify those with a response, but suffice
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to say, Your Honor, every hour that Hahn & Hessen billed has
been accounted for in our time records both prior to the
appointment of the Trustee, and our retention as Trust
counsel when we were counsel for the Creditors Committee and
as counsel to the Liquidating Trust. It goes to the review
process as was testified to Mr. Jacobs. And if there were
any questions wed certainly hear about it.
Your Honor, lets talk a little bit about the
destruction motion because thats going to come up in several
of the motions that you hear today. If the Court will recall
in fact, I hate to admit it, but I actually lost that motion.
In fact the borrowers as a result of their objections were
successful in defeating the relief sought by the Trustee.
Ms. Galope correctly pointed out that the Trustee cannot get
rid of any documents in its possession without further order
of this Court.
So what did we do, Your Honor? We knew that this
case was coming to a close. We decided to look at what we
call the low hanging fruit, the documents in which we thought
we could get rid of. We tried to get rid of documents in
which were either Bankruptcy pleadings or duplicative, but
they were a significant objection. And as a result of this
Courts ruling none of those documents have been destroyed,
nor will they be destroyed absent further order of this
Court. We have maintained all of the documents in the form
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that we have them.
In addition, Your Honor, as a result of that hearing
we have provided everybody who objected and who has asked
since with copies not only of their own loan file, but every
document that we have related to their loan. So for example,
if their loan was related to any particular transfer
documents and we could easily identify it, we provided them
with a transfer document as well. It may not be what theyre
looking for, but its in fact what we have in our books and
records.
So the Trustee not only did not create any scheme to
destroy documents as a result of the [indiscernible]
decision. In fact it was the start of a process which we
knew would be an ongoing process in order to get rid of
documents which were costing this estate money to retain and
needed to be done if this case was ultimately going to be
concluded.
Your Honor, and only because they are in the
documents that Ms. Galope submitted to the Court, to which we
have no objection, I think we need to address the American
Home case. And as this Court knows I was counsel to the
Creditors Committee there and I am presently co-counsel with
Young Conaway as counsel to the Liquidating Trustee.
Your Honor, the allegations contained in Ms.
Galopes response could not be further from the truth. There
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are some truths, but they are taken out of context. Yes, we
did have a Borrowers Committee in the American Home
Bankruptcy proceeding. It was a motion that was made, dually
noticed and supported the U.S. Trustee at the time we were
negotiating a plan.
A Borrowers Committee was appointed over the
objection of the Unsecured Creditors Committee; I lost that
one to, but over the objection, and was appointed for a very
finite limited purpose to negotiate provisions in the plan to
deal with borrower issues. And mainly the borrowers in that
case were concerned with finding out when their loan was
sold, who owned their loan, who is the present servicer.
Your Honor, as a result of what we learned in that
case we took it back to Mr. Jacobs and we suggested as soon
as Mr. Jacobs became the Liquidating Trustee we said lets do
what were doing in American Home. If people call and ask,
lets tell them we filed Bankruptcy, lets tell them, you
know, what we have about their loan, lets tell them when it
was sold and lets tell them who it was sold to because
really thats all the information that we had.
In American Home we put in place an Ombudsman who
does that. In American Home learning from the other cases we
put that into place and weve done that ever since Mr. Jacobs
was in. So, Your Honor, were doing in fact in this case
more than they did in American Home voluntarily.
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Your Honor, the other thing that I will just mention
with respect to the American Home, since I drafted both plans
there is a provision in Article 8G4 of the American Home Plan
that sets forth the rights and duties of the Plan Advisory
Committee and among other things it includes the removal of
the Trustee, approval of releases, commencing litigation. So
in a different way we had to go to the American Home Plan
Advisory Committee for the same way that Mr. Jacobs goes to
the Plan Advisory Committee in this case.
In addition pursuant to the terms of 2.2 of the
American Home Plan Advisory Agreement it provides again the
authority for the Liquidating Trustee. And those
specifically in that case we did it a little differently.
The Trustee has authority up to a certain dollar amount and
then after that he must go to the Plan Advisory Committee for
approval.
So, Your Honor, for all of the reasons weve set
forth in our pleadings, for all of the reasons set forth in
Mr. Jacobss testimony we do not believe the Trustees
removal is warranted. We believe that Mr. Jacobs has done an
incredible job and was returning an incredible return to
these Creditors. And to the extent there are allowed claims,
unsecured claims as a result of Mr. Jacobss services they
will receive a much larger distribution then they might have
otherwise, but Mr. Jacobs is bound by the rule of law under
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the Bankruptcy Code, under the Liquidating Trust Agreement.
And to the extent that he believes that there are
not valid claims he has an obligation to prosecute them to
the fullest extent he can if they cannot be settled. And
this Court knows we have attempted very early on to settle
these matters to no avail. So, Your Honor, we believe the
motion should be denied on all counts.
THE COURT: All right, thank you. I will take this
matter under advisement and issue a decision in due course.
Lets turn to the next motion.
MR. INDELICATO: Thank you, Your Honor. The next
motion, Your Honor, is Ms. Galopes second motion for
reconsideration. And since it is her motion I will turn it
over to her.
THE COURT: All right, Ms. Galope.
MS. GALOPE: Yes, Your Honor, I thought I was going
to have a second chance to speak, Your Honor.
THE COURT: Ms. Galope, normally I give a Movant the
chance for rebuttal, but Ive heard so much here and so much
has been submitted, I dont think anything further would be
helpful to the Court. So lets move onto your second motion
for reconsideration.
MS. GALOPE: Id like to say this, you know, he kept
referring to the Kevin Cloyd letter. You know, talk is
cheap, Your Honor.
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THE COURT: Ms. Galope, Ms. Galope, if you do not
follow my instructions I will not allow you to participate by
phone. Please turn to your second motion for
reconsideration. If you have anything youd like to
highlight about the submissions that youve made in writing
you may do so now.
MS. GALOPE: All right, the second motion for
reconsideration, Your Honor, is Id like to remind the Court
that my motion for reconsideration is on my claim to be
allowed. Previously this Court has denied my claim because
it was late filed.
After all this, Your Honor, this Court has allowed
many other borrowers claims that were also late filed. I
believe my claim should not be considered any differently
only to the ruling on Owens vs. Corning, for which I will
explain in detail in a few minutes.
Since I have nominated myself to be member of the
Proposed Borrowers Committee, a prerequisite for which would
be to have my claim accepted that I hope you would grant me
the favor after presenting my responses to the objections and
my explanation.
The grounds for the second motion for
reconsideration is based on the application of the new case
law, the Third Circuit decision on Wright vs. Owens Corning
which was upheld by the Supreme Court on February 19 th, 2013.
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The Trust objections are erroneous, irrelevant and perceived
as either a lack of comprehension of the relevance and
applicability of the Wright vs. Owens Corning, Galope and
similar others were situated for a deliberate effort, a
modest rounding by the Trust to confuse the uninformed on the
new case law.
Owing is highly improbably for lawyers,
[indiscernible] that they are. The counsels have
misunderstood the new case law. Either way the objections
are without basis and without merit. And Galopes second
motion should be allowed including claim number 4131. Its
ridiculous, Your Honor, the way the objections were raised
there for the caliber that these counsels have.
I was trying to understand this Wright vs. Owens
Corning. It came to me very clearly when I read it
yesterday. The Owens Corning that details parallels, so many
parallels to the New Century borrowers claims. In Owens
Corning, Patricia Wright bought, had been exposed to the
brother of the Debtor by buying their shingles in 1999. By
2009 those shingles leaked and by, I think 2009, she filed a
class action against Owens Corning.
Now, at that time in 2002 Owens Corning filed a
Bankruptcy petition. At that time the rule controlled the
claim of Patricia Wright and another Litigant Mr. West. The
difference between them is Ms. Wright bought his shingles in
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1999 while Mr. West bought his shingles in 2005.
Now, the Bankruptcy occurred in 2002. A
confirmation of the plan occurred before 2009. Now, at that
time the rule controlled the status of the claim of both Ms.
Wright and Mr. West. And so they did not have, the rule held
that they did not have claims.
But at the same time there were efforts to overturn
that rule and they did so successfully in 2010. By that they
have decided, the Third Circuit decided to retroactively
apply the Grossmans Rule that made Wright and West claims to
have claims and the right to payment in the Bankruptcy.
Now, what happened was, and this is very significant
to the adequacy of the notices, all right, had Ms. Wright and
Mr. West seen those notices when they were issued they would
not have any interest to file claim because they did not have
claims at that time because the rule controlled the status of
their claims, meaning they would be discharged just as they
have by the District Court.
But because of the retroactive application of
Grossman doesnt mean they have this claim, their right to a
payment. And the Court ruled that because the claims were
filed way after the notices, the bar dates and the
confirmation of the plan, the same way for most of borrowers
here, they held that the Plaintiffs did not have due process.
So, in short it was irrelevant that the notices were
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judged as adequate because it no longer was, it didnt serve
the purpose. The Debtors did not held claims when it was
published. As applied in the New Century case
[indiscernible] was retroactively overturned in 2007, thus
Galope and similar others in this Bankruptcy case held
claims. But at the time of the New Century Bankruptcy
filing, the Frenville throughout this controlled the status
of Galope claim.
While Galope refinanced, while I refinanced my loan
with New Century it took me years to realize my exposure to
the harm of New Century. And I named New Century as a
defender in my adversary proceeding, but there was nothing in
there that I spoke about the harm from New Century as I still
did not realize the harm by New Century at that time in 2010.
It was sometime in late 2010 when I learned about
the real reasons of the financial crisis of 2008. And thats
when I caught on. I realized that New Century was in
litigation in Delaware. So I went there and filed my claim.
When the bar dates notices were published sometime in July
2007 in this sense of the case Frenville was the law in this
Circuit. Galope and similarly situated others their notices
were sent out and published. We did not get the actual bar
notices from the mail. We di