Perception or Deception?
Padrick’s Presentation to the Summit Principals – Part 3
Tim: And again, I am probably just repeating myself here, not understanding all the legal positioning that needs to go on and the right channels that need to be followed for this. From the get go, we basically said, here, you guys tell us how to take control. Now when I say you guys I’m talking about Sussman. We said to communicate to anyone who was in a position to tell us how you want to take control and move this forward. A big part of our frustration is that things aren’t moving forward and we can’t figure out why.
Kevin: Nobody has a bigger frustration with this than I do. Let me tell you.
Mark: Wanna bet?
Kevin: Well I…I don’t know.
Mark: Why did you think it was a good strategy just to not say anything to us this whole time? You’re a smart guy. You would think you would want to get everyone involved to say this is the way to do it.
Kevin: I’ve been talking to your attorneys. You guys are represented by your attorneys…I’m talking to your attorneys. And I don’t know what you want from me.
Mark: I guess I’m a little confused. You work for Summit. I look to Terry for communication of whatever, but you won’t communicate like your presentation you won’t give your presentation to Terry. And so I’m not sure why that is…if you work for Summit why that communication wouldn’t come up. We finally said what was going on with Obsidian and they said, well, we think they sent something to somebody so I asked if I could get that or whatever so we’ve just been in the dark this whole time and Ewan…I asked him, when are you guys going to have something in December and he said first week of January we’ll have a proforma. That is really the last communication on when Obsidian is going to have something and he said we will have something fairly quickly here. So everything you described the principals don’t know anything about it. We don’t know who is plugging up the process or whatever. All we know is we want to get moving. We hate this.
Kevin: I hate it more than you do.
Tim: The hold up is doing the very opposite of building credibility and trust between us and the creditors and yet all along all we wanted to do was…you know what….we messed up here in our business plan and our business plan didn’t work as we had intended and now we’ve got to make it right and in the intervening 45 days. 50 days now…that trust….obviously the reaction to Susan’s letter is one of the reasons…what are these guys doing? All we want to do is to figure out the quickest way to make this stuff available and start getting it liquidated. And so that is our frustration with Sussman Shank and our frustration with you guys…you know and I’ll say Terry has communicated what he knows at least he’s communicating with us. I totally understand as frustrating as it is, that if we are represented by legal counsel you’re communicating with them, but the communication that ends up back in this room or with the 4 partners is slim to none.
Kevin: Well I understand, but you’ve got to understand from our perspective, we didn’t perceive that we needed to come and meet with you. If we perceived that we needed to come meet with you we would have requested to come meet with you. We didn’t. We didn’t perceive that. We thought we’d go forward and then we were told stop, we would go forward and then we were told stop. So every time it was like back and forth. We’re in go mode then we’re in hold mode. That is exactly what we were perceiving…K…the whole time this thing occurred. In my view, whatever happened doesn’t make any difference. It’s not really about…. at this point it shouldn’t be about whose fault it is. We have for two months been in this process and we still have damages stacking up and we still don’t have control of the assets. And that just can’t exist because not just from your perspective. You guys have a completely reasonable, rational perspective, but from the creditors’ perspective, right, it’s not like if they thought there’s a hundred million dollars you’d say well maybe they think there’s a hundred million dollars, but we don’t really care so we’ll go waste the money. They don’t think there’s a hundred million dollars. They don’t know if they are going to get paid or not. From their perspective, their interest and your interest are actually completely identical.
Lane: The only disconnect I’ve got in this at all Kevin, I mean I talked to you before any of these other people, Bill Smith referred me over to you and what not and then I presented Sussman and you and Terry were both recommended by outside people. And when Sussman met with you over there, and I think Terry was there, maybe you weren’t, I may be putting people there who weren’t there, but Susan called me afterwards and said, “yeah, I think this is a good idea. I think these guys have a skill set that will be helpful in your situation,” and I said, “well, what is Terry’s reaction?” And this is Susan who may be putting words in your mouth…..what Susan says to me is, “Well, Terry thinks it’s alright too, and they’re going to work for Summit so if Terry doesn’t like it we’ll fire them.” That’s what she says, and the Obsidian engagement in this is that you’re being retained by Summit. And so if I have any frustration….. it’s the legal chain of command I don’t think was followed and makes any sense here it seems to me in hindsight. I wouldn’t expect you to be calling me and I think your guy’s principals, if you’re expecting him to call you, I think you’re laboring under a false assumption because my impression is that you work for SAI and Terry we don’t run it anymore. Terry runs SAI and if anybody is telling you to stop, go, go meet, whatever, then Terry’s your boss and when I go to Terry just because I’m here all the time working, and say, hey, what’s going on and he says, “I don’t know they haven’t met with the creditors yet”, I start to get paranoid. You know it’s real easy in the absence of information to start spinning in really high quality John Grisham-like conspiracy in your head. It’s like, okay, somebody got a big retainer, I haven’t heard from them, the person they work for has not heard from them, they’re talking to the people who want my scalp on a wall, and now I see a motion coming that they’re trying to fire the only person I see on a regular basis who’s trying to work on this, and pretty quick I got a pretty good story running in my head. Now it may be wrong… I’m willing to give people the benefit of the doubt, I have no problem with that, and I have no animosity, but if you look at that communication pattern, I hope you can see how it’s real easy for me to start to get paranoid about what’s going on.
Kevin: Look, lack of communication always creates paranoia. It always does, it doesn’t make a difference this situation or any situation, lack of communication creates that issue. Especially…you guys are under stress, umm, and so it always does that..umm… I agree with that. And you’re correct, we thought that as we do things that we’re communicating and that Terry is communicating to you what we’re doing. If Terry thought we weren’t communicating with him Terry should have picked up the phone and said, “Kevin, I need to have this, this, and this from you”.
Lane: Well I think that’s a major…and I brought this up to Terry a couple of times and I’m going to bring it up real pointedly right now. I don’t want anybody to labor under the assumption that I think Sussmen is doing a good job. I think Sussmen is driving this case, and what pisses me off is that Sussmen is a lawyer and the client is SAI and Terry runs SAI and if Sussmen is telling you to do something and Terry doesn’t know about it, the last time I checked, the lawyer is supposed to check with their f-in principal before they take action on… And Sussmen signing onto a friggin’ motion to effectively fire the president of the client, just boggles my mind, boggles my attorney’s mind too, and Bob Vanden Bos as well as David Foracker are scratching their heads. How the hell did we get here? So that just kinda added fuel to the paranoia fire. What the hell is going on? It’s like there’s this dead carcass and we’ve got all these professionals circling around it, they’ve all got retainers and the only person I see every day, and again so I communicate with Terry, I see what he’s doing, I hear his frustration, I keep pushing on this reverse issue. We need to get these dang things assigned, we need to get this done, and Sussmen doesn’t seem to want to do a damn thing. Their self-proclaimed 1031 expert Jeff Tarr doesn’t even know what the hell a lease-hold improvement exchange is. If he’s a friggin’ expert, he oughta have an opinion on whether they work or not, but not be asking Susan to send him pages out of a treatison 1031′s that show him the private letter rules. So I think we’ve got some people over there that have some book knowledge, a little bit, enough to be dangerous on 1031′s, but they don’t know s— from shinola on how to get any of this done. This idea of a trust and what not, hell, we were talking about that three months ago. I mean, we talked about that with Susan when we met with her. We said, “We can put all these things to an LLC or a trust… ” let’s get them in there, let’s put the trust, let’s make our own little mini resolution trust. I mean the ideas that you’re working on and the plan, they don’t come as a surprise, because we’ve been thinking about it, but I keep hearing that work keeps getting stopped and I keep seeing things that Sussmen are doing, and to me, the people who should be driving this are these two organizations (points to Terry and Kevin). He’s on the ground here (points to Terry), I don’t run this place, Mark you don’t run it, Tim you don’t have any say in it. I’ve tried to make that as clear as possible and my attorney has as well. I don’t want to be perceived by the creditors as controlling anything. If Terry needs help with something, I want to help to move it forward, other than that every time I offer anything, say anything about anything, I get Susan Ford crawling up my ass with a microscope and threatening to sue me for being in control, she’s done that twice. And I don’t know what the hell I did to deserve that and my attorney doesn’t know what the hell I did to deserve that. Anytime we advocate to get the reverses done, so my frustration isn’t nearly as much with you, you’re here so I’m thanking you, it’s with Sussmen. This s— isn’t going to get done, period, with them at the helm. I may be completely off base on my interpretation of their confidence in how they handle this, but as far as I’m concerned, its been a three-star mess. You may not share that. We want to move forward.
Kevin: I…I…I…no, I what I’m saying is I don’t actually know how every decision gets made. We know what the result of the decisions are, which is, for example, go deliver all the exchange files over, umm stop doing this stuff, we know that okay? You know. And we see an email Susan – one of the things the creditors did react to that you remind me of, and this is one of the emails – is it says “And Kevin is not doing this”, and I can’t remember how it was but we’re not doing something, we’re not doing exchanges or we’re not doing something, something, anyway it was in there, and of course the creditors are thinking “no we want this stuff to be done, I mean why nobody’s doing this stuff, somebody’s gotta be doing it”. So, that’s their perception, so their perception and your perception are very close. Now, you’re an attorney (talking to Lane) and you also know that attorneys, that clients, remember I’m on both sides because I’m an attorney but I’m also, I don’t practice, I do business stuff. I’ve been doing that for fifteen, sixteen years, and as a client you want things to move and sometimes they can’t move as fast as you think. It just seems like there’s a practical solution that’s where you were a second ago (talking to Mark). There’s a practical solution, d–n it… why can’t we have a practical solution tomorrow? I’m usually with you, I’m on that side. Usually I’m going get this done, I mean that’s literally we spent, I spent Friday night after that first meeting coming up with outlining that complete strategy…. I got Ewan on the phone Friday night at eight or nine-o-clock at night and I said ”I gotta look at this and I want the bond looked at and I want this and we’re going to have this mitigation strategy and we got this and here’s what we gotta do and we gotta get these assets transferred and we gotta go go on this stuff because damages are going to build up and we gotta get control of the assets because otherwise there’s no cash coming in, so we gotta do it”. I have him call them Sunday, stand down so…..
Lane: That call should have come from you (points to Terry)
Kevin: He was on the phone.
Stephanie: So is there a way that we could, I don’t know, somehow figure out a way to work together to move this forward quickly rather than having all of the professionals get in the way? Is there a way you can consult with Terry or consult with us?
Kevin: Well there’s going to be a Chapter 11 Trustee appointed, so that’s going to happen.
Lane: Is that….you guys know more about this process than I do, you certainly (Kevin). That was kind of a motion out of the blue that I’m thinking we saw coming. Might the judge change his mind on that or once that goes….
Kevin: He’s entered the order.
Lane: Okay. So what does that mean?
Mark: What does that mean now?
Tim: What role could you guys (Pointing to Kevin) then have in that situation, I don’t understand if a Trustee is appointed is there still a role for Obsidian in that?
Stephanie: Well, what they’re saying is that you (Kevin) are the Trustee.
Kevin: Proposed….We’re proposed as being the Trustee, whether it’s Obsidian or whether it’s me individually or whether it’s me individually through an amenity, that’s what they’re proposing.
Tim: That you be the Trustee?
Kevin: That we be the Trustee.
Tim: Okay.
Kevin: Okay? And when I talked to Sussman yesterday he said that if we get appointed Trustee, we don’t know if we will or not, it’s not our decision, umm, we have to move forward on this stuff. And I…and I had Martin, and I said, “Martin we have to have a blanket on this, we just have to have a blanket” and I intend to have Patty Whittington now re-engage with Martin and if we get appointed and get a blanket order.
Tim: Who’s Patty Whittington?
Kevin: She’s our..our tax person.
Jan: Why wouldn’t Terry be entered into the picture because he has been here for as long as he has and since you guys haven’t been communicating with people?
Mark: Well, he’d still be the CRO.
Kevin: A Trustee replaces the current management.
Mark: Okay.
Lane: If….If for example Michael Batlin got appointed, I mean he’s the one that serves this area and I know Mike, pretty good guy, if we had a Chapter 11 Trustee other than Obsidian, or say Terry, if you guys weren’t it, would the Trustee potentially turn to an organization like yours to assist? Because the Trustee is limited by the statute, what they can earn, blah, blah, blah, but do they have the ability to retain outside advisors if they think that they can generate more fees…well, more assets for the estate by using an outside party. Is that how it plays out?
Kevin: Yes, I mean, you’re asking can they do it or do they do it?
Lane: Well, okay, can they, yes, will they?
Kevin: And it depends it’s in the discretion of the Trustee.
Lane: Do they? Probably not very often..
Kevin: It depends. Oregon hasn’t had a lot of major cases until just really recently. And so if you go back and look, I mean, it …you can’t really use the last six years, the last six years are just…they’re an abberation in terms of the economic situation.
Stephanie: So, what are your feelings about being the Trustee?
Kevin: What are our feelings? I mean, we’ve told the U.S. Trustees that we’re willing to serve as Trustees and the creditors want us to serve as Trustees.
Mark: So is there any….what’s the compensation arrangement with someone that’s appointed Trustee?
Lane: Statutory, it’s like one percent or something.
Kevin: Well, it’s a scale that starts and goes down.
Lane: Well, and I guess the question that I have is doing what your proposal was before this Trustee thing came up, I was ….you make fifteen percent to one….well, why is the case still interesting to you?
Kevin: It’s exactly what you said, there’s no….the limitation….what doesn’t apply to the other services you provide…you can provide services on an hourly basis, you can provide them on a percentage basis, you can provide them however’s approved by the public…..But as Trustee your Trustee role has this…
Lane: So if Kevin Padrick, an individual, gets appointed, can Kevin Padrick retain Obsidian?
Kevin: Yes
Lane: Really?
Kevin: Mmhhmm, in fact, it’s most commonly done .
Lane: Oh…
Kevin: If you’re an accountant you’d retain your accounting firm, if you’re a lawyer you’d retain your law firm, it’s the most common way. Especially on the east coast, not as common on the west coast, but really common on the east coast.
Lane: Really? That’s wierd. Then again, that’s just my ignorance in the bankruptcy process. I thought that the interest in the company that you’re referring to would have some issues with the Trustee role.
Kevin: No, and actually the code specifically says…it’s in the code.
Lane: Oh okay.