On October 6, 2010 we discussed Barney’s Supplemental Statement filing. This filing asked the bankruptcy court to allow Barney’s group to hire a few firms, amongst them the Kelly Law Group. KLG was to provide legal services to the Siena. As we all know, the Kelly Law Group is run by (virtual) legal dynamos Stephanie & Matthew Kelly, also known as Barney’s daughter and son-in-law.
While the SEC allowed its employees to spend many of their office hours watching pornography on the internet instead of prosecuting the NG family and Bruce Horwitz, the lawyers in the Office of The U.S. Trustee were working hard, as evidenced by their October 20, 2010 filing objecting to the arrangement between Barney NG and the Kellys. The Attorneys for the Acting U.S. Trustee August B. Landis deserve a standing ovation thus far.
In 13 easy-to-comprehend pages, Landis’ attorneys spell out exactly why the sweetheart deal Barney put in place with his family doesn’t pass muster and would have been denied by Judge Newsome had the Siena not shut down earlier this week. It is comforting to finally see Barney take a right hook to the chin. Perhaps he didn’t realize he’d get called on his bullshit. This isn’t the bush leagues anymore, Barney. You can no longer make up the rules as you go along, enriching yourself and those you deem worthy. You are now playing in the big leagues. Everything you do shows up on PACER. Sure, the RGJ and other newspapers may not cover ever move you make, but you can be certain the team behind http://www.barkinvestors.blogspot.com will. A simple Google search leads people to this website. The web traffic shows people are coming to this website often, looking for updates on your latest transgressions. You and your Bar-K cohorts fooled us for years. Those days are over.
Getting back to the Landis filing, here are the salient points:
RELEVANT FACTS:
1. Matthew Kelly is Barney Ng’s son-in-law and grand-son-in-law to Walter Ng.
2. Barney Ng is the managing member of each of the debtors and has served in that capacity since May 8, 1998.
3. Barney Ng is the 100% owner of Wild Game Ng, LLC.
4. Barney Ng is the sole unsecured creditor for Hi-Five Enterprises, LLC ($75,000).
5. Barney Ng and Walter Ng are co-debtors with One South Lake Street, LLC on the secured note to RE Reno, LLC.
6. Walter Ng is the registered agent and manager of One South Lake Street, LLC.
7. The Kelly Law Group – Matt Kelly was paid $4,656.70 on the petition date.
8. Matthew Kelly is not licensed to practice law in Nevada, only California.
9. The Kelly Law Group, LLP is “a virtual law firm.”
10. Although the Application states that the Applicant was employed since December 2009, the Engagement Letter is dated July 22, 2010.
11. Barney Ng’s testimony at the 341 hearing state in-part:
a. Matthew Kelly was employed on an “oral basis before the bankruptcies were filed “because he’s my son-in-law”;
b. the flat fee rate of $7,000 per month is a “family discount”;
c. Matthew Kelly was employed by Barney Ng on numerous personal matters;
d. Matthew Kelly was in-house counsel for Bar-K, Inc., an entity owned by Barney Ng and where Barney Ng was also employed;
e. Matthew Kelly left Bar-K, Inc. employment when Barney Ng left Bar-K, Inc. employment;
f. Walter Ng and Barney Ng’s brother were also involved with Bar-K, Inc.;
g. initially, Matthew Kelly was working on mostly personal issues for Barney Ng (70% of his time), not the Debtors; and
h. Barney Ng has an unsecured claim of approximately $35 to $36 million, that he intends to subordinate to other unsecured claims.
12. The first application to employ the Applicant was filed on September 8, 2010, forty-nine (49) days after the petitions were filed.
Whew. That’s a lot to digest, but we’re not done yet!
In the “Application Of Authorities To The Relevant Facts” section of the filing, Landis’ team describes why the Kelly Law Group is not eligible to receive Barney’s rich handout.
A professional in a bankruptcy case should not be put in the position of having to divide his loyalties. Matthew Kelly, as Barney Ng’s son-in-law, is an insider and therefore is NOT a disinterested person.
The Application and the accompanying verified statement of Applicant and Barney Ng, do not adequately disclose the significant connections between the Applicant, Barney Ng and Walter Ng.
Additionally, Applicant gave a less than full disclosure that his “four years working in-house for one of California’s largest private commercial real estate lenders” was Bar-K, Inc., a company that is owned by Barney Ng and also involved Barney Ng, Walter Ng and Barney Ng’s brother. Applicant’s statement that he “is a disinterested person as that term is defined in 11 U.S.C. § 101(14),” shows a lack of understanding of and appreciation for the requirements of disclosure by professionals working for a bankruptcy estate.
Applicant’s legal abilities are not unique or extraordinary enough to warrant overlooking the obvious concerns regarding his allegiance to his family over the interests of the estates.
Allow us to summarize:
1. The U.S. Trustee and his staff won’t stand for Barney’s bovine feces.
2. Matthew Kelly attested to the fact that he and his firm would be a “disinterested” party as required by law. Landis called him on his blatant lie. The California State Bar will want to look into this ethical breach.
3. Barney’s $7,000 per month gravy train broke down and became unhitched.
4. How much would this contract cost if the ‘family discount’ weren’t applied?
4. We still haven’t recovered a single cent of our investment, unlike favored investors Leonard Epstein and Phillip Tagami.
Please add your own analysis below in the comments section.