{"id":"court_ctb_2245_0","court":"CTB","case_no":"22-50073","doc_number":2245,"sub_number":0,"doc_type":"TRANSCRIPT","filed_date":"2023-10-06","title":"UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT IN RE: HO WAN KWOK and GENEVER HOLDINGS, LLC, Debtors. . . . . .","summary_zh":null,"summary_en":null,"body_en":"UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT IN RE: HO WAN KWOK and GENEVER HOLDINGS, LLC, Debtors. . . . . . . . . . Case No. 22-50073 Chapter 11 915 Lafayette Boulevard Bridgeport, CT 06604 Wednesday, September 27, 2023 2:01 p.m. . . . . . . . . . . . . . . . . TRANSCRIPT OF FINAL APPLICATION FOR COMPENSATION FOR SAXE DOERNBERGER & VITA, P.C., OTHER PROFESSIONAL, FEE: \\$230,840.00, EXPENSES: \\$5,612.00. FILED BY SAXE DOERNBERGER & VITA, P.C. [2156]; APPLICATION TO EMPLOY KROLL, LLC AS FORENSIC INVESTIGATORS FILED BY PATRICK R. LINSEY ON BEHALF OF LUC A. DESPINS, CHAPTER 11 TRUSTEE [2162] BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY COURT JUDGE APPEARANCES: Chapter 11 Trustee: Paul Hastings LLP By: LUC A. DESPINS, ESQ. 200 Park Avenue New York, NY 10166 (212) 318-6001 For the Chapter 11 Trustee: Neubert Pepe & Monteith, P.C. By: PATRICK R. LINSEY, ESQ. 195 Church Street, 13th Floor New Haven, CT 06510 (203) 821-2000 APPEARANCES CONTINUED. Audio Operator: Courtroom ECRO Personnel Transcription Company: Access Transcripts, LLC 10110 Youngwood Lane Fishers, IN 46048 (855) 873-2223 [www.accesstranscripts.com](htt) Proceedings recorded by electronic sound recording, transcript produced by transcription service.\n\nAPPEARANCES (Continued): For the Chapter 11 Trustee: Saxe Doernberger & Vita, P.C. By: BRIAN J. CLIFFORD, ESQ. 35 Nutmeg Drive, Suite 140 Trumbull, CT 06611 (203) 287-2100 For Pacific Alliance Asia Opportunity Fund L.P.: Robinson & Cole, LLP By: ANNECCA H. SMITH, ESQ. 280 Trumbull Street Hartford, CT 06103 (860) 275-8325 For the U.S. Trustee Office of the United States Trustee By: STEVEN E. MACKEY, ESQ. The Giaimo Federal Building 150 Court Street, Room 302 New Haven, CT 06510 (203) 773-2210\n\n\n\n| 1 | (Proceedings commence at 2:01 p.m.) |\n|----|--------------------------------------------------------------------|\n| 2 | THE CLERK:
22-50073, Ho Wan Kwok and Genever |\n| 3 | Holdings LLC. |\n| 4 | THE COURT:
Okay.
Good afternoon.
If we could have |\n| 5 | appearances for the record, please, starting with the Chapter |\n| 6 | 11 Trustee. |\n| 7 | MR. DESPINS:
Good afternoon, Your Honor.
Luc |\n| 8 | Despins for the Chapter 11 Trustee. |\n| 9 | MR. LINSEY:
Good afternoon, Your Honor.
Patrick |\n| 10 | Linsey for the Trustee. |\n| 11 | MR. CLIFFORD:
Good afternoon, Your Honor. |\n| 12 | Brian Clifford for the Trustee. |\n| 13 | MS. SMITH:
Good afternoon, Your Honor.
Annecca |\n| 14 | Smith, Robinson & Cole on behalf of PACS. |\n| 15 | MR. MACKEY:
Steven Mackey for the U.S. Trustee. |\n| 16 | THE COURT:
Good afternoon to everyone.
Oh, I think |\n| 17 | --
wait a minute.
I think there's somebody else maybe coming |\n| 18 | in?
Who is iPhone 21, please? |\n| 19 | MR. DESPINS:
That's Mr.
Pfeiffer,
who is the |\n| 20 | business representative from Kroll, Your Honor.
He's just |\n| 21 | there in case the case --
the Court has questions regarding the |\n| 22 | Kroll retention. |\n| 23 | THE COURT:
Okay.
Let's change --
we'll change his |\n| 24 | name to Mr.
Pfeiffer, please. |\n| 25 | Okay.
There are two matters on the calendar this |\n| | |\n\n## Case 22-50073 Doc 2245 Filed 10/06/23 Entered 10/06/23 14:58:53 Page 4 of 27\n\n| 1 | afternoon.
The –-
in the Kwok cases, the final application for |\n|----|-------------------------------------------------------------------------|\n| 2 | compensation of counsel --
special counsel to the debtor, Saxe |\n| 3 | Doernberger & Vita, and then the application to employ Kroll. |\n| 4 | Trustee Despins, how would you like to proceed? |\n| 5 | MR. DESPINS:
I think we could start with the Saxe |\n| 6 | final application.
I see Mr.
Clifford is there.
I don't think |\n| 7 | there are any objections but to the extent the Court has |\n| 8 | questions or other parties have questions, Mr.
Clifford is |\n| 9 | there to answer them. |\n| 10 | THE COURT:
And this will be the final fee |\n| 11 | application for Kroll.
I'm sorry --
I said that --
I'm looking |\n| 12 | at the word Kroll as I'm talking.
For Saxe Doernberger & Vita, |\n| 13 | correct? |\n| 14 | MR. DESPINS:
That's correct, Your Honor. |\n| 15 | THE COURT:
Okay. |\n| 16 | MR. CLIFFORD:
Correct, Your Honor. |\n| 17 | THE COURT:
All right.
Mr.
Mackey, the United States |\n| 18 | Trustee's Office has reviewed this application and filed a |\n| 19 | statement of no objection.
Is that correct? |\n| 20 | MR. MACKEY:
We have, Your Honor.
As for the |\n| 21 | employment application, our statement of no objection is
2231. |\n| 22 | THE COURT:
Not the employment application, the |\n| 23 | application for compensation. |\n| 24 | MR. MACKEY:
For our --
for compensation, Your Honor, |\n| 25 | it's 2206 is the statement of no objection. |\n\nCase 22-50073 Doc 2245 Filed 10/06/23 Entered 10/06/23 14:58:53 Page 5 of 27\n\n| 1 | THE COURT:
Okay.
Thank you.
All right.
The fee |\n|----|-------------------------------------------------------------------|\n| 2 | application --
the final fee application, I've reviewed it. |\n| 3 | No one has filed any written objections to the fee |\n| 4 | application.
There is no one participating in the hearing |\n| 5 | today that is objecting to the fee application.
The United |\n| 6 | States Trustee's Office has filed a statement of no objection |\n| 7 | with regard to the fee application --
the application for |\n| 8 | compensation, which as Attorney Mackey stated, is ECF Number |\n| 9 | 2206.
Is there anything --
is there anyone wish to be heard |\n| 10 | with regard to the final application for compensation
of Saxe, |\n| 11 | Doernberger &
Vita? |\n| 12 | I noticed there's a couple of typos in the order. |\n| 13 | We're going to fix the order so that it says it's a final |\n| 14 | application and note today's hearing date.
I think Paragraphs |\n| 15 | 4, 5, and 6 of the proposed order are not necessary and they're |\n| 16 | duplicative of the things that are in the first three ordered |\n| 17 | paragraphs, so I'm not going to include those provisions in the |\n| 18 | order unless someone has a problem with that.
I'd like them to |\n| 19 | address that now, if you do.
Otherwise, that's how the |\n| 20 | proposed order will be revised before it is docketed and the |\n| 21 | application --
the final application is granted. |\n| 22 | Okay.
Hearing nothing, then the final application of |\n| 23 | Saxe, Doernberger & and Vita for compensation of special |\n| 24 | insurance coverage counsel is granted.
And the proposed order |\n| 25 | will be revised as noted on the record and we'll enter. |\n| | |\n\nACCESS TRANSCRIPTS, LLC 1-855-USE-ACCESS (873-2223)\n\n| 1 | MR. CLIFFORD:
Thank you, Your Honor. |\n|----|---------------------------------------------------------------------|\n| 2 | THE COURT:
Thank you. |\n| 3 | MR. DESPINS:
Thank you.
And Your Honor, on the |\n| 4 | Kroll retention, Mr.
Linsey is going to handle that. |\n| 5 | THE COURT:
Okay.
Go right ahead, Attorney Linsey. |\n| 6 | MR. LINSEY:
Thank you, Your Honor.
I just have a |\n| 7 | brief presentation on the application to employ Kroll as |\n| 8 | forensic investigators.
The Trustee requires this type of |\n| 9 | professional assistance both to uncover and analyze information |\n| 10 | that's necessary to understand the debtor's finances and to |\n| 11 | assist the Trustee with forensic analysis in connection with |\n| 12 | the Trustee's prosecution of adversary proceedings that have |\n| 13 | been and will be securing property of the estate. |\n| 14 | As we've discussed in a number of contexts, the |\n| 15 | debtor's finances, and particularly the manner in which assets |\n| 16 | have flowed throughout entities
and individuals associated with |\n| 17 | the debtor is convoluted.
The Trustee believes that Kroll can |\n| 18 | help untangle the web of the debtor's business and financial |\n| 19 | interests.
Kroll has assisted in a number of complex |\n| 20 | bankruptcy cases, providing exactly that sort
of expertise, |\n| 21 | including in Lehman Brothers Holding
and the Madoff
case, for |\n| 22 | two examples, from the Southern District of New York. |\n| 23 | The Trustee
--
I want to emphasize this
--
has |\n| 24 | negotiated discounts to Kroll's typical hourly rates.
Those |\n| 25 | discounts go on a
sliding scale for a minimum of 10 percent to |\n\nACCESS TRANSCRIPTS, LLC 1-855-USE-ACCESS (873-2223)\n\n| | 7 |\n|----|---------------------------------------------------------------------|\n| 1 | the Kroll professionals with lower rates to a maximum of 25 |\n| 2 | percent discount to the Kroll professionals with their higher |\n| 3 | billing rates.
The Trustee believes that these discounts will |\n| 4 | generate substantial savings for the estate.
And more |\n| 5 | generally, we believe that the investment in Kroll's services |\n| 6 | will return substantial value to the estate by ensuring that |\n| 7 | the debtor's financial interests are understood and that estate |\n| 8 | assets are recovered for the benefit of
creditors. |\n| 9 | In fact, Kroll is already at work analyzing many of |\n| 10 | the business and financial records that the Trustee has |\n| 11 | obtained and accumulated in the course of Rule 2004 and other |\n| 12 | discovery in the year that we've been involved in the case -- |\n| 13 | the year-plus.
For that reason, we've asked that the |\n| 14 | engagement be retroactive to August 2nd, which is within that |\n| 15 | 30-day safe harbor look-back window from the filing of their |\n| 16 | retention application. |\n| 17 | The Trustee has filed a certificate of service, which |\n| 18 | is at ECF 2179.
The U.S. Trustee has filed a statement of no |\n| 19 | objection, which is at 2231.
Mr.
--
the Trustee introduced |\n| 20 | Allen Pfeiffer, who is the lead professional on the engagement. |\n| 21 | He is here in the hearing today if the Court has any questions. |\n| 22 | But if not, we would ask that the Court enter the order |\n| 23 | approving Kroll's engagement. |\n| 24 | THE COURT:
Okay.
Thank you.
Does anyone wish to be |\n\nheard on the application to employ Kroll as the estate's\n\n\n\n investigator, specifically forensic investigator? Attorney Mackey, your office has reviewed this application. Is that correct? MR. MACKEY: That is correct. It was Attorney Claiborn, of course, who spent most of the time with this case. She reviewed it and it was she who filed the statement of no objection, Your Honor. THE COURT: Okay. Thank you. I do have a question or two about the application and the proposed order. I don't know why the estate is indemnifying Kroll in connection with this retention. I don't see any reason why that should occur. MR. DESPINS: Yeah, let me address –- MR. LINSEY: Your Honor –- oh, go ahead. MR. DESPINS: And I -- many judges have had this reaction to these requests for indemnification, Your Honor. They have, for better or for worse, become standard, and I know that's not a complete answer to Your Honor. But they are now standard in all retention orders in a sense that no financial advisor is going to be retained without that language because all the others are getting that same language. But remember that there's an – exculpate doesn't mean exclusion if they're in bad faith or grossly negligent. THE COURT: Well, isn't that true regardless of an indemnification? I mean, if the forensic professionals act in a -- in gross negligence or malfeasance, or -- then they're\n\nACCESS TRANSCRIPTS, LLC 1-855-USE-ACCESS (873-2223)\n\n| 1 | liable anyway.
So what's the need for an indemnification? |\n|----|-------------------------------------------------------------------|\n| 2 | MR. DESPINS:
Yes. |\n| 3 | THE COURT:
I don't understand.
I don't --
I |\n| 4 | understand anybody can ask for what they want, but why are we |\n| 5 | putting the estate out as --
with another liability, potential |\n| 6 | liability that it doesn't have?
I'm, you know, this isn't GM |\n| 7 | or Chrysler
or LTL
or any of those other cases where, or |\n| 8 | Madoff, or the other cases that have been cited to.
And just |\n| 9 | because somebody asked for it and they got it, doesn't mean |\n| 10 | that it's appropriate.
And I'm not sure why it's appropriate |\n| 11 | in this case. |\n| 12 | MR. DESPINS:
It's because, Your Honor, particularly |\n| 13 | in this case when you're dealing with somebody as litigious as |\n| 14 | the debtor or his associates who could bring claims against |\n| 15 | anyone, that's why it's, you know, I think there's not one firm |\n| 16 | that wouldn't ask for that and insist on that because of the |\n| 17 | risk of getting involved and ending up on the wrong end of a |\n| 18 | lawsuit with the debtor or his associates. |\n| 19 | THE COURT:
Well, they'd have to sue you because |\n| 20 | you're the one that retained them.
You're --
they're your |\n| 21 | professionals.
They're an arm of you.
They're not acting |\n| 22 | independently.
They're retained by this estate to act as your |\n| 23 | professional. |\n| 24 | I understand your point.
I understand your argument |\n| 25 | that there could be a lawsuit, but that could be true in any |\n\nACCESS TRANSCRIPTS, LLC 1-855-USE-ACCESS (873-2223)\n\n| 1 | case:
Chapter 7, Chapter 11, Chapter 13.
But you are the |\n|----|----------------------------------------------------------------------|\n| 2 | estate representative who is retaining this professional as an |\n| 3 | arm of you to carry out the duties that you believe you need to |\n| 4 | carry out.
And I --
don't get me wrong.
I understand the |\n| 5 | reason for the request, but, you know, just because you ask for |\n| 6 | it doesn't mean you're entitled to it.
And why are we putting |\n| 7 | this liability out there?
I mean, it's, I just don't --
I |\n| 8 | don't understand it.
If Kroll and I –
obviously, they are |\n| 9 | completely able to carry out these duties and responsibilities |\n| 10 | as they've done in all these other Chapter 11 cases. |\n| 11 | So I don't understand what their risk is.
What's the |\n| 12 | risk?
What's the risk?
What's the need for an |\n| 13 | indemnification? |\n| 14 | I don't want to have --
I don't want to sit --
I'm |\n| 15 | not going to have litigation over indemnification of a |\n| 16 | professional retained by the Trustee.
So then, because then |\n| 17 | the dispute's going to be between the Trustee and the |\n| 18 | professional, and the estate and the professional.
We've got |\n| 19 | better things to do than to worry about that. |\n| 20 | MR. DESPINS:
I understand your reaction, Your Honor. |\n| 21 | But in this case, given the fact that, for example, I've been |\n| 22 | sued in all, you know, in many other courts, and we got rid of |\n| 23 | those claims.
But, you know, it is --
it's a different case in |\n| 24 | that regard, Your Honor.
You've remarked many times that this |\n| 25 | case is different in certain respects.
This is another |\n\n$$\\mathbf{A}$$\n\n| 1 | instance where it is different because the debtor's associates |\n|----|-----------------------------------------------------------------------|\n| 2 | have no compunction about suing anyone in any other court and |\n| 3 | your --
I understand your point is that I --
because they're my |\n| 4 | agent, I would come to their defense under the Barton
doctrine |\n| 5 | or something like that to try to bring it back to Your Honor, |\n| 6 | et cetera. |\n| 7 | But in this case, I have to tell you --
I want to be |\n| 8 | very candid, Your Honor.
We interviewed a number of firms
that |\n| 9 | actually withdrew from the process because of the fear of being |\n| 10 | on the wrong
end of the debtor or his associates.
And to their |\n| 11 | credit, Kroll stepped up to the plate with the normal standard |\n| 12 | language.
I understand this is not General Motors.
It's not |\n| 13 | you know, it's not FTX.
I get all that, but, Your Honor, I |\n| 14 | would urge the Court to adopt a --
an exception to the general |\n| 15 | rule that you have, which is there should be no |\n| 16 | indemnification, because of the external circumstances here. |\n| 17 | THE COURT:
Well, what's the indemnification |\n| 18 | protecting against?
Just so that Kroll doesn't have to have a |\n| 19 | fight in this Court with you?
And you're going to have to |\n| 20 | pay
-- |\n| 21 | MR. DESPINS:
No, no. |\n| 22 | THE COURT:
And how are we going to see what it is |\n| 23 | they're entitled to be in --
who's going to determine what |\n| 24 | they're entitled to under the indemnification provision? |\n| 25 | MR. DESPINS:
Well, if that's not clear, it should be |\n\n| 1 | this Court that determines that. |\n|----|---------------------------------------------------------------------|\n| 2 | THE COURT:
Right.
So that's my point. |\n| 3 | MR. DESPINS:
And the first thing that we would do |\n| 4 | is
-- |\n| 5 | THE COURT:
So now that's my point.
So now I'm going |\n| 6 | to have to have a fight over whether --
what and if and to what |\n| 7 | extent they should be indemnified. |\n| 8 | MR. DESPINS:
Well, yes and no.
It depends.
If |\n| 9 | they're clearly sued for wrong reasons, there's no doubt that I |\n| 10 | should, because they're my agent, defend them in your court, |\n| 11 | Your Honor, under the Barton
doctrine to say that nobody can |\n| 12 | sue them without your prior authorization.
I don't expect that |\n| 13 | there'll be disputes between the Trustee and Kroll over the |\n| 14 | scope of the indemnification. |\n| 15 | But your point is well taken that only Your Honor |\n| 16 | should determine the scope of the --.
And I think that's the |\n| 17 | way we resolve the agent --
the claims agent as well.
That we |\n| 18 | resolved that by making sure that Your Honor, as between the |\n| 19 | Trustee and the equivalent
of Kroll was the claims agent in |\n| 20 | that case, that Your Honor had exclusive jurisdiction over |\n| 21 | these issues to make these determinations.
And I think that's |\n| 22 | how Your Honor ultimately got comfortable with that, the |\n| 23 | language in the engagement letter for the claims agent. |\n| 24 | So
there's no doubt --
I haven't spoken to |\n| 25 | Mr.
Pfeiffer about this, but there's no doubt that this Court |\n\nCase 22-50073 Doc 2245 Filed 10/06/23 Entered 10/06/23 14:58:53 Page 13 of 27\n\n| 1 | should have the final say-so on the issue of indemnification |\n|----|--------------------------------------------------------------------------|\n| 2 | and also claims asserted against Kroll, because we would move |\n| 3 | all these cases to Your Honor, in any event.
Hopefully |\n| 4 | that's
-- |\n| 5 | THE COURT:
Well, one of the provisions – |\n| 6 | MR. DESPINS:
--
goes a long way. |\n| 7 | THE COURT:
--
of the order says, in the event Kroll |\n| 8 | seeks reimbursement for the debtors'
--
for attorneys'
fees and |\n| 9 | expenses.
Why would they need attorneys?
I don't understand |\n| 10 | that.
They're your professional. |\n| 11 | MR. DESPINS:
Well, I --
my intention is to defend |\n| 12 | them, meaning against wrongfully brought claims.
But that is |\n| 13 | typical in these documents. |\n| 14 | THE COURT:
I understand.
Believe me, I understand. |\n| 15 | I understand what the agreements say.
I understand that |\n| 16 | there's provision --
there's a lot of provisions in a lot of |\n| 17 | agreements that people just put in.
That doesn't mean |\n| 18 | they're
-– |\n| 19 | MR. DESPINS:
Yes. |\n| 20 | THE COURT:
--
that they are appropriate.
So, |\n| 21 | Mr.
Pfeiffer, is Kroll not going to proceed if there isn't |\n| 22 | indemnification language in this agreement with the Trustee? |\n| 23 | MR. PFEIFFER:
My experience is that we typically do |\n| 24 | not proceed unless we have these provisions in order.
I have |\n| 25 | not asked our general counsel specifically with regard to this |\n| | |\n\n\n\nCase 22-50073 Doc 2245 Filed 10/06/23 Entered 10/06/23 14:58:53 Page 14 of 27\n\n| 1 | case, about what we would do, but I am doubtful. |\n|----|-------------------------------------------------------------------|\n| 2 | THE COURT:
And why is that?
So that I can be |\n| 3 | educated. |\n| 4 | MR. PFEIFFER:
Well, as you just discussed, it's |\n| 5 | become a risk that a firm like ours is not willing to take. |\n| 6 | THE COURT:
What --
what's your risk though?
That's |\n| 7 | what I'm trying to understand. |\n| 8 | MR. PFEIFFER:
We obviously have a firm of –- |\n| 9 | THE COURT:
I'm trying to understand what's your |\n| 10 | risk. |\n| 11 | MR. PFEIFFER:
A risk that we get sued.
If we get |\n| 12 | sued in a case where, you know, just for whatever wrongful |\n| 13 | action that was --
is not really a suit that we've done |\n| 14 | anything terrible, but we still have to defend it.
It costs us |\n| 15 | a lot of money and a lot of legal fees. |\n| 16 | THE COURT:
Well, isn't that a risk of your business |\n| 17 | every day?
Every engagement you enter into?
Isn't there |\n| 18 | always a risk that you'll be sued? |\n| 19 | MR. PFEIFFER:
Sure.
The risk of being sued by |\n| 20 | certain --
you know, we take a --
we have a fee. |\n| 21 | THE COURT:
Right. |\n| 22 | MR. PFEIFFER:
And we don't want to take a -–
and |\n| 23 | defending the case, which, you know, where we –- |\n| 24 | THE COURT:
Well, in this –- |\n| 25 | MR. PFEIFFER:
--
it becomes economically unfeasible |\n\n| 1 | for us. |\n|----|-------------------------------------------------------------------|\n| 2 | THE COURT:
In this case, the trust --
you're being |\n| 3 | ---
you're not being --
you're not in an engagement with a |\n| 4 | party.
You're in an engagement with a court officer who is |\n| 5 | retaining you to carry out certain duties so you're not going |\n| 6 | to be sued, or if you are sued, the Trustee's going to have to |\n| 7 | address that issue. |\n| 8 | MR. PFEIFFER:
Right. |\n| 9 | THE COURT:
I don't understand why Kroll would be |\n| 10 | entitled to be paid additional fees and expenses above their -- |\n| 11 | or hourly rates that have already been negotiated in connection |\n| 12 | --
because there's two possibilities, right?
You get sued |\n| 13 | because there is gross mismanagement, or you get sued because |\n| 14 | it's a frivolous suit, or maybe not frivolous --
it's not a |\n| 15 | sustainable suit. |\n| 16 | If it's not a sustainable suit, the Trustee's going |\n| 17 | to deal with that, as the Trustee should.
He's employing you |\n| 18 | as an officer of this estate.
If it's for gross mismanagement, |\n| 19 | then you're going to be sued regardless.
And you're going to |\n| 20 | have to deal with that, and there is no indemnification for |\n| 21 | that. |\n| 22 | MR. PFEIFFER:
Okay. |\n| 23 | THE COURT:
So I'm a little puzzled.
Other than, oh, |\n| 24 | everybody gets this, so we want it.
And I understand that. |\n| 25 | But this, you know, this estate already has substantial |\n\n| 1 | administrative expenses under --
justified under the |\n|----|---------------------------------------------------------------------|\n| 2 | circumstances of this case.
I am not inclined to expose the |\n| 3 | estate to another potential administrative expense when it's |\n| 4 | not necessary.
Or no one's convinced me yet. |\n| 5 | MR. LINSEY:
Your Honor, can I just mention one -- |\n| 6 | THE COURT:
No one's convinced me yet why it's |\n| 7 | necessary other than this is what we want in the documents and |\n| 8 | if we don't want --
if we don't get it, we're not going to do |\n| 9 | the work. |\n| 10 | MR. LINSEY:
Your Honor, can I just add one thing?
I |\n| 11 | do want to --
and I probably should have mentioned this |\n| 12 | initially.
The engagement letter that's attached as the |\n| 13 | exhibit to the retention application was extensively negotiated |\n| 14 | between the Trustee and Kroll.
We did not just take Kroll's |\n| 15 | form engagement letter and agree to it.
There are numerous |\n| 16 | provisions, including the scope of the indemnification |\n| 17 | provision, including the provision in the engagement letter, |\n| 18 | that provides this Court sole authority over any claims and |\n| 19 | controversies, which Your Honor's obviously aware, of during |\n| 20 | the pendency of this bankruptcy. |\n| 21 | And other facets of the agreement were negotiated |\n| 22 | during these --
during an
extensive back and forth, including |\n| 23 | the discounts that Kroll agreed to apply to its hourly rates. |\n| 24 | That we feel is, under the circumstances, not only a fair, but |\n| 25 | a competitive package for their engagement.
And that's why we |\n\n\n\n| 1 | feel that we have, you know, are happy to put it in front of |\n|----|-----------------------------------------------------------------------|\n| 2 | Your Honor and have not seen objections to date.
But I say |\n| 3 | that, understanding Your Honor's concerns.
I just wanted to |\n| 4 | make sure that Your Honor had that context. |\n| 5 | THE COURT:
Thank you.
So Trustee Despins, you seem |\n| 6 | to be suggesting that you'd go back and talk about this |\n| 7 | indemnification issue and try to change the provisions of the |\n| 8 | order and possibly the engagement letter to be more along the |\n| 9 | lines of the indemnification issues that we've already |\n| 10 | addressed with regard to
a claims agent.
Is that where you're |\n| 11 | headed? |\n| 12 | MR. DESPINS:
Well, I was just suggesting that it was |\n| 13 | just for the purpose of making sure, if it's not already there, |\n| 14 | that this Court has exclusive jurisdiction to determine the |\n| 15 | scope of the indemnification, meaning whether they're entitled |\n| 16 | to it or not.
That is my recollection of what we have –
had |\n| 17 | been agreed to with the claims agent and that is what I would |\n| 18 | propose here.
It may already be there.
I apologize.
I should |\n| 19 | know that offhand, but if it's not there, I would go back to |\n| 20 | Kroll and ask them to agree to that, because I think that's -- |\n| 21 | if it's not there, that it should be there. |\n| 22 | But I would not ask them to drop their |\n| 23 | indemnification claim, Your Honor.
I don't think that, based |\n| 24 | on practical experience in this case of trying to retain a |\n| 25 | financial advisor, and based on the fact that the debtor and |\n| | |\n\n| 1 | his associates have, in fact, asserted claims against people |\n|----|-----------------------------------------------------------------------|\n| 2 | that are completely frivolous and have been sanctioned by other |\n| 3 | courts.
I think that I understand fully why Kroll would not |\n| 4 | proceed without that language.
But clearly Your Honor should |\n| 5 | be the sole arbiter of whether they're entitled to |\n| 6 | indemnification or not.
And I believe that's a compromise that |\n| 7 | was reached with the claims agent. |\n| 8 | THE COURT:
Okay.
With regard to the claims agent |\n| 9 | too, I don't understand why they're still incurring fees, by |\n| 10 | the way.
So I think you need to take a look at that, because |\n| 11 | they --
I have no understanding why they would be still |\n| 12 | incurring fees. |\n| 13 | But in any event, I don't think the order says what |\n| 14 | you just said, Trustee Despins, number one.
Number two, |\n| 15 | it's
--
it has a lot of other provisions in it that I think are |\n| 16 | unnecessary.
Number --
the third ordered paragraph is |\n| 17 | duplicative of the second.
It's unnecessary.
The sex --
the |\n| 18 | sixth paragraph is not necessary.
Or you can --
if you're |\n| 19 | saying you shall indemnify Kroll to the extent, well, you're |\n| 20 | only going to indemnify Kroll if this Court finds that an |\n| 21 | indemnification --
I don't agree that it's necessary.
But if |\n| 22 | you're telling me that that's the only way this is going to |\n| 23 | proceed, then I'll turn my head and let it happen, although I |\n| 24 | don't understand what the risk is.
The risk --
I don't |\n| 25 | understand what additional risk there is than the risk that |\n\n| 1 | already exists every day with any professional out in the |\n|----|--------------------------------------------------------------------------|\n| 2 | world, because that's the way it works. |\n| 3 | So in any event, I --
the indemnification is not |\n| 4 | going to --
whether or not there's any indemnification of |\n| 5 | anything, would have to be brought before this Court.
And |\n| 6 | unless and until it is, there is no indemnification.
I don't |\n| 7 | understand what Paragraph 9 --
why Paragraph 9 is necessary in |\n| 8 | the order.
Paragraph 10, your increases in rates, you can |\n| 9 | notify people about increases in rates, but that doesn't mean |\n| 10 | that they're determined to be allowed by this Court, because |\n| 11 | that doesn't happen without the Court approving that increase |\n| 12 | in rate, meaning you can ask for it at the time --
approval at |\n| 13 | the time you increase the rate, or you can ask for it when you |\n| 14 | file your fee application.
But just because you increase the |\n| 15 | rate doesn't mean it's approved. |\n| 16 | I don't see why Paragraphs 11, 12, 14 and 15 –
well, |\n| 17 | 14 are necessary.
With regard to 13, it says, to the extent |\n| 18 | the application, the engagement letter, and the Pfeiffer |\n| 19 | declaration are inconsistent with this order, the terms of the |\n| 20 | order shall govern.
Well, that's all the more reason why this |\n| 21 | order needs to be fixed, because if it was written the way I |\n| 22 | think it would be written, there wouldn't be an indemnification |\n| 23 | provision in it so you'll have to fix that. |\n| 24 | And I'm not saying --
I'm sure Kroll will do an |\n| 25 | excellent job.
But I --
and it's --
Mr.
Pfeiffer, you're new |\n\n| 1 | to the case.
You don't know everything that has happened over |\n|----|-----------------------------------------------------------------------|\n| 2 | the past however many, you know, I guess 18 or
more months. |\n| 3 | But I don't want to have a fight about indemnification.
I |\n| 4 | think it's unnecessary,
and I don't understand your risk yet. |\n| 5 | I haven't --
it hasn't been persuaded --
I'm not persuaded that |\n| 6 | the risk that you say that you're trying to protect against -- |\n| 7 | I think it exists today regardless of this case, anybody can |\n| 8 | sue you at any time.
You're being retained as a professional |\n| 9 | by the estate.
But I understand that you get it in all your |\n| 10 | other agreements.
I understand that. |\n| 11 | But, you know, in any event, I think I've said |\n| 12 | enough.
I think you need to talk.
You need --
you both need |\n| 13 | to look at the order and revise it.
I'll allow for the |\n| 14 | indemnification insofar as you can seek it through this Court |\n| 15 | and the Court will either approve it or deny it.
But I'm not |\n| 16 | saying that there's an automatic indemnification that you can |\n| 17 | just say to the Trustee, we spent this,
and you have to pay us |\n| 18 | that.
That's not going to happen. |\n| 19 | The fees in this case --
at some point, there's got |\n| 20 | to be a distribution to creditors.
That's what this case is |\n| 21 | about, the creditors.
And I appreciate the negotiations that |\n| 22 | the parties have had prior to today, and I appreciate |\n| 23 | everything you've said.
But the Court has to look at the big |\n| 24 | picture and make sure it's not exposing the estate to |\n| 25 | additional potential administrative expenses that are |\n\n| 1 | unnecessary because every administrative expense dollar is one |\n|----|----------------------------------------------------------------------|\n| 2 | less dollar that goes to creditors. |\n| 3 | Whether --
I mean, I know you know that, and you may |\n| 4 | not --
that may not be your concern, but it has to be the |\n| 5 | Court's concern.
So, does anyone else wish to be heard, or |\n| 6 | Mr.
Pfeiffer, is there anything else you'd like to say?
You've |\n| 7 | come in and out a little bit on this hearing, so I haven't |\n| 8 | necessarily heard everything you've said because I think
the |\n| 9 | connection is a little poor, but I'm happy to listen to |\n| 10 | anything you would like to add to the record. |\n| 11 | MR. PFEIFFER:
I apologize for the connection.
I |\n| 12 | understand your concern.
The administrative costs of the |\n| 13 | estate are also a concern to us.
We will be careful to be |\n| 14 | efficient and maximize –
help --
work with the Trustee to |\n| 15 | maximize the payoff to creditors,
and we appreciate your time |\n| 16 | here today and look forward to adding a lot of value to the |\n| 17 | Trustee and to the Court. |\n| 18 | THE COURT:
Thank you.
Trustee
Despins, is there |\n| 19 | anything else -- |\n| 20 | MR. DESPINS:
Your Honor, we will –- |\n| 21 | THE COURT:
Go ahead. |\n| 22 | MR. DESPINS:
Well, we, you know, we heard what you |\n| 23 | said, loud and clear.
We'll talk to Kroll and with Mr.
Linsey |\n| 24 | and come back to Your Honor with a revised proposed order on |\n| 25 | this. |\n| | |\n\n| 1 | THE COURT:
Yes.
And to be clear, I'm not saying |\n|----|-------------------------------------------------------------------|\n| 2 | there can't be an indemnification provision, but it's not |\n| 3 | automatic.
It's subject to Court review and granting or |\n| 4 | denying that.
And I do understand the position that you're |\n| 5 | taking, but I --
I'm having –
well.
So yes, if you would |\n| 6 | please do that, if you would submit a revised proposed order. |\n| 7 | How much time?
I mean, I think, first of all, I |\n| 8 | agree with Attorney Linsey that this application was filed |\n| 9 | within the time frame under our local rules, so the effective |\n| 10 | date of the retention of Kroll would be August 2nd.
So there |\n| 11 | is --
I don't have an issue with that at all. |\n| 12 | How much time do you need to talk about and submit a |\n| 13 | revised order?
I mean, do you think you can do it by the end |\n| 14 | of the week,
or would you like more time than that? |\n| 15 | MR. DESPINS:
Yes, Your Honor.
Yeah.
I think we can |\n| 16 | do it by the end of the week, Your Honor. |\n| 17 | THE COURT:
Well, today's already Wednesday, so if |\n| 18 | you need more time, then let the courtroom deputy know that |\n| 19 | you're still working on the revised proposed order, please, and |\n| 20 | then we won't worry about it. |\n| 21 | MR. DESPINS:
We'll do, Your Honor. |\n| 22 | THE COURT:
We'll know that you'll get there. |\n| 23 | Assuming you both can be satisfied with the language in the |\n| 24 | proposed order, then the application is granted.
And Kroll |\n| 25 | will be employed effective as of August 2nd, 2023, and the |\n| | |\n\n| 1 | revised proposed order will be submitted by the parties.
I'm |\n|----|------------------------------------------------------------------|\n| 2 | not going to give you a date because today is already Wednesday |\n| 3 | and the hearing was supposed to be yesterday, obviously.
But |\n| 4 | if you don't --
if you believe you are not in a position to |\n| 5 | have a revised proposed order by, you know, the afternoon on |\n| 6 | Friday, please send an email to the courtroom deputy email box, |\n| 7 | saying that you're still working on the terms and conditions of |\n| 8 | the order.
Okay? |\n| 9 | MR. DESPINS:
Will do, Your Honor.
And, Your Honor, |\n| 10 | if I may, I just want to cover two points that should not be |\n| 11 | controversial at all.
Very quickly, just in the nature of |\n| 12 | updates, if Your Honor –-
if I may. |\n| 13 | THE COURT:
Yes, go right ahead. |\n| 14 | MR. DESPINS:
Okay.
So the first thing is this |\n| 15 | morning around ten o'clock or so, we filed a document, a notice |\n| 16 | to update the Court and parties in the case.
Document Number |\n| 17 | 2234, which attaches a number of pleadings or letters that were |\n| 18 | filed in the criminal case.
I wanted to make sure the Court |\n| 19 | has that.
Of course, you haven't seen it yet, but that you |\n| 20 | know about that.
And I would particularly draw your attention |\n| 21 | to the first document, which is the Department of Justice |\n| 22 | submission to the criminal court. |\n| 23 | In terms of the model
of property, I think that Your |\n| 24 | Honor will find that interesting, but I wanted to also mention |\n| 25 | something in our submission to the criminal court.
You will |\n\n\n\n| 1 | see in there that the Trustee has said that to the criminal |\n|----|----------------------------------------------------------------------|\n| 2 | court that at this time, we will not seek to enforce Your |\n| 3 | Honor's contempt order of the debtor.
And obviously before |\n| 4 | agreeing to that, you know, I thought long and hard about it. |\n| 5 | It was a very difficult decision because, in particular, |\n| 6 | because I'm sure Your Honor spent hours and hours drafting
that |\n| 7 | opinion, which, again, there's no problem with the opinion at |\n| 8 | all.
We agree with it 100 percent,
but as I said to Your Honor |\n| 9 | before in the case, to the extent we can avoid direct conflict |\n| 10 | with the Department of Justice, we will do that, and this was |\n| 11 | one of these instances.
So we didn't do this because Kwok |\n| 12 | requested it, but because the Department of Justice requested |\n| 13 | it, and I wanted Your Honor to know that, that that's the |\n| 14 | reason why we did that.
And I apologize. |\n| 15 | I wish, you know, Your Honor did not have to write |\n| 16 | that very lengthy, very, very thorough decision.
I'm sure |\n| 17 | there was a lot of pain and suffering involved in that, but |\n| 18 | anyway, it came after the fact.
And we basically had to agree |\n| 19 | to that, to avoid direct conflict with the DOJ, so I want to |\n| 20 | make sure Your Honor knew that. |\n| 21 | The second thing I want to mention, which is not |\n| 22 | related at all to this 2234 docket filing, is the fact that we |\n| 23 | have not given you any news about the Lady May II
for a long, |\n| 24 | for a while now.
And so, you may be wondering what's happening |\n| 25 | with that.
It's been marketed,
and there was actually a boat |\n\n show in Newport about 10 days ago. We were told by the broker we should wait for that so the boat could be exposed to numerous buyers. Now we have several -- over, I think, four or five, buyers that are interested, but not at a price that is satisfactory to us at this point.\n\n So we're going to do the same process we did with the *Lady May*, which is we told them that they need to submit their highest and best offer by Wednesday of next week. This is not done pursuant to any court order. It's the same process we followed with the *Lady May*. And depending on what transpires on Wednesday of next week, in terms of bids being acceptable or not, we will file a motion submitting for Court approval, the winning bid -- again, subject to higher and better offers in the bankruptcy process. We've consulted with the Committee, with PACS on this, and the U.S. Trustee, so they're aware of this, and I wanted Your Honor to know about it at all -- as well.\n\n We're not asking the Court for any relief. We're just really telling the Court that this is going on in the background. The idea here is that, you know, the sale price is not going to be \\$20 million. Obviously, it's much less than that. So therefore, the cost of winterizing, which, I'm not sure that's a verb, but winterizing the boat and maintaining the boat and all that, you know, are large compared to the value of the boat, so we need to sell this boat as quickly as\n\n\n\n| 1 | we can,
and that's why we're engaging in that process.
I |\n|----|-------------------------------------------------------------------|\n| 2 | wanted to make sure Your Honor knew about that as well.
But |\n| 3 | again, we're not asking the Court to take any action on this at |\n| 4 | this time.
And that would complete my update, Your Honor. |\n| 5 | THE COURT:
Okay.
Thank you.
I will --
I do know |\n| 6 | that you filed something today.
And I understand the update on |\n| 7 | the Lady May
II.
So thank you. |\n| 8 | Is there anyone else that wishes to be heard on any |\n| 9 | matter this afternoon in these cases?
Okay.
Thank you, all |\n| 10 | then.
I'm not sure when our next hearings are scheduled, but |\n| 11 | I'm sure there are some hearings.
Oh, there are some hearings |\n| 12 | coming up on the 17th of October, and maybe there'll be some |\n| 13 | before, who knows?
But that's --
I think our next scheduled |\n| 14 | hearings in these cases, unless there's some adversaries that |\n| 15 | have hearings scheduled, which could be next week or the |\n| 16 | following week, which is fine.
But in any event,
we will go |\n| 17 | from there. |\n| 18 | I think we have an adversary next week and then the |\n| 19 | 17th is the next day.
Okay?
All right.
Thank you, all. |\n| 20 | MR. LINSEY:
Thank you, Your Honor. |\n| 21 | MR. DESPINS:
Thank you, Your Honor. |\n| 22 | MR. CLIFFORD:
Thank you, Your Honor. |\n| 23 | MR. MACKEY:
Thank you, Your Honor. |\n| 24 | MR. PFEIFFER:
Thank you. |\n| 25 | THE COURT:
That concludes the hearings this |\n\n afternoon. That was the last matter on the calendar. So court is adjourned. THE CLERK: Court is adjourned. (Proceedings concluded at 2:41 p.m.) \\* \\* \\* \\* \\* C E R T I F I C A T I O N I, Teresa Saint-Amour, do hereby certify that the foregoing is a correct transcript from the electronic sound recording provided for transcription and prepared to the best of my professional skills and ability. \\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_ TERESA SAINT-AMOUR, AAERT NO. 2020 Dated: October 3, 2023 ACCESS TRANSCRIPTS, LLC\n\n","body_zh":null,"key_entities":["Despins","Je","Kwok","Ho Wan Kwok","Paul Hastings","CIPA"],"ecf_references":[{"doc_number":2179,"court":"CTB"}],"word_count":7927,"status":"published","published_at":"2023-10-06 00:00:00","created_at":"2023-10-06","updated_at":"2026-07-07 08:01:12"}