Questions For Next Week’s Reorganization Conference Call

Hi everyone.  We thought it might be helpful to have a single thread dedicated to legitimate questions we want answered on the next teleconference.  These  questions are not to be answered on the blog by Mr. Cooley, but rather on the next call.  Noteholders:  Please consider answering the questions people pose on this thread on the conference call.  To those posing questions, please keep this civil.  Pointed questions are fine, but let’s keep the name-calling and anger we all share to ourselves for the moment.

I’ll start with two:  What are the different classes of voters?

Yes or no question – only one word necessary (“Yes” or “No”):  Does Wells Fargo have a vote?

Everyone, please fire away.

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25 thoughts on “Questions For Next Week’s Reorganization Conference Call

  1. Can we get a disclosure of due diligence on the effort to refinance with both WF and alternative financing? Counsel claimed alternative financing fell through – what is the evidence of that?

  2. This was submitted by a reader:

    In rounded numbers, who are the ten largest stakeholders in RE Loans, LLC?

    1. Wells Fargo – $65M – $75M

    2. MF’08 – $60M

    3. RE Reno, LLC – $23M

    4. Sherratt Reicher, personal and representing all McGah family investments – $ M

    5.

    6.

    7.

    8.

    9.

    10.

  3. 1. Please describe and discuss the effect of any governmental investigations, indictments or sentences against RE Loans and related entities, the Ngs, or Dr. Horwitz would have on the bankruptcy, including time factors. Would there be any hope of the Noteholders getting any benefit other than the sense of justice being served? Has anyone in the bankruptcy proceeding been contacted by the FBI, SEC or other investigative organization?

    2. What are the chances of the RE Loans Noteholders getting any money from the bankruptcy estate if the Plan is approved? What are the chances of us getting any money from the bankruptcy estate if it is not approved? In other words, is there any value to us in spending time and money trying to understand all the issues and consequences, or should we just accept our losses as best we can and hope to see justice prevail in a different courtroom?

    3. Please address the issue of conflict of interest in the selection of the Creditors’ Committee, specifically, how the Bankruptcy Trustee determined that there wasn’t any when he selected the committee members. Was he aware of current personal and social relationships among the Ngs and some of the members chosen?

  4. Are there minutes of the Creditors Committee meetings? If so, can they be posted? Copies of correspondence among/between the committee members and counsel? We have been told that the committee members took an oath regarding conflicts of interest, but were examples described to them and were they actually questioned about potential conflicts under oath?

  5. RE: 1. Audio Replay of Conference Call 2. 2007 Re-issue of `1099’s

    Hopefully, with this week’s call, they will allow us access to both the “presentation” and the questions and answers. I spoke with Michael who said the initial call with questions was too long. So I asked if at least the second call, could be available to us in two parts if necessary, as the questions and answers have a lot of value to all of us, and give a more complete picture.

    Secondly, I asked if we could have a positive resolution, not just an update on the question of reissuing 1099’s. My concern is, without another conference call set up for all of us, the issue will linger and perhaps fall by the wayside. Again, my belief is that any distributions would have had to be principal rather than interest, since we were so underfunded and had very little interest coming in, hence funding from O8 (and perhaps more from Wells).

  6. This question pertains to the ‘Preferential return of investments’ and ‘clawback’ solutions as proposed by the Plan being put forth by the Committee;

    Former Noteholders Len Epstein and Phil Tagami, two of the biggest movers and shakers in real estate development in the San Fransisco Bay Area, owners of California Capital & Investment Group (http://www.californiagroup.com/), VERY politically connected, and friends of the Ngs, were allowed to cash out in excess of $11.7M of their combined investments after 11/1/2007.
    (Document 00079, Exhibit B, PROPOSED EXHIBITS TO DISCLOSURE STATEMENT FOR THE DEBTORS’
    SECOND AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION DATED APRIL 26, 2012)

    They also ended up with the $13M Austin Val Verde loan when it was transfered to them – California Capital & Investment Group – by and from RE Loans, LLC (actual date of transfer unknown but court records would seem to indicated sometime in late 2007 or early 2008).

    These documented transactions occurred AFTER many, many Noteholders were told that we could not obtain any return of our investments. (The excuse as early as June and July, 2007, was that the SEC had shut down the fund except for ongoing interest payments and that no investments were allowed to be returned.)

    There are many other documented instances where some Noteholders were allowed to cash out or received returns of substantial amounts from their principal investments after 11/1/2007, although none appear as egregious as Epstein and Tagami.

    For the ‘Official’ Noteholders Committee to suggest that, in cases such as this, investors who received obviously preferential treatment should only have to return to the Fund 5% of what they received, while those of us who were refused should have to settle for perhaps 5% of what we had invested (in maybe two or more years) is outrageous. A 5% loss as compared to a 95% loss?

    Does the ‘Official’ Committee actually expect us, the outsiders, to believe that this proposal is in our best interest?

    Do they not understand that this is unacceptable to us and is one of our primary reasons for distrusting them?

    Is there no better solution that they, and their advisors, could come up with?

    Who, with any degree of intelligence, would consider this as a best solution for we of the rank and file?

    • Mr. Gibbs nonchalantly told us today in a passing comment
      there was a 4 year statute of limitations for claw backs
      and that they were not going to pursue anyone from November
      2007 back.

      The Ng’s by stalling the filing of the bankruptcy
      for so long benefited a select group of people who are beyond
      the four years.

      A partial list.

      3/1/2007 MCG Investments 2,000,000.00 wire
      3/1/2007 Gifford Fong 677,008.00 29875
      3/9/2007 Len Epstein 1,250,000.00 wire
      3/15/2007 Kenneth Ambrose 1,600,000.00 29988
      3/30/2007 J. Robert Orton, III 5,000,000.00 wire
      4/9/2007 MCG Investments 6,691,300.00 30619
      4/16/2007 Kelly Ng 495,000.00 30728
      4/23/2007 Gifford Fong 3,365,569.00 30801
      4/23/2007 Tim Fong 661,419.00 30802
      4/23/2007 Steven Fong 661,416.00 30803
      6/13/2007 Bruce Horwitz (16B) 100,000.00 31703
      7/17/2007 Hudson Lending 1,000,000.00 32206
      8/23/2007 Bruce Horwitz (16B) 164,000.00 32760
      9/12/2007 Bruce Horwitz 300,000.00 33174
      11/8/2007 Michael Ziegler 2,900,000.00 34108
      11/9/2007 Kenneth Nelson 1,000,000.00 34127
      12/7/2007 CP Trofie 450,000.00 34624
      12/20/2007 Steven Fong 1,250,000.00

      • 3/1/2007 MCG Investments 2,000,000.00 wire
        4/9/2007 MCG Investments 6,691,300.00 30619
        7/17/2007 Hudson Lending 1,000,000.00 32206

        Aren’t these accounts associated with Sherratt Reicher, who holds a position on the Official Committee of Noteholders? And isn’t his chair on the Committee being filled by Ron Lavelle, the CFO of the McGah family dynasty who, although well educated and experienced, has no personal investment in RE Loans, LLC?

      • The WFF loan originated in July 2007. Maybe if the gang in Lafayette had not paid out $23.26 million to the few investors listed in equitatus’ post in the 4 months prior, REL might never have needed the loan! Funny how some of the same names keep popping up.

        • According to the testimoney at the McGuire trial, they also took a big slice of the WFF loan for themselves and Barney took a commission for obtaining the loan…hope Mr. Brower will confirm or refute my memory. Stress plays havoc on mind and body.

  7. In Jim Weissenborn’s February 11, 2011 status update letter sent to all the noteholders, on page 8 he discusses the “potential need” for a Chapter 11 bankruptcy filing for RE Loans. He states that:

    In the event that a Chapter 11 case is commenced, an Official Committee of Creditors (an “Official Committee”) will be appointed. Mackinac Partners and
    RE Loans’ counsel believe that noteholders will likely be appointed to that Official Committee, even though noteholders’ claims are secured by a junior security interest. That Official Committee would be responsible for representing the interest of creditors in any Chapter 11 case, and Mackinac Partners and RE Loans would seek to work constructively with that Official Committee to provide it with pertinent information and obtain views with respect to the ultimate reorganization plan. THAT OFFICIAL COMMITTEE WOULD ALSO LIKELY BE VESTED WITH THE AUTHORITY AND MANDATE TO INVESTIGATE POTENTIAL CLAIMS AGAINST INSIDERS.

    Why did the Official Committee fail to sue Barney et al on the $150 MILLION in personal guarantees and related party loans? Michael Cooley’s explanation that the committee was occupied with more immediate tasks is nonsensical. The Committee was represented by Akin Gump, the financial consultants, FTI were paid $100,000.00 per month to find an alternate lender, and Diamond McCarthy was retained to investigate any estate claims against Wells Fargo. Why wasn’t another firm engaged to enforce the guarantees and related party loans ?

    With the authority and mandate to investigate potential claims against insiders like Barney, Kelly and Bruce, it does not appear that the Committee was protecting the interests of the 1400 investors.

    I have no faith that the Committee could possibly have worked out a good plan for the investors if they missed this opportunity.

    • The Committee began negotiating from a position of weakness.

      They should have made it clear from the beginning that giving up rights
      as to WF was a “non-starter”

      Instead they gave into the fear of DSI’s argument. Weak.

      They agreed to continue a hearing for resolution of McGrane’s arguments
      until after the hearing on the plan. They should have taken him on and disposed
      of him instead of running scared. I am sure they will say that they avoided the
      “risk”. You don’t gain in negotiations by avoiding risk by giving into the other guys argument.

  8. I would all like to know what efforts the Creditors’ Committee have made to verify that all the debtors’ assets were reported accurately. Is there any recourse within the bankruptcy proceeding against inaccurate appraisals made in-house, or will that have to wait for the class action or other lawsuits?

  9. 1. A modification to the plan was filed on 6/1/2012. Does that mean it is possible to make alterations to the plan even after it has been mailed for voting? For instance . . .

    2. Why cannot Achin Gump and the committee work with Weissenborn to modify the plan to more equitably clawback from the 100+ accounts that were fully closed and from the investors who withdrew more than 8% (annual interest) of their investment after 11/1/2007? On last week’s call someone made a failed attempt to explain the fairness of folks keeping $.95 of the dollar while others will get less than $.07 a few years down the road. (Just eyeballing Exhibit B, less than 20 accounts make up $36 million of the $120 million taken after 11/1/2007. Most of theses accounts were closed, with full interest paid, at the same time many investors were denied withdrawals of interest/RMD.)

    3. I am troubled by the addition of specific names of “insiders” on page 25 of the 6/1/2012 modified plan because of the ommission of others. For instance, Barney Ng’s daughter and her husband (surname Kelly I believe) were legal counsel. I have heard Dr. Horwitz put most of his investment in the name of a family trust. Will his children benefit from this loophole and be able to lay claim to the “family trust”? Walter Ng took funds from out of state people (barred from investing in REL by law) and invested them in REL. Should these claims be paid?
    In becoming so specific, I fear the plan has opened the door for unspecified folks to retain or make claims when they should be considered insiders and denied payments.

    4. On the 6/11/2012 call, I would like to hear a fair and balanced view of the pros and cons of approving AND rejecting the plan.

    • Why are certain members of the creditors committee such as Walters so called best friend, golf & dining partner, and Walters distant relative, still allowed to serve the note holders on the committee? Why have they not been asked to step down, or be removed for what appears to be a big conflict of interest, and a major black eye for the committee. Mr. Cooley, please, why should I trust these people? The oath they took reminds me of Walters personal guarantee. Worthless.

  10. If Class 8 (REL Investors) rejects the plan, do I read correctly that the plan could be approved anyway?

    If Class 8 (REL Investors) rejects the plan, are Class 8 interests automatically subordinated to Class 5 (MF08)?

  11. Anyone feeling any great revelations from the conference call?

    It seemed to me that they frequently liked to toot their own horn, so to speak. The multiple mentions of how long and hard they have searched and worked to bring this plan to us, but that’s what we pay them the millions of dollars (collectively) to do. Several callers were so polite in thanking them for their efforts and time, and I’m all for being polite and civil, but for that many lawyers and consultants on one call, I’m guessing the bill to us for their 3 1/2 hours will be in the thousands of dollars, collectively. Plus research time to gather and prepare responses for our questions.

    As for the content, I’m not swayed. I felt that note holders did a pretty good job of framing the questions in a variety of ways, to cover many different angles, and the final answer seems to be that either way, we’re not going to get very much money from the process, and it will be years before we see that.

    Also, very worrisome, is this notion they have that Weissenborn can sell enough properties in the next year to pay down Well’s Fargo loan so that we’re either free or it’s more attractive to another debtor. I am as dubious as the questioners were, and it seems most likely, based on our years of paying Mackinac Parterns millions of dollars so far, that we could be in a bind in Sept 2013 if they do not succeed. There is nothing in our history with James Weissenborn that gives me any confidence that he is working on anything other than finding ways to bill us more.

    The tax issues, and Ng’s sending us the incorrect 1099’s which probably cost a lot of people more money on interest they never got is just more bad news.

  12. For me, the big revelation of the day was that some Noteholders received returns of their investments as late as 2009! This information was supplied by Mr. Cooley in response to a direct question and, to my knowledge, this had never been revealed.

    I was told by Bruce Horwitz (and all three Ngs) MANY times, as early as June/July, 2007, that I could neither have any of my investment back nor could I begin receiving interest payments (I had been rolling over my interest previously).

    As far as I’m concerned, those Noteholders who had previously been receiving interest only payments through Sept., 2008 are fine, but ANYONE who received any return of their investment principal after July, 2007, or any principal or interest after Sept., 2008, received preferential payments.

    How the ‘Official’ Committee can suggest that we let this slide is beyond me.

    Between these preferential payments and the fact that Wells Fargo is attempting to blackmail us into letting themselves off of the hook is enough reason to vote NO on the ‘plan’.

    To add insult to injury, the telecon today revealed that we realistically shouldn’t expect much, if any, of our investment back. It sounded to me as if not even Mr. Gibbs didn’t believes in the 4% to 7% numbers that have been suggested.

    Vote NO and let the chips fall where they may. The ‘plan’ will probably still pass and we may get left in the dirt, but will we be any better off in two, three, or four years than we are today?

  13. i don’t know if you saw the quarterly fee application of these “professionals”
    for the first quarter of the year.

    This is a complete list of all of those who are at the trough it doesn’t include the
    consultants like FTI.

    Hines Smith Carder, Fee: $265,115.00, Expenses: $25,266.36.

    Gardere Wynne Sewell Fee: $356,495.50, Expenses: $15,238.73.

    Mackinac Partners, Fee: $1,507,095.00, Expenses: $114,361.23.

    Stutman Treister & Glatt Jones,Fee: $1,405,450.00, Expenses: $40,066.74.

    Total Quarterly Fees : $3,534,155.50

    Total Quarterly Expenses $ 194,933.06

    How many quarters will they be billing for in the future?

    • Hog fest and investors are living in their cars. This is a disgrace. Thank you Equitatus for these illuminating posts

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