Moonlight Basin U.S. Trustee seeks examination of Lehman/Poole deal

By Caroline Salls

Pittsburgh, July 28 - The U.S. Trustee for Moonlight Basin Ranch's Chapter 11 case has asked the U.S. Bankruptcy Court for the District of Montana to appoint an examiner, citing insider Lee Poole's conflict of interest and "unwillingness to be perfectly candid and honest with the court, the debtors' creditors and other parties in interest," according to a Wednesday court filing.

As previously reported, Moonlight Basin has requested court approval of the transfer and sale of its assets to pre-bankruptcy lenders Lehman Brothers Holdings Inc. and Lehman Commercial Paper Inc. for $43.2 million.

The assets will be transferred and the payment price will be credited to their pre-petition debt at closing.

Insider Lee Poole will be paid $3.5 million at closing for his assets.

U.S. Trustee Robert D. Miller Jr. said Poole stands to receive $3.5 million for his "cooperation with Lehman," but will really receive $163.5 million from Moonlight Basin's bankruptcy case.

Specifically, Miller said Poole's personal guarantee of Lehman's $200 million in claims will be extinguished, assuming that Lehman is going to purchase all of the company's assets for $40 million.

If Lehman does purchase the assets, the U.S. Trustee said it would come away with a $160 million deficiency claim against Poole.

"Not only is Poole's $160 million personal liability to Lehman for its deficiency claim going away, but Lehman has decided to give Poole an extra $3.5 million kicker for his cooperation," Miller said in the motion.

"Lehman's efforts to justify this payment in [Moonlight Basin's disclosure statement], which it no doubt had a significant hand in drafting, is insufficient to allay suspicions of fraud and dishonesty on the part of Poole.

"Even under the best of circumstances, it is doubtful that Poole would have prevailed in his own personal litigation against Lehman to the tune of a $163.5 million judgment.

"But because Poole controlled what happened in the context of his own claims and in the context of the debtors' claims, someone needs to investigate the bona fides of this whole deal."

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

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