More than a year after two Tacoma developers filed the state’s largest bankruptcy, a judge said Friday he was concerned about the case’s administrative costs and indicated he was running out of patience.
“Settling this case isn’t getting a lot of traction,” Paul Snyder said at a hearing in Tacoma’s federal courthouse. “It seems like this case is drifting into limbo.”
Tom Price and Hyun Um filed personal bankruptcies with a collective $350 million in debt related to real estate company Prium. No one can agree on how much money flowing through that business should be available to pay the pair’s creditors. And two court-ordered savings accounts, where the men have made monthly deposits since February, have only $100,000-$112,000 between them.
The bills are much bigger.
• A law firm representing Price and Um asked Snyder to approve about $142,000 in legal fees for work done between February and August of this year. That’s on top of $85,000 already paid.
• A court-appointed forensic accountant reviewing Prium’s operations has been paid about $46,000 so far for a preliminary report. The final report, and his final bill, is pending.
• The law firm representing some creditors has yet to submit a bill, but its expenses are presumably in the tens of thousands of dollars.
“My concern is, as it has been from the start, is where we’re going with this? We’re now getting more administrative expenses than we have money,” Snyder said. “What are we going to do about that?”
Price and Um’s creditors say it’s clear more money is available besides the savings accounts. The preliminary report from the accountant, also known as an examiner, showed several of Prium’s operations have good cash flow.
The News Tribune reported in July on Prium’s complicated web of dozens of limited liability corporations. Price and Um used the web to borrow hundreds of millions for real estate and personal enrichment, while regularly not paying contractors. Their empire is under strain, with many buildings being run by third parties and several LLCs in bankruptcy. They’ve sued and been sued dozens of times.
So far, only one business done wrong by Prium has been able to pierce the LLC web. Soundbuilt Northwest won $5.9 million for breach of contract in April 2010, and a Pierce County judge held Price and Um personally responsible. They appealed. Oral arguments were finally heard in June, and no ruling has been issued.
The appeal didn’t stop Soundbuilt from trying to collect. In August 2010, Soundbuilt sent moving vans to the men’s homes while trying to take over Price and Um’s ownership interests in their LLCs. That’s when the men sought the protection of bankruptcy and where they’ve been since, arguing with the unsecured creditors committee that has Soundbuilt as an active member.
Larry Ream, the committee’s lawyer, told Snyder on Monday the Soundbuilt case is influencing how Price and Um manage Prium.
“There’s money available” for all creditors, he said, “and our belief is that it’s being kept at the upper levels” of Pruim’s LLC web and not in Price and Um’s names because of the judgment.
On Monday, Snyder said he wants the creditors and debtors to settle. A mediation was scheduled last month with Seattle bankruptcy judge Marc Barreca. That session was scrubbed because Barreca is presiding over real estate mogul Michael Mastro’s bankruptcy, and at least one Prium loan is among the dozens being untangled in that case.
Price and Um attorney Todd Tracy said Monday that he’s been trying to think of another mediator in the Western Washington legal community who wouldn’t have any conflict of interest – no involvement with Mastro, Price, Um or any of their creditors. “That list is pretty small,” he said.
They’re considering a judge in Yakima.
Tracy said “this case calls for mediation. If it’s good enough for Washington Mutual, it’s good enough for us.”
But a few moments later, he said before any settlement talks could begin, “we need the examiner’s report. We need the court of appeals to finally rule.”
“We’re not going to wait,” Snyder responded.
Snyder turned to Ream. Why hasn’t the examiner filed his final report? Ream said a draft started circulating a month ago.
“We keep pressing,” Ream said. “He sent out a draft. We had some minor fixes. Mr. Tracy had larger concerns about cash flow.”
Snyder told Ream to push harder. Tracy then said Price and Um received a request from the examiner just this week for more information. That seemed to aggravate the judge.
“This has got to stop,” Snyder said.
Snyder then singled out Ream’s firm for not submitting any invoices for their year of work. Very few firms can afford to hold those kinds of expenses on their books “unless they’re a really rich firm,” Snyder said. It was a mild taunt.
The judge asked Ream to submit an estimate by next week. Ream seemed reluctant. No one said it, but the appeals court decision looms over the committee, too.
Ream pointed out that Monday is a holiday – Columbus Day.
“Yes, it’s a holiday and the court will be closed, but is your firm closed?” Snyder asked.
“Yes,” Ream replied.
Snyder needled.
“Really? I can’t think of another firm that would be closed. No one will be working?”
Ream parried.
“Well, when you’re a really rich firm you can afford to let your employees have the day off.”
Snyder scheduled a hearing for Nov. 3 and dictated a to-do list. A week before, Snyder said, he wants the final examiner report; an up-to-date accounting of what funds are available to pay creditors; an estimate of the committee’s legal fees, and a date for the next mediation session.
He told Ream it’s possible his firm won’t be paid.
“If you’re not concerned, then I’m not either,” Snyder said. “If you can’t get your fees in by the third, then I’m going to make some decisions. I will disburse some money on Nov. 3.”
Meanwhile, the creditors committee will continue its hunt for Prium’s money. It filed notice with the bankruptcy court this week that it plans to depose Price’s and Um’s wives.
Kathleen Cooper: 253-597-8546
kathleen.cooper@thenewstribune.com
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