Moonlight Basin trustee objects to $3.5 million payout to CEO Poole

By Jim Witters

Wilmington, Del., July 22 - The Moonlight Basin Ranch trustee recommended Thursday that the judge deny approval of the joint debtors' disclosure statement, saying there is no basis for paying president and CEO Lee Poole $3.5 million while "general unsecured creditors must each share a small percentage of only $287,500."

In the filing in U.S. Bankruptcy Court for the District Of Montana, Trustee Robert D. Miller Jr. states that it appears the parties "intentionally orchestrated" a "deception" and tried to hide it "on page 132 of 139 near the very end of Exhibit 2" to the disclosure statement.

The disclosure statement says Poole will receive the money for "the Insider Purchased Assets, the settlement of his claims against the Lenders, his cooperation in ensuring the smooth transfer of assets, and the releases granted by the Insiders to the Lenders in the Settlement and Sale Agreement." But there is no explanation of who calculated the figure or how.

The proposed payment to Poole also appears to be an attempted "end-around" of the absolute priority rule, Miller wrote. The rule requires all creditors senior to the debtor or the debtor's equity holders to be paid in full before the equity holders can receive any payments.

"Perhaps Debtors intend to argue that it does not apply because the equity holders (Lee Poole and other insiders) are portrayed in the Plan as receiving 'no recovery.' Is the treatment of Poole's millions fashioned so as to intentionally avoid having to otherwise satisfy the absolute priority rule?" Miller wrote.

Miller's other objections included:

• Ambiguous language that could mean Lehman Commercial Paper Inc. and Lehman Brothers Holdings Inc. could waive their unsecured deficiency claims but retain the right to vote on the reorganization plan.

• The terms of the plan included with the disclosure statement are based on ongoing negotiations and are not final.

• The legal fees incurred in fighting Lehman could have been better used paying the claims of the general unsecured creditors. The disclosure statement includes the conclusion that the recovery offered by the lenders to the unsecured creditors "exceeded the recovery such creditors would have received" if the debtors prevailed in court. Through May, the debtor's professionals (attorneys, restructuring experts and others) incurred more than $3.5 million in fees and costs. The $287,500 in cash reserves set aside for general unsecured claims could be "cannibalized" by paying expenses of the plan administrator.

• Regarding Lehman's proposed purchase of the debtor's assets, there is no explanation of how the $43.2 million purchase price was arrived at.

• The document contains a "vague reference" to ski passes for "debtor parties and their affiliates."

"What is this all about? Have Poole and his family members and others (who exactly?) been given 'lifetime' ski passes at Moonlight Basin Resort?" Miller wrote.

Moonlight Basin Ranch, an Ennis, Mont., resort, filed for bankruptcy on Nov. 18, 2009. Its Chapter 11 case number is 09-62327.

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