The Work

May 4, 2009 7:47 PM

Trustee Objects to Weil Hire in Trump Casino Bankruptcy

Posted by Brian Baxter

UPDATE: May 14, 6:08 p.m. A U.S. bankruptcy court in New Jersey has approved Weil, Gotshal & Manges as debtors counsel for Trump Casinos.

Despite the boom in bankruptcy filings in recent months, there's been a surprising lack of objections to debtors' counsel appointments.

Leave it to The Donald to trump that trend.

The real estate billionaire--we're not touching the net worth issue--stepped down from the board of the holding company for his ailing Atlantic City casinos in mid-February.

Less than a week later, Trump Entertainment Resorts (TER) filed for Chapter 11 protection in U.S. bankruptcy court in Camden, N.J.--the third time the Atlantic City-based holding company has filed for Chapter 11.

Now a U.S. trustee is objecting to TER's request to hire Weil, Gotshal & Manges as bankruptcy cocounsel because of an alleged conflict of interest stemming from one of the company's previous Chapter 11 cases.

According to a 13-page motion to object filed on Friday by Jeffrey Sponder, counsel to acting U.S. trustee Roberta DeAngelis, Weil should be precluded from representing TER because the firm counseled an ad hoc committee of note holders when TER last filed for bankruptcy in November 2004.

When TER emerged from Chapter 11 in May 2005, the company's reorganization plan called for certain secured note holders in the Trump Taj Mahal and Trump Plaza casinos to "receive new second-lien notes and a controlling equity interest in the [d]ebtors," the trustee claims in the 13-page motion.

Some of those note holders are still Weil clients and could thus present a potential conflict of interest, the trustee claims, citing a 12-page affidavit filed with the bankruptcy court by Weil restructuring partner Michael Walsh.

According to Weil's motion to be employed as debtor's counsel, the firm became TER's general corporate counsel in 2005--after the company had emerged from bankruptcy. (Weil represented TER on its $316 million sale of the Trump Marina Hotel Casino last May.)

In October 2008, Weil began advising TER on its restructuring efforts. Real estate cochair J. Philip Rosen, restructuring cochair Ted Waksman, Walsh, tax partner Mark Hoenig, and capital markets partner Todd Chandler are advising the company. (Rosen and Walsh were not immediately available for comment.)

Court documents show that Weil has been paid a $1 million retainer by TER, from which $527,000 has already been deducted for fees and expenses. Weil partners are billing between $650 and $950 per hour, and associates are billing hourly rates between $355 and $640.

A hearing on the trustee's objection is scheduled for May 14.

Weil is expected to argue that the ad hoc committee was disbanded when TER emerged from bankruptcy in 2005 and that although some former TER creditors may remain clients of the firm, Weil represents them in unrelated matters. The firm is also likely to present waivers showing that it has permission from those clients to take on the new TER case.

Negotiations with the U.S. trustee on the matter are ongoing.

One thing that may help Weil's argument is the host of other firms seeking approval from the bankruptcy court to do work for TER. Should a potential conflict with Weil arise, another firm could step in and handle that part of the proceedings for TER.

Among those other lawyers is Charles Stanziale, Jr., a partner in the commercial litigation and debtor/creditor practice group at McCarter & English, which has filed for permission to serve as TER's cobankruptcy counsel. Stanziale, who joined McCarter in November from New Jersey firm McElroy, Deutsch, Mulvaney & Carpenter, has a long history of handling bankruptcies involving Trump-related entities.

Stanziale served as cocounsel along with Willkie Farr & Gallagher to several Trump casinos that were in bankruptcy in the early nineties, according to a 15-page affidavit filed with the bankruptcy court. He also served as cocounsel along with Latham & Watkins to TER in its Chapter 11 proceedings five years ago.

Bankruptcy court records show that TER has paid McCarter a $505,000 retainer. Stanziale is being assisted by McCarter partners Jeffrey Testa, Joseph Lubertazzi, Jr., and Lisa Bonsall. Partners from the firm bill between $375 and $680 per hour while associates bill at hourly rates between $205 and $395.

Blank Rome is seeking to serve as special litigation and tax counsel to TER. Blank Rome commercial litigation partner Stephen Schrier and tax partner Robert Harrill, Jr., are advising the company. A 17-page affidavit submitted by Harrill shows that the firm took the tax matter, which involves a dispute with New Jersey state authorities, on contingency.

Philip Braginsky, chair of the IP practice at New Jersey firm Sills Cummis & Gross, is seeking to be appointed special patent counsel to TER. Braginsky bills $550 an hour.

Trump, who owns a 32 percent stake in TER, is no stranger to fee fights with lawyers. But while the company that bears his name waits for approval of its bankruptcy cocounsel-of-choice, perhaps The Donald can take solace that The Apprentice has been renewed for another season.

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It's really quite funny to see so many professional people fighting over money when us low life employees can hardly get by with a smlile!

They should just liquidate already. Trump's casino empire is kaput, when is everyone going to finally face the reality of this.

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