Guo Wengui / Miles Guo — bankruptcy case · ORDER · ECF #547

Case 22-50073 Doc 547 Filed 07/13/22 Entered 07/13/22 15:21:36 Page 1 of 21

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KWOK, \* Bridgeport, Connecticut \* July 8, 2022 Debtor. \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* TRANSCRIPT OF APPLICATION FOR ORDER APPROVING APPOINTMENT OF CHAPTER 11 TRUSTEE BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY JUDGE APPEARANCES: For the Debtor: WILLIAM R. BALDIGA, ESQ. Brown Rudnick, LLP Seven Times Square New York, NY 10036 For the Creditor, Pacific PETER FRIEDMAN, ESQ. Alliance Asia Opportunity STUART M. SARNOFF, ESQ. Fund L.P.: O'Melveny & Myers LLP Times Square Tower 7 Times Square New York, NY 10036 PATRICK BIRNEY, ESQ. Robinson & Cole 28 Trumbull Street Hartford, CT 06103 Proceedings recorded by electronic sound recording, transcript produced by transcription service. **Fiore Reporting and Transcription Service, Inc. 4 Research Drive, Suite 402 Shelton, Connecticut 06484 (203)929-9992**

APPEARANCES Cont'd: For the Creditors Committee: IRVE GOLDMAN, ESQ. Pullman & Comley 850 Main Street Bridgeport, CT 06601 For the Creditor, Rui Ma: KRISTEN MAYHEW, ESQ. McElroy Deutsch Mulvaney & Carpenter 225 Liberty Street 36th Floor New York, NY 10281 For the U.S. Trustee: HOLLEY L. CLAIBORN, ESQ. Office of the United States Trustee The Giaimo Federal Building 150 Court Street, Room 302 New Haven, CT 06510 For HK International Funds STEPHEN R. KINDSETH, ESQ. Investments (USA) Limited, Zeisler & Zeisler LLC: 10 Middle Street, 15th FL. Bridgeport, CT 06604 For the Creditor, JAY MARSHALL WOLMAN, ESQ. Logan Cheng: Randazza Legal Group, PLLC 100 Pearl Street, 14th Floor Hartford, CT 06103

| | 3 | |----|--------------------------------------------------------------| | 1 | (Proceedings commenced at 10:02 a.m.) | | 2 | THE CLERK:<br>Case No. 22-50073, Ho Wan Kwok. | | 3 | THE COURT:<br>Okay.<br>Good morning.<br>If we could have | | 4 | appearances for the record, please, starting with the | | 5 | debtor's counsel. | | 6 | MR. BALDIGA:<br>Good morning, Your Honor.<br>William | | 7 | Baldiga, Brown Rudnick, for the debtor. | | 8 | THE COURT:<br>Good morning. | | 9 | Counsel for PAX, please. | | 10 | MR. FRIEDMAN:<br>Good morning, Your Honor.<br>Peter | | 11 | Friedman, from O'Melveny & Meyers, on behalf of Pacific | | 12 | Alliance Group.<br>I see Mr. Sarnoff and Mr. Birney, of the | | 13 | Robinson & Cole firm as well this morning, on behalf of PAX. | | 14 | THE COURT:<br>Good morning. | | 15 | Counsel for the creditors committee? | | 16 | MR. GOLDMAN:<br>Good morning, Your Honor.<br>Irve | | 17 | Goldman, Pullman & Comley, representing the creditors | | 18 | committee. | | 19 | THE COURT:<br>Good morning. | | 20 | Counsel for Rui Ma? | | 21 | MS. MAYHEW:<br>Good morning, Your Honor.<br>Kristen | | 22 | Mayhew, McElroy Deutsch Mulvaney & Carpenter, on behalf of | | 23 | creditors Rui Ma, Zheng Wu and Weican Meng. | | 24 | THE COURT:<br>Good morning. | | 25 | The Office of the United States Trustee? | | | |

MS. CLAIBORN: Good morning, Your Honor. Holley Claiborn for the U.S. Trustee. And also with me this morning is the Chapter 11 trustee candidate, Attorney Luc Despins. THE COURT: Good morning. Good morning to both of you. MR. DESPINS: Good morning, Your Honor. THE COURT: Okay. I also see counsel for HK International. MR. KINDSETH: Yes, Your Honor. Good morning. Stephen Kindseth, Zeisler & Zeisler, for HK International Funds Investments. THE COURT: Good morning. And Attorney Wolman? I see you today -- MR. WOLMAN: Good morning, Your Honor. THE COURT: -- so I didn't forget to say hello. But I often -- for some times the screen cuts you off for some reason, but I see you this morning. So go right ahead. MR. WOLMAN: Thank you, Your Honor. Good morning. This is Jay Wolman, of Randazza Legal Group, for creditor Logan Cheng. THE COURT: Good morning. So I think that's everyone that has -- everyone that I see, anyway, has noted their appearance. Is that correct?

(No audible response.) THE COURT: Okay. So we'll proceed with this hearing this morning on the United States Trustee's motion -- application for the order approving the United States Trustee's appointment of a Chapter 11 trustee. Attorney Claiborn, you -- please proceed. MS. CLAIBORN: Thank you, Your Honor. Good morning. Before the Court this morning is the United States Trustee's application for an order approving the appointment of Mr. Despins as the Chapter 11 trustee. Mr. Despins has a significant Chapter 11 history practice in his firm and in his past. He's been a member of the bar for over 30 years. And the U.S. Trustee has attached to the application a declaration of disinterestedness, which sets forth his connections and his contacts with various parties in this case, and with creditors and with the debtor. And based upon that the U.S. Trustee's requested the Court approve the application this morning. I do, however, want to bring to the Court's attention that this morning we learned there are some additional disclosures that need to be made and will be made by Attorney Despins as to connections with entities that are connected to, we believe, PAX. And Mr. Despins can put a finer point on that and

address the Court and explain. And, again, that will be followed by a supplemental disclosure that will be filed with the Court as soon as possible in the hope that that is within a matter of just a day or two. So, with that, Your Honor, if I could ask Mr. Despins to address the Court about the supplemental disclosures that are not yet before the Court in writing? THE COURT: Yes, please. Go right ahead. MR. DESPINS: Good morning, Your Honor. As I stated in paragraph 11 of my declaration, I said that to the extent we learned of new connections that were not known to us at the time I submitted the declaration, we would update our disclosure statement and I will do that in writing. But I wanted to make sure today that I mentioned to the Court that we discovered last night that we have in the past represented entities that have -- that are -- have the acronym PAG in them, P-A-G. Unbeknownst to our conflict system, PAG means Pacific Asia Group. And those entities -- and, again, as I said, these are representations that were completed, but these entities are unrelated to the Kwok matter in any way. However, PAX is probably managed by a similar or a PAG entity of some kind. We're trying to figure out exactly which one.

But it doesn't change anything from our point of view in a sense that we still believe we're disinterested, we can be adverse to PAX, not that we are seeking that, but we're -- we can be adverse to PAX. And, therefore, it doesn't change the declaration. But given that these P-A-G entities are somehow related to PAX, I wanted to bring that to the attention of the Court early on this morning. And I did, by the way, not only with the U.S. Trustee, but I mentioned this to Mr. Friedman, you know, around 8:45 this morning. THE COURT: Okay. Thank you. And when you say we, you're speaking of the firm of Paul Hastings? MR. DESPINS: Yes. Yes. Yes. Yes. But personally, I've never had any representation of PAG. I didn't even know it existed frankly until last night. THE COURT: Understood. Understood, obviously, with the firm having offices in different areas of the world. That's why I was asking when you said we, you mean Paul Hastings, not you individually? MR. DESPINS: That's correct, Your Honor. THE COURT: Okay. Thank you. I see a gentleman. Mr. Bassett, are you a counsel in this case? I don't recognize you and I'm sorry if I should, but I don't.

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MR. BASSETT: Your Honor, I'm with Paul Hastings. THE COURT: Okay. MR. BASSETT: I would be serving as counsel to Mr. Despins in his capacity as trustee. THE COURT: Okay. Well, Mr. Despins, I don't think you need to file an appearance because you're the Chapter 11 trustee. If Mr. Bassett and/or your firm is going to be proposed to be counsel to you, acting as the Chapter 11 trustee, as you know, you'll have to file an application. And Mr. Bassett and any other members of Paul Hastings will have to file notices of appearance and/or pro hac motions, depending upon whether they're admitted to the District Court of Connecticut. And you'll take care of that. MR. DESPINS: Yes. THE COURT: So that's why I didn't recognize Mr. Bassett. You haven't been involved in any of the other hearings. So that's -- I'm glad at least that it was -- that I was correct that I hadn't seen you before. But in any event, with regard to the United States Trustee's application to -- for an order approving the appointment of a Chapter 11 trustee, does any party wish to be heard? MR. FRIEDMAN: Your Honor, it's Peter Friedman

from O'Melveny. We don't have an issue directly with Mr. Despins. We just -- Mr. Despins just mentioned he disclosed at 8:45 this morning that his firm had had some involvement with the parent of our client, which I think is actually -- the correct terminology for that is Pacific Alliance Group, which is slightly different than our fund, Pacific Asia Opportunity Fund, but we do obviously need to consult with our client as to the nature of the relationship. I don't -- I'm not saying that there is an issue. It is midnight or 10 p.m. in Hong Kong already, which is where our client is located. And to the extent that our client needs to look at any files -- I don't know if that's doable over the weekend -- but I think that might be a Paul Hastings issue as opposed to a trustee issue. But this is a, you know, a late-breaking development. And I guess that I can't say it's a concern, but I do think it's important to mention to the Court in this context that, you know, it's just something that we'll have to look at in the context of a retention of Paul Hastings. And, you know, Your Honor, I think, just as I said at every hearing we will be constructive. We will work closely with Mr. Despins, who I have encountered over the years in other Chapter 11 cases.

I have high respect for Mr. Despins. He was counsel to the creditors committee in Puerto Rico where I represented the debtor. So I've been adverse to him and on the same side of the (indiscernible) over the last five years.

You know, we are concerned about expense. We will do everything we can. And we hope everything can be done by Mr. Despins and Paul Hastings to -- you know, especially in light of the circumstances of this debtor having a very limited available -- readily available fund. We really hope that there will be, you know, as much cost efficiency as possible given the size of the estate at current.

And, you know, with those comments, we look forward to hopefully a successful trustee appointment.

And if there are issues relating to past retention or employment of Paul Hastings by our client, we will obviously have to address those in the future.

THE COURT: Okay. Thank you, Attorney Friedman. Does anyone else wish to be heard?

MR. GOLDMAN: Your Honor, Irve Goldman for the committee.

This is the first time I'm hearing about this additional disclosure. I would have the same caveat as Mr. Friedman and would hope that he would share his diligence with the committee so we can take a closer look and evaluate

this additional connection. We're not looking to upset this appointment, but just with the same ideas Mr. Friedman articulated, we'd just want to consider it further. THE COURT: Well, do you agree that it's an issue with regard -- as Attorney Friedman said -- that it would be an issue with regard to the retention of Paul Hastings as counsel versus Mr. Despins as Chapter 11 trustee? MR. GOLDMAN: Yes, I do. He's made it clear that he had no connection, wasn't even aware of the existence of this entity. So with that, I agree it's an retention issue. THE COURT: Okay. Thank you. Does anyone else wish to be heard? MR. BALDIGA: Yes, Your Honor. William Baldiga, Brown Rudnick, for the debtor. THE COURT: Go right ahead. MR. BALDIGA: We have the same qualification concern. We share Brown Rudnick's great respect for Paul Hastings, and Mr. Despins more specifically, but we will need to understand the new disclosures exactly given that PAG is the business behind the fund which is PAX. And PAX is obviously the largest creditor by far of the estate. So I think we all need to understand that. THE COURT: Do you, Mr. Baldiga, agree with what

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-- the question I just asked Attorney Goldman? Then is your concern more with regard to Paul Hastings being retained as counsel and not with Mr. Despins serving as the Chapter 11 trustee? Or do you have a concern even with Mr. Despins serving as the Chapter 11 trustee? MR. BALDIGA: I don't know yet. I think -- I'm not sure we're going to have -- going to have any concerns. But to the extent we do, I think it's premature to assess what those would be exactly until we see the disclosure and have an opportunity to talk to the client about that. THE COURT: And that's fine, because the bankruptcy code has provisions with regard to if someone thought that the trustee as appointed should no longer serve as the trustee. So I don't -- I do not see an impediment to the appointment of Mr. Despins as the Chapter 11 trustee today unless someone wants to persuade me otherwise. MR. BALDIGA: We just haven't seen anything, so we -- it's hard to do a persuasive argument, Your Honor, with just finding out about this during the course of the hearing. THE COURT: I understand. I do understand what you're saying. But I'm talking about right now, today, the only thing before the Court is the appointment of Mr. Despins as the Chapter 11 trustee.

And no one has put forth any reason at this point as to why that should not occur. And if it occurs and then you find some reason, then you have remedies under the bankruptcy code to address those reasons.

We're not going to wait any longer for the appointment of a Chapter 11 trustee. I mean, the decision was issued on June 15th. It's July 8th.

My understanding -- and maybe that's why Attorney Kindseth is here today -- is that the yacht is in Bridgeport Steelpointe Harbor. So the Lady May is here. It arrived on the 6th at night is my understanding. So there's plenty for Mr. Despins to do as soon as an order enters. And I don't see any reason for delay.

So unless someone has some other concern or argument that they want to advance about Mr. Despins being the Chapter 11 trustee, then I'm going to grant the United States Trustee's application and enter an order approving the appointment of Mr. Despins as the Chapter 11 trustee in this case.

So I'm giving everyone one last opportunity to tell me why I should not do that.

MR. BALDIGA: Your Honor, William Baldiga again. We have nothing further to add other than what I already said.

THE COURT: Okay. Thank you.

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MR. BALDIGA: And that's just we don't have the disclosure to make a final decision on that. THE COURT: Okay. Thank you. Anyone else wish to be heard? (No audible response.) THE COURT: All right. Then, Mr. Despins, I know you will continue to review the issues that you've already discussed on the record and that you've already set forth in your affidavit. Whenever you have an opportunity in the next -- you know, soon to make further disclosures, please do. But as of now, as of 10:19 a.m., on July 8th, the Court is ordering that the application of the U.S. Trustee is granted and that you're appointed as the -- you will be serving as the Chapter 11 trustee in this case. And I appreciate your willingness to do so. As I noted for the record, and, Attorney Kindseth, you should correct me if I'm wrong, but one of the -- I don't know what you've looked at, if anything, Mr. Despins, yet, but one of the issues in this case that's now almost five months old, but not quite, was the debtor's pledge of a -- of this yacht, the Lady May, to a plan, which of course is not on track at the moment. But there was also an agreement that the Lady May would be brought back into the navigable waters of Connecticut.

And my understanding is that occurred on July -- I suppose I could go outside and go look quite frankly. It's not that far away -- on July 6th. And that is -- that was an issue of contention among the parties, both before this Chapter 11 case was filed and after the Chapter 11 case was filed. So there seems to me, in addition to the yacht, the Lady May, other issues that there are plenty of things that you could become -- that you could become involved in fairly quickly, if not immediately, in this matter. MR. DESPINS: Yes, Your Honor. We are aware of the situation. In fact, we have already contacted counsel that were parties to the stipulation, docket number 299, that Your Honor entered a while ago, and I've asked them to consent to the trustee having the same rights as PAX and the official committee under that stipulation. We received some response that request but notfrom everyone, so we expect to obviously -- to us it's a no brainer that that needs to happen. But we expect to be back in front of the Court to modify the stipulation to ensure that the trustee has exactly the same rights as PAX or the official committee. Thank you, Your Honor. THE COURT: Thank you. MR. FRIEDMAN: Your Honor, on the record -- it's

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Peter Friedman on behalf of PAX -- THE COURT: Yes. MR. FRIEDMAN: -- we consent to that. We consent to that request. THE COURT: Okay. Thank you. And I would note that there are, Mr. Despins, other provisions of that stipulation that I believe anyway, but I don't have it in front of me, and you're all the lawyers so you will figure it out, but that still need to be -- there still needs to be compliance with other provisions in that stipulation once the boat was returned to the navigable waters. So there are other issues that still need to be addressed in that stipulation now that the yacht is back in the navigable waters of Connecticut. So in any event, to let you all know, Monday, Tuesday and Wednesday of next week, I have to attend required meetings. But if there is a need for a hearing, I could -- I could have one at some point during any of those three days at some time, but I will be remote, as will you. But once we get over this hurdle of the next few days, then, you know, our hearings are going to be in person for the most part. This is a case where we need to make sure that we're all on the same page. And while I truly agree that remote hearings serve

a very valuable purpose and can be very helpful, given what has occurred in this case, we're going to be coming together in person. Okay? So, I mean, there may be a situation if we're having a five-minute discussion that we could turn to remote, but I would like everyone to understand that we are going to be here in person. Okay? MR. DESPINS: Yes, Your Honor. THE COURT: All right. Is there anything further we should address today? Attorney Claiborn, your order approving appointment of Chapter 11 trustee that was attached to the application, I actually -- I would like to change it to an order granting the appointment and that's what I'm going to do. Otherwise, the proposed order is fine with me. Are there any other changes that anyone else wanted to make to the order, Attorney Claiborn, that you're aware of? MS. CLAIBORN: No, Your Honor. THE COURT: Anyone else wish to be heard on the proposed order that Attorney -- Oh, the only thing, Attorney Claiborn, that -- the amount of the bond, that may have to change during the course of this case I would assume. MS. CLAIBORN: It is a fluid issue, Your Honor.

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THE COURT: Okay. MS. CLAIBORN: And that is just a starting point for the cash that we know that will be coming to Mr. Despins hopefully in short order from the debtor. But it will have to be adjusted upward in the event that there is money that comes to the estate that Mr. Despins is responsible for. THE COURT: Great. I just -- I mean, your order does say that, but I wanted to be clear on that, that I would anticipate that there would have to be a change in the amount of the bond during the case. Okay? MS. CLAIBORN: Yes, Your Honor. MR. KINDSETH: Your Honor, would you like an update on the Lady May? THE COURT: Sure. MR. KINDSETH: Thank you very much. So as Your Honor noted, the Lady May returned to Connecticut, specifically to Bridgeport, on July 6th. In the week prior -- a week or two prior -- I reached out to counsel for the creditors committee and counsel for PAX, concerning the inspection that they are entitled to conduct. Just to remind Your Honor, the other elements of the stipulation are that the captain and the yacht management company are served with this court's order, they signed a declaration attesting to certain items that are set

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forth in the stipulation, and that this court provides for repair reserves to fund the remaining repairs to the Lady May. All the repairs were done except for the -- to my knowledge -- the replacement of the sea inlet valves. We're in the process of obtaining two estimates for the cost of that, which would guide us with respect to proposing a repair reserve. We are also in touch, as I said, with counsel for PAX and the creditors committee to coordinate their inspection. So hopefully their inspection will take place next week. We're hoping that we can have a joint proposed motion approving the repair reserve. Once the repair reserve is put in place, I can then file the certification that each of the elements of the stipulation that my client is obligated to perform has been performed. The various other parties would then have 15 days from the filing of that certification to object. I spoke to the then proposed trustee, the now trustee, Mr. Despins, this morning and expressed tentatively my client's understanding and agreement that he would be having the same rights and obligations and really a party to the stipulation. Our hope is that we would be drafting a proposed stipulated modification to the existing order simply having

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Mr. Despins as an additional party to the existing stipulation. And so that's the status of the Lady May. THE COURT: Thank you. The other provision that I believe you didn't -- you did not mention with regard to the stipulation was that the captain and the -- I don't remember what the other name -- whether it was a harbor master, whomever, would also be restrained, agreed to be restrained, from removing the boat from the navigable waters of Connecticut once it arrived. MR. KINDSETH: That's one of the elements of the declaration, yes. THE COURT: Okay. MR. KINDSETH: The declaration has multiple elements, one of which is that they understand they're restrained from removing the yacht from the navigable waters of Connecticut. THE COURT: I just -- I think that's an important provision to note for especially Mr. Despins who's just become involved so that he's aware of that. MR. KINDSETH: Agreed. THE COURT: Okay? All right. Anything further that we need to address today in the Kwok matter? MS. CLAIBORN: No, Your Honor. THE COURT: All right. Then the United States

| | 21 | |----|--------------------------------------------------------------| | 1 | Trustee's application for an order approving the appointment | | 2 | of a Chapter 11 trustee is granted and the proposed order | | 3 | will enter. | | 4 | MS. CLAIBORN:<br>Thank you, Your Honor. | | 5 | THE COURT:<br>All right.<br>Thank you, all. | | 6 | MR. DESPINS:<br>Thank you, Your Honor. | | 7 | THE COURT:<br>And that is the last matter on the | | 8 | calendar this morning, so court is adjourned. | | 9 | (Proceedings concluded at 10:28 a.m.) | | 10 | I, CHRISTINE FIORE, court-approved transcriber and | | 11 | certified electronic reporter and transcriber, certify that | | 12 | the foregoing is a correct transcript from the official | | 13 | electronic sound recording of the proceedings in the above | | 14 | entitled matter. | | 15 | | | 16 | | | 17 | July 13, 2022 | | 18 | Christine Fiore, CERT | | 19 | Transcriber | | 20 | | | 21 | | | 22 | | | 23 | | | 24 | | | 25 | | | | |

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