In the heart of Riverside, Illinois (America’s first planned suburb, itself a National Historic Landmark District) an 1871 Victorian Gothic landmark known as the Arcade lies imperiled. The Arcade, designed by Frederick C. Withers, is America’s first suburban shopping center. 
Until recently, although it was in need of some deferred maintenance, the Arcade was an attractive component of Riverside’s historic downtown. The centrally-located Arcade was occupied with shops and restaurants contributing not only to Riverside’s economy, but to its sense of community identity. 
In the summer of 2008, most of the ground floor windows were removed for a proposed rehabilitation. On August 11, 2008, the U.S. Securities and Exchange Commission (SEC) sued the Arcade’s owners for allegedly defrauding over 1,200 investors of approximately $255 million. All assets were frozen. Work on the Arcade immediately halted. Since then, the Arcade sits with plywood covering most, but not all, openings. Water and animals are infiltrating the largely vacant building. Water in the plumbing and sprinkling systems poses a major structural threat, as the unheated pipes will freeze and burst this winter. The ongoing derelict appearance of this prominent building is hampering Riverside’s efforts to attract tourism and demoralizing the community.
Possible Solutions
The court-appointed receiver could release funds to prevent the loss of the Arcade building but appears unwilling to do so. Partnering with the National Trust for Historic Preservation may elicit the receiver’s cooperation without formal legal intervention. Ideally, the Arcade will be secured and heated until a reputable, preservation-minded purchaser is identified.
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Our poor little landmark Arcade has now become embroiled in a huge legal fiasco in the making. Judge Denny Chin is presiding over the case of SEC v. Steven Byers et al, Case No. 08 Civ. 7104 which is quickly becoming a cash cow for the Receiver, Timothy Coleman, and the attorneys, Dewey & LeBoeuf.
From the Receiver's web site:
"On November 14, 2008, the Receiver and receivership attorneys Dewey & LeBoeuf filed a joint application for reimbursement of fees and expenses. The application covers the period from August 11, 2008 through August 31, 2008, including the efforts of the Receiver and receivership attorneys to marshal the Wextrust assets and investigate the activities of the Wextrust Entities and others. (The application and supporting exhibits are listed below.)
Pursuant to the Receiver's agreement with the SEC, which was approved by the Court, the SEC reviewed and approved the application before it was filed. The total amount of fees requested by the Receiver is $57,300. Dewey & LeBoeuf has requested $2.1 million in fees and $86,000 in expenses.
The fee application reflects discounts that the Receiver and Dewey & LeBoeuf agreed to extend, based on the public service nature of the receivership. The Receiver's hourly rate for all work on the receivership has been reduced from $850 to $250. The fees of other Dewey & LeBoeuf professionals for the first interim application were discounted by approximately $600,000."
Look folks: whether it's called Wexford, Wextrust, Riverside Arcade LLC or anything else, whether it involves a slew of unnamed investors or just Mssrs. Byers, Shereshevsky or Don Price who brought us this debacle, the building needs help NOW. Winter is upon us. There are large openings that will let the cold and rain enter the building unimpeded. The water and sprinkler systems need to be drained and the drains winterized. A small amount of heat should be kept in the building or more costly damage will occur. It appears to me, and will certainly appear so to the investors and lenders, that, despite their obvious handiness with producing a bill, the Receiver and the Attorneys are, by not safeguarding the condition of this landmark structure, breaching their fiduciary duty under the court's order and are failing to protect the condition and safeguard the asset of the landmark Arcade, thus causing it to "lose substantial value."
Come on Judge Chin - order these Bozos to do the right thing and protect this structure. It has survived more than a hundred years of winters and storms, but who knows if it can survive at the hands of remote and distant attorneys.
Here's a breakdown of the Receiver and Legal billing for just one month - up to Aug 31. And we can't get $10-15,000 to keep the building healthy through the winter. "There ought to be a law." Read it and weep. (This is a partial excerpt from the public record direct from the filing with the court.
III. SERVICES RENDERED BY RECEIVER AND D&L DURING FIRST
APPLICATION PERIOD
28. In accordance with Section D.3 of the SEC Billing Guidelines,
D&L segregated its time during the First Application Period into 14 activity categories.
Narrative summaries of these activity categories follow:
29. Asset Analysis and Recovery (B120) Total Fees: $634,001.5010
Although Wextrust sold securities to private placements investors through
a registered-broker dealer (Wextrust Securities), it also organized, provided initial capital
and in most instances managed the real estate and other projects in which it solicited
investments. Thus, much of the first three weeks of the receivership consisted of
identifying and analyzing real estate and other assets either owned or controlled by the
Wextrust Entities. This identification and analysis was critical to obtaining any
10
As noted above, Exhibit C hereto shows each professional working on a particular activity
category and the total hours he or she billed in that category. The fees for each activity category are stated
herein without showing the reductions discussed in paragraph 16-21 above.
16
meaningful recovery for defrauded investors because, as in most alleged Ponzi schemes,
Wextrust suffered from substantial liquidity issues at the receivership's inception. Timely
identification and a preliminary understanding of asset values were necessary to fund
ongoing costs of administering the receivership estate. Examples of services performed
in this activity category and particular professionals involved include:
(a) Reviewing and analyzing employee interviews, available
project-level financial statements, capitalization structures, and immediate funding needs
at particular hotel and other real estate projects (Vincent P. Schmeltz III, Bryan M.
Westhoff, Jeffrey H. Newhouse, Dean C. Gramlich, Mohsin N. Khambati, David D.
Cleary, Robin L. Moore, Jennifer O. Whitener, Kristien M. Kahn, Matthew L. DiRisio,
Thomas Feeney, Ilona B. Coleman, Boaz I.Green);
(b) creating written summaries of each real estate project
(Bryan M. Westhoff, Jeffrey H. Newhouse, Dean C. Gramlich, Mohsin N. Khambati,
Robin L. Moore, Matthew L. DiRiso);
(c) identifying all Wextrust bank and brokerage accounts,
contacting financial institutions to inform them of the Freeze Order and Initial
Receivership Order and engaging in extensive follow-up discussions with such
institutions to resolve various issues and to ensure compliance with the Orders (Mark S.
Radke, James R. Cotner, Nancy M. Riley, Teresa N. Chen);
(d) negotiating with banks and other financial institutions
regarding fund and wire transfers, cash management and funding issues (Dean C.
Gramlich, Bryan M. Westhoff, Jeffrey H. Newhouse, Nancy M. Riley);
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 16 of 32
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(e) identifying and providing preliminary analysis of loans by
the various high yield funds and related fraud issues and negotiating with participating
lender HPC (Mohsin N. Khambati, Nancy M. Riley);
(f) analyzing Wextrust’s commodity pool assets and regulatory
issues concerning the status of those assets (Timothy J. Carey, Vincent P. Schmeltz III,
Nancy M. Riley, Joanna Collias);
(g) preparing inventories of artwork and other personal
property located at the various office sites (Timothy C. Welch, Boaz I. Green);
(h) determining ownership of the Wextrust Affiliates (David D.
Cleary, Vincent P. Schmeltz III, Dean C. Gramlich, Mohsin N. Khambati, Bryan M.
Westhoff, Robin L. Moore, John K. Warren);
(i) identifying Wextrust properties and interests in Africa and
developing and executing the Receiver’s strategy to gain control of those assets (Harvey
Kurzweil, Richard Reinthaler, Arthur S. Radke, Leo V. Gagion, Greg Nott, John K.
Warren, Ilona B. Coleman, Miatta T. Dabo, Rajen Ranchhoojee, Nathan D. Larsen); and
(j) identifying various assets subject to the Freeze Order,
including real estate titled to the individual Defendants and their associates, and Wextrust
personal property located in the United States and Israel, and taking steps to secure and
prevent dissipation of such assets (Arthur S. Radke, Christine Y. Chi, Vincent P.
Schmeltz, III, Boaz I. Green).
30. Asset Disposition (B130) Total Fees: $12,544.50
Given the magnitude and complexity of Wextrust's business operations, it
comes as no surprise that the Receiver did not immediately focus on dispositions of
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 17 of 32
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assets. As previously noted the Receiver and his attorneys made every effort to avoid a
"fire-sale" perception which would serve to lower returns on asset dispositions and
ultimately to defrauded investors. Also the Receiver required the services of an
experienced consultant like Hilco before decisions could be made on the marketing of
real estate assets. As result, very little time was billed to the Asset Disposition category
during the First Application Period.
The principal asset disposition efforts conducted in the first few weeks of
the receivership were analyses of the potential distribution of funds in Wextrust
commodity pools and hotel assets managed by Axela.
31. Case Management (B140) Total Fees: $233,985.75
This activity category consisted of a number of in-person and telephone
conferences conducted by the Receiver and his attorneys at the inception of the case to,
inter alia, coordinate site visits, employee and third-party interviews, insure that as little
disruption as possible occurred as to business operations and formulate a strategy for
recovering PAM's investment in South African mining operations. These conferences
occurred on practically a daily basis to facilitate the exchange of relevant information and
to avoid duplication of effort. The Receiver maintained oversight over the legal work
being done through these conferences. The Receiver conducted periodic team meetings
with representatives of the SEC, U.S. Attorneys’ Office and FBI to coordinate the
Receiver’s efforts with those of the governmental agencies.
This category also includes interviews by Martin J. Bienenstock, head of
D&L’s Business Solutions and Governance Department, with potential accountants and
consultants to be retained by the receivership estate and the administration of the South
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 18 of 32
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African investigation and issues relating to South African corporate governance. D&L
partner Patrick Gennardo worked on analyzing and maintaining insurance coverage.
32. Bankruptcy Analysis (General) (B160) Total Fees: $127,766
The Initial Receivership Order required the Receiver to determine whether
any Wextrust entity should file a bankruptcy case. In connection with that determination,
the Receiver’s bankruptcy counsel considered the equitable doctrine of substantive
consolidation. Substantive consolidation permits a bankruptcy court to order the
consolidation of the assets and liabilities of separate legal entities when their financial
affairs are so intertwined that it becomes impossible to separate them. Byers and
Shereshevsky’s management of the Wextrust entities, particularly the intermingling of
the various entities' cash through the mechanism of intercompany loans, gave rise to
substantive consolidation issues analyzed by D&L insolvency attorneys shortly after the
Receiver's appointment. Partners Martin J. Bienenstock and William Schrag analyzed the
relevant precedent and advised the Receiver on the use of substantive consolidation as a
means of equalizing the treatment of investors with interests in disparate assets.
In addition to substantive consolidation, D&L partners Lewis S.
Rosenbloom, David D. Cleary and several other D&L insolvency attorneys prepared an
extensive written analysis of the ownership, capitalization and business prospects of the
hotels, WEP properties and WDG properties. The Receiver needed the analysis to
determine which entities might most benefit from chapter 11 reorganization and how
such filings might be accomplished where third-party joint venture partners shared
ownership with an Axela, WEP or WDG LLC Entity. D&L partner Martin J.
Bienenstock researched issues relating to the Receiver's duties. Other attorneys
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researched issues relating to SIPC coverage and the commencement of chapter 11 cases
by the various LLC Entities.
33. Evidence Preservation (B170) Total Fees:
$747,659.75
At the inception of the receivership, the Wextrust Entities and Affiliates
operated principally out of offices in Chicago; Hinsdale, Illinois (a Chicago suburb); New
York; Bethesda, Maryland; Nashville, Tennessee; Atlanta, Georgia; Norfolk, Virginia;
Boca Raton, Florida; Pretoria, South Africa; and Tel Aviv, Israel. After the FBI executed
search warrants at the Chicago and Norfolk offices, D&L attorneys took custody of those
and the other Wextrust offices and began the process of securing each site; changing
locks, preserving, collecting, and reviewing hard copy documents; making forensic
copies of all electronic media at each site; preparing charts summarizing relevant data;
photographing sites prior to any disposition of office contents; and documenting the chain
of custody for all physical evidence. D&L attorneys conducted interviews of dozens of
Wextrust employees and prepared memoranda reflecting those interviews. They
reviewed the email and other files of Wextrust personnel regarding South African
investments through PAM and other entities, obtained commodities trading information
needed for the National Futures Association, arranged for the imaging of hard copy
documents and prepared third party subpoenas of Northern Trust, Ralph Sabine, Tom
Coorsh and other persons. In addition to the Receiver, D&L professionals conducting the
evidence collection at each site were:
Chicago: Vincent P. Schmeltz III, Nancy M. Riley, Mohsin N. Khambati,
Nathan D Larsen, Timothy C. Welch and Jill Friedman.
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Hinsdale, IL: Dean C. Gramlich.
New York: Kristien M. Kahn, Ilona B. Coleman, Matthew L. DiRisio,
Jeffrey J. Amato and Thomas Feeney.
Norfolk, VA: Ilona B. Coleman, Thomas Feeney and Teresa Chen.
Bethesda, MD: Robin L. Moore, Sarah J. Gans and Sherika L. Jones.
Nashville, TN/Atlanta, GA: Bryan M. Westhoff and Jeffrey H.
Newhouse.
Boca Raton, FL: Bryan M. Westhoff.
Tel Aviv, Israel: Boaz I. Green and Miatta T. Dabo.
Pretoria, South Africa: Greg Nott, Rajen Ranchhoojee and Miatta Dabo
34. Business Operations (B210) Total Fees:
$200,993
With its two principals under arrest for securities fraud, the Receiver,
charged with the duty to prevent further dissipation of asset values and to preserve the
status quo, succeeded to what was initially a highly challenging business environment.
With respect to the Park View Hotel and other properties, trade vendors in many
instances refused to provide necessary goods and services, the Freeze Order created
issues with the use of operating bank accounts and mortgage lenders threatened
foreclosure and other measures. The Receiver and D&L attorneys managed and directed
employees on the resolution of a number of liquidity, office lease, budget, payroll, cash
management and other business issues. Vincent P. Schmeltz III, Nancy M. Riley and
other D&L attorneys also worked closely with Deloitte in analyzing accounting issues.
The Receiver and D&L attorneys answered questions raised by concerned employees
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about the receivership and addressed issues relating to the termination of particular
employees. D&L attorneys Dean C. Gramlich and Bryan M. Westhoff negotiated a
funding arrangement with the mortgage lender on the Rogers Plaza retail mall (one of the
WEP properties) which avoided a shut down of essential services at the mall over the
Labor Day weekend. D&L attorneys also began the development of a mechanism
(implemented in September) for expeditiously requesting the Receiver's approval of
business decisions through use of a Request for Action Form (or RFA).
35. Financial Analysis (B230) Total Fees:
$41,522.50
This activity category primarily consisted of analyses of various hotel,
WEP and WDG properties to determine their continued viability, their capitalization
structures and funding needs based on data provided by the Wextrust Entities and
Affiliates and from interviews conducted with Wextrust personnel. D&L partner David
D. Cleary and other insolvency attorneys used this information to develop the bankruptcy
analysis described in paragraph 31 above. Attorneys Vincent P. Schmeltz III and Mohsin
N. Khambati also assisted internal management and Deloitte in analyzing budget, cash
management and forensic accounting issues. Associate Robin L. Moore worked
extensively on expense reduction issues at the hotel properties.
36. Litigation (General) (B240) Total Fees:
$51,440.50
Although the pursuit of various claims and causes of action is likely to
become of importance as the case progresses, it was not a priority item at the inception of
the receivership. The Receiver assigned D&L partner Leo V. Gagion, an experienced
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insolvency litigator, to prepare an inventory of the numerous pending litigation matters
involving the Wextrust Entities and Affiliates.
37. Receivership Court Proceedings (B270) Total Fees: $47,536
This activity category covers work done by D&L partners Martin J.
Bienenstock, Mark S. Radke, David C. Cleary and associate James R. Cotner in preparing
an amendment to the Court's Initial Receivership Order and related affidavits. The
amendment (entered by the Court on September 11, 2008) gave the Receiver additional
authority in connection with the sale of assets, the incurring of business debt and other
business issues, established the Southern District of New York as the venue for any
bankruptcy and gave the Receiver standing as a debtor in possession with respect to
chapter 11 filings by any Wextrust Entity or Affiliate.
This activity category also covers associate John K. Warrens’s work in
assisting the SEC in its application for a freeze order concerning relief against Elka
Shereshevsky, including the preparation of a detailed declaration of the Receiver setting
forth evidence in support of that application. Associate Nathan D. Larsen also worked on
ex parte motions relating to certain evidentiary matters.
38. Case Administration/Receivership Non-Legal (B320)
Total Fees:$89,461
This activity category covers work primarily done by D&L paralegals and
litigation support personnel in creating and maintaining electronic and hard copy filing
systems and a document depository; creating and maintaining an investor relations
website; gathering, memorializing and responding to investor inquiries; uploading
interview memoranda and other documents to the extranet; creating mailing and contact
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 23 of 32
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lists; sorting and delivering mail from the Receiver mail box; transcribing investor
voicemails; and printing and sorting investor emails. D&L litigation support specialist
Adam Lew coordinated the collection and organization of documents at several sites and
negotiated arrangements with Encore and other outside vendors for the scanning and
imaging of these documents.
39. Investor Relations (B400) Total Fees:
$243,913.25
During the First Application Period, the Receiver and his counsel
conducted in-person meetings with investors in Chicago, New York, Norfolk and Israel.
The Receiver considered such face-to-face contact essential to ensure that defrauded
investors understood his efforts on their behalf and that he understood how Byers and
Shereshevsky had solicited their investments.
D&L attorney Nancy M. Riley also worked extensively on setting up an
investor website as an additional means of educating investors on what had occurred,
keeping them apprised of ongoing developments and giving investors another channel for
communicating with the Receiver. D&L attorneys Margaret V. Dennis, Miatta T. Diabo,
Ying Lin, Nancy M. Riley and various paralegals worked on setting up an investor call-
center, responded to investor inquiries, drafted memoranda regarding their interviews
with investors, trained personnel to staff the call-center, reviewed requests for
redemptions from the commodities funds and other investor requests and prepared
correspondence to investors.
40. Receiver Time (B420) Total Fees: $179,350
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 24 of 32
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This category covers work performed by the Receiver during the First
Application Period. The Receiver's activities ranged from daily conferences with
working groups of D&L attorneys and paralegals to the meetings with investors described
above. The Receiver visited several domestic Wextrust offices and Wextrust’s office in
Israel to interview employees and gain first-hand knowledge of the businesses operated
by the Wextrust Entities and Affiliates. The Receiver also traveled to Johannesburg,
South Africa to investigate the transfer of funds to Africa and consult with legal counsel,
accountants and professional advisors. The Receiver held meetings with the SEC counsel
and the U. S. Attorneys’ Office on a variety of issues, coordinated the difficult process of
freezing Wextrust's offshore accounts and generally supervised the activities of D&L
attorneys described herein. Although the Receiver’s standard billing rate is currently
$850 per hour, D&L has reduced his hourly rate to $250 as part of its public service as
discussed in Section II above.
41. Travel Time Total Fees: $115,294
This activity category covers all non-working travel time of D&L
professionals during the First Application Period. Exhibits B, C and D and the amount
stated above reflect the actual travel time of the professionals. Section E.2.j. of the SEC
Fee Guidelines permits non-working travel time to be billed at fifty percent of the
professional's billing rate. The actual 50% reduction was $26,390 with respect to the
Receiver, with the Receiver billing his travel time at half his reduced rate (or $125 per
hour). D&L reduced its portion of this category ($84,354) to $42,177.
IV. EXPLANATION OF EXPENSES AND RELATED POLICIES
42. D&L seeks reimbursement of its out-of-pocket costs in the amount
of $85,840.10. Exhibit E sets forth the various categories of expenses for which D&L
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seeks reimbursement. Also, pages 145 through 200 of Exhibit D to the First Interim
Application contain further detail regarding each of the expense categories for which
D&L seeks reimbursement. D&L will retain the documentation supporting these
expenses for a period of seven years in accordance with the SEC Fee Guidelines and will
provide the SEC with copies upon request.
43. D&L observed the following policies in connection with its
expenses during the First Application Period:
(a) In accordance with Section E.2.b. of the SEC Fee
Guidelines, D&L seeks its internal photocopying expenses (listed as reproduction
expenses in Exhibit E) at a rate of $.15 per page. D&L made 54,572 internal
photocopies during the First Application Period at the $.15 rate.
(b) In accordance with Section E.2.g., D&L seeks
reimbursement of outgoing facsimile charges at a rate of $1.00 per page for outgoing
transmissions. D&L made 686 outgoing facsimile transmissions during the First
Application Period. D&L cannot readily determine its toll charges. D&L has not
charged for incoming facsimile transmissions.
(c) Pages 164 and 192 of Exhibit D list charges of $6,303.06
and $3,835.19, respectively. These charges are for the mass mailing of notice of the
receivership sent out by D&L to both domestic and foreign recipients on August 15,
2008. D&L utilized a third party vendor in Chicago, Discovere, LLC, to facilitate this
mailing.
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 26 of 32
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(d) Exhibit E reflects a charge for professional fees in the
amount of $25.00. This charge is for reimbursement of a $25.00 pro hac vice admission
fee paid by D&L partner Mark S. Radke.
(e) Exhibit E reflects a charge of $54.00 described as
Corporate Service fees. This charge is for reimbursement of the cost of obtaining
certified copies of documents from the Clerk’s Office of the United States District Court
for the Southern District of New York.
(f) With respect to all expenses, D&L seeks reimbursement
only for the actual cost of its filing and court reporting fees, postage and overnight
delivery fees, locksmith charges (relating to the changing of the locks at various Wextrust
office sites) and long distance telephone charges. D&L has not included in any request
for expense reimbursement the amortization of the cost of any investment, equipment or
capital outlay (except to the extent that any such amortization is included within the
permitted allowable amounts set forth in the SEC Billing Guidelines for photocopies and
facsimile transmissions).
(g) Whenever possible, D&L has used email to transmit
documents via portable document format, thereby reducing facsimile, overnight courier
and copying costs otherwise chargeable to the receivership estate.
(h) In accordance with Section E.2.j. of the SEC Billing
Guidelines, D&L has not sought reimbursement for local travel expenses, including
mileage, taxis and meals.
(i) With respect to long distance travel expenses, D&L
professionals have used the lowest available airfare and train fare and have not sought
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reimbursement for luxury accommodations or deluxe meals. In maintaining its expense
documentation, D&L retains copies of receipts relating to long distance travel. As noted
in Section II above, D&L has not sought reimbursement for the Receiver’s upgrade to
business class in connection with his trips to Israel and South Africa.
(j) D&L has not sought reimbursement for secretarial, word
processing, proofreading or document preparation expenses (other than by professionals
or paraprofessionals), data processing and other staff services (exclusive of
paraprofessional services) or clerical overtime.
(k) As noted in Section II above, D&L has not charged for its
Lexis and WestLaw research expenses with respect to this Application.
(l) As indicated above, D&L has created an investor relations
website. To the extent possible, D&L has utilized clerical or paralegal staff to handle
communications with investors. D&L has also established an investor call center staffed
by Trak Legal at a cost below the $200.00 per hour rate applied to the Investor Relations
activity category (B320).
(m) In some instances, cost incurred during a particular
application period will not be reflected in D&L's records until a subsequent application
period. D&L will seek reimbursement for such “trailing” expenses in subsequent fee
application periods.
V. FACTORS TO BE CONSIDERED BY THE COURT IN AWARDING FEES
The case law on equity receiverships sets forth the standards for approving
receiver compensation and the fees and expenses for the receiver's counsel. The District
Court has discretion to determine compensation to be awarded to a court-appointed
equity receiver and his or her counsel and “may consider all of the factors involved in a
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particular receivership in determining the appropriate fee.” Gaskill v. Gordon, 27 F.3d
248, 253 (7th Cir. 1994). Many authorities (some quite dated) provide “convenient
guidelines”, but in the final analysis, “the unique fact situation renders direct reliance on
precedent impossible.” Securities & Exchange Comm’n v. W.L. Moody & Co., 374 F.
Supp. 465, 480 (S.D. Tex. 1974), aff'd, 519 F. 2d 1087 (5th Cir. 1975).
In allowing counsel fees in Securities Act receiverships, “[t]he court will consider
. . . the complexity of problems faced, the benefit to the receivership estate, the quality of
work performed, and the time records presented.” Securities & Exchange Comm’n v.
Fifth Ave. Coach Lines, Inc., 364 F. Supp. 1220, 1222 (S.D.N.Y. 1973); see also United
States v. Code Prods., 362 F.2d 669, 673 (3rd Cir. 1966) (court should consider the time,
labor and skill required (but not necessarily expended), the fair value of such time, labor
and skill, the degree of activity, the dispatch with which the work is conducted and the
result obtained). “ ‘[R]esults are always relevant.’” Securities & Exchange Comm’n v.
Elliott, 953 F.2d 1560, 1577 (11th Cir. 1992), quoting Moody, 374 F Supp. at 480.
However, a good result may take a form other than a bare increase in monetary value. Id.
(“Even though a receiver may not have increased, or prevented a decrease in, the value of
the collateral, if a receiver reasonably and diligently discharges his duties, he is entitled to
compensation.”). Obviously, overall results can be determined only at the conclusion of
the case.
Another "basic consideration is the nature and complexity of the legal problems
confronted and the skill necessary to resolve them." Moody, 374 F. Supp. at 485.
Moreover, “[t]ime spent cannot be ignored.” Id.at 483. This is particularly true when
the dimension and complexity of a receivership prevent counsel from taking on other full
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time assignments. Id. at 483-486(describing the efforts of the receiver counsel’s in the
difficult task of determining ownership and disposability of a bank’s assets and the high
priority given to the matter by counsel). Another "significant factor is the amount of
money involved." Id. at 486; see also Gasser v. Infanti Int’l, Inc., 358 F. Supp 2d 176,
182 (E.D.N.Y. 2005) (receiver’s legal fees “must be reasonable in light of the services
rendered by counsel and the amount of property held in the receivership”).
Under these standards the Receiver and D&L have adequately demonstrated that
the amount of fees requested is appropriate. The Receiver and D&L have acted quickly
to take control of other assets of the Wextrust Entities and Affiliates and prevent further
dissipation by Byers and Shereshevsky. The benefit to investors, though not quantifiable
at this early stage at the receivership, will become quantifiable as the case proceeds.
Investors now have a forum in which they may present their views (including their
criticisms) and monitor the Receiver's efforts to marshal the valuable assets of Wextrust,
expeditiously dispose of these assets unlikely to generate a return and investigate the
Ponzi scheme allegedly perpetrated by Byers, Sherevesky and others acting under their
direction. The amounts at issue are substantial by any measure; hundreds of millions of
dollars of assets and investments are within the scope of the receivership.
The issues being addressed by the Receiver and D&L are highly complex, ranging
from commodities trading to real estate finance to diamond mining to the investigation of
complex fraud perpetrated over a multi-year period. The magnitude of this case largely
precludes the Receiver and his core group of attorneys from accepting other employment
at this time. Nor will comparisons with other receiverships adequately reflect the effect
of the unprecedented crisis in the nation's financial markets that accelerated just as the
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receivership commenced, making the Receiver's efforts only that much more difficult and
time consuming. Based on the foregoing, we respectfully submit that the compensation
sought by the Receiver and D&L is wholly warranted.
WHEREFORE, PREMISES CONSIDERED, the Receiver and D&L respectfully
request that the Court:
(a) grant interim approval of the Receiver's compensation in
the amount of $57,300;
(b) grant interim approval of D&L compensation in the amount
of $2,147,666.75;
(c) grant interim approval of D&L's request for reimbursement
of its out-of-pocket expenses in the amount of $85,840.10; and
(d) order the Wextrust Entities to pay within ten (10) business
days from available cash the approved fees of the Receiver and D&L in the amounts set
forth herein and reimburse D&L for its approved expenses; and
(e) grant such other relief as the Court deems appropriate.
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 31 of 32
Dated: New York, NY
November 14, 2008
Counsel to the Receiver,
Timothy J. Coleman
s/ Leo V. Gagion
Martin J. Bienenstock
Leo V. Gagion
Dewey & LeBoeuf LLP
1301 Avenue of the Americas
New York, NY 10019
212.259.8000 (t)
212.259.6333 (f)
and
Mark S. Radke
Dewey & LeBoeuf LLP
1101 New York Avenue – NW
Suite 1100
Washington, D.C. 20005
202.346.8000 (t)
202.346.8102 (f)
Case 1:08-cv-07104-DC Document 92 Filed 11/14/2008 Page 32 of 32
I hope they are having a good time flying to Isreal and Souh Africa while the Arcade sits lonely and cold. Shakespeare was right.
Wolfstalker -
Thank you for posting the details on the SEC case.
It's interesting that Mr. Coleman (the receiver) claims to be making "every effort to avoid a fire-sale perception which would serve to lower returns on asset dispositions and ultimately to defrauded investors" yet has taken actions inconsistent with the proper protection and appropriate marketing of the landmark Arcade building.
Mr. Coleman's decision to forego the recommendation of the Preservation Commission to maintain minimal heat and keep systems (including fire supression) operable does not make the building more marketable, but less so.
I hope he is not under the mistaken impression that the landmark Arcade building can be marketed as a tear-down. Beyond the protections against demolotion of landmarks provided by Riverside's Preservation Code, there is tremendous community concern for this building.
As outlined in the "Breaking News" post, the landmark Arcade is eligible for a myriad of tax incentives which can be combined to make historic rehabilitation projects economically worthwhile. If Mr. Coleman understood the value of this asset, he should have followed the above recommendations and targeted marketed this building to groups experienced in the rehabilitation of historic landmarks.
I too would think that the receiver's duty to preserve the value of the assets is a fiduciary duty. Breach of fiduciary duty is quite serious. The investors clearly have standing to bring such a claim, but I am not sure how far that standing extends to other interested parties such as the Village of Riverside. Anyone out there know?
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