The Fair Finance Co. trustee says his law firm is willing to give up more than $1.65 million in hourly billings and instead take a one-third commission on money recovered in the bankruptcy case now more than 2 years old.
Trustee Brian Bash has 128 pending lawsuits seeking more than $1.5 billion in actual and treble damages in the alleged $223 million-plus Ponzi scheme. He recently filed papers with U.S. Bankruptcy Court in Akron seeking approval to change how his Cleveland law firm, Baker & Hostetler, will be compensated in the case.
As of March 16, the Fair Finance estate contained $2,671,598.74 in recovered assets, according to the latest available figures.
But in the court filing, Baker & Hostetler said as of March 16, it has unpaid bills of $4,547,137.50 since Dec. 31, 2010. The law firm said its hourly bills total $5,847,929, not including $720,000 for the time Bash has put in, since taking on the case shortly after Fair Finance was forced into bankruptcy in February 2010.
The law firm received an interim payment of more than $1.3 million for billings through Dec. 31, 2010.
“This contingent fee arrangement will significantly reduce additional hour professional fees to be charged against the estate in the face of uncertain future recoveries,” Bash wrote. “This arrangement will also enable the trustee to more easily make interim distributions should funds be received. The trustee believes this is in the best interest of the estate and its creditors and there seeks approval of the contingency fee arrangement …”
The change, if approved, would affect only billings after Nov. 12, 2011, according to the court filing. Those billings total the more than $1.65 million that Bash said Baker & Hostetler is willing to waive and instead take via commission.
“Although the trustee believes that significant additional cash will be recovered as a result of the trustee’s lawsuits, there can be no guarantee of that result,” the court filing said. “Baker & Hostetler has undertaken a significant financial risk in commencing the contingency matters for the trustee. There can be no guarantee of recoveries in the contingency matters given the uncertainties of litigation.”
No court date has been set on hearing the proposed change in fee arrangements.
Fair Finance’s Indiana co-owners Timothy Durham and James Cochran are awaiting trial this summer in Indianapolis on federal criminal charges that they defrauded investors after they bought the longtime Akron finance company in 2002.
Since that sale, more than 5,000 Ohio residents and organizations purchased more than $220 million in uninsured investment certificates from Fair Finance.
Bash earlier this year sued former Fair Finance owner Don Fair for $150 million, alleging Fair participated or at least knew of the fraud by Durham and Cochran.
Bash is also suing Providence, R.I.-based Textron Financial for as much as $950 million and is seeking as much as $223 million from New York-based Fortress Credit Corp., saying the two businesses also knew, or should have known, about fraud but continued to loan money to Fair Finance.
There was little discussion of the latest court filings in a brief, regularly scheduled status report hearing Tuesday in bankruptcy court in downtown Akron.
The next status hearing is set for 9:30 a.m. May 22 in the court, 2 S. Main St.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org