A federal judge ruled Friday that the public trustee in Alice Rogoff's Alaska Dispatch News bankruptcy case may hire a Seattle legal firm with expertise in recovering assets.
U.S. Federal Bankruptcy Court Alaska Division Judge Gary Spraker didn't buy into an argument by Rogoff's attorney that such a move would be a wasted expense.
Public trustee Nacole Jipping is obligated to examine the affairs and records of Alaska Dispatch News LLC and requires special legal expertise to do so, her attorney, William Artus, had argued in asking Spraker's permission to hire extra counsel.
"To suggest the distribution would be smaller if (another attorney is hired) is not sufficient basis, or any basis for that matter, to not employ special counsel," Spraker said in response to Rogoff's bankruptcy attorney, Cabot Christianson, who argued extensively in written and oral arguments against hiring Bush Kornfeld of Seattle.
Christianson claimed Rogoff would be the recipient of 88 percent of any money recovered during the Chapter 7 process because she is owed $16.6 million in "loans" she claims to have made to the Alaska Dispatch News. Therefore, she would see the biggest losses in a lower monetary recovery after contingency fees are paid out.
"To Ms. Rogoff, it's just crazy. It's just crazy if you look at it from the other creditors' small benefit, after an increase in attorney fees," Christianson argued.
The other unsecured creditors are those dozens of individuals and businesses owed a collective $2.3 million by the former Alaska Dispatch News.
Rogoff owned the Alaska Dispatch News for three years from 2014-17 before filing bankruptcy on Aug. 12. The newspaper was sold to the Binkley Co. a month later for $1 million and the company has returned the paper to its original name, the Anchorage Daily News.
Spraker further warned Christianson he hadn't yet ruled on Rogoff's claim that she will be owed $16.6 million.
"You're jumping to the end," he told Christianson.
After the what's known as a "2004 examination" takes place in court, Spraker will decide whether to allow Rogoff's claim as the largest creditor of her former company.
That step comes perhaps several months away, after the examination into many financial documents by Jipping, the public trustee, is complete.
Christianson also accused Jipping's attorney of jumping the gun in allowing Bush Kornfeld to help author legal responses, saying the firm had already started "ghostwriting" for Artus before the judge gave them approval to hire the firm.
"It's a stealth thing by a front man while we get these documents solely designed for litigation," Christianson complained.
If the judge didn't allow the hire of Bush Kornfeld, "I want it to cease," he said of the so-called ghostwriting.
In granting approval to hire the firm, Spraker said he was permitting them to continue to consult. Christine Tobin-Presser, an attorney with Bush Kornfeld, joined the hearing via video to speak about documents they will need in order to make a thorough examination of finances leading up to bankruptcy.
Tobin-Presser has worked for the firm since 1998 in a practice that "emphasizes commercial creditor-debtor issues" as well as Chapter 11 bankruptcy reorganizations and liquidations, according to a biography on the Bush Kornfeld website.
Artus had asked to hire special counsel from Bush Kornfeld LLP to represent the trustee "in analyzing and potentially pursuing avoidance actions." This is a legal phrasing that boils down to whether there are assets out there that can be claimed from third parties that formerly belonged to Rogoff.
The prevailing legal concept is that if it has monetary value, that value should go to the people owed money, Presser-Tobin later explained.
Presser-Tobin will help Jipping analyze what apparently are "voluminous" documents pertaining to finances leading up to Rogoff's Aug. 12 bankruptcy.
After the Sept. 11 sale of the Dispatch to the Binkley Co., much of the financial bank statements and earnings/losses reports were transferred to the new owners as well. Christianson complained about the "burdensomeness" of the requested documents and some of the problems client Rogoff is having fulfilling the court order to produce them since the documents aren't in her possession.
The GCI purchase of the Anchorage Daily News headquarters, and rental agreements, for example, are on a CD that encompasses 560 pages, Christianson said.
Other documents, such as the Northrim Bank transactions, and emails produced by Rogoff while she was publisher of Alaska Dispatch may have proprietary information that isn't pertinent to the bankruptcy, Christianson said.
Rogoff's personal attorney, James Lister of the Washington D.C. firm of Birch Horton Bittner & Cherot, also wants to keep separate any documents requested that may be personal to Rogoff, and documents related to the business.
Bankruptcy laws address the limited liability corporate holdings, in this case, the Alaska Dispatch News. They cannot, in most instances, address Rogoff's personal wealth.
In fact, Lister argued in a motion asking the judge to deny a 2004 rule exam that "it would be unfair to Rogoff for the Trustee to … (require) the Debtor to produce documents regarding Rogoff's business affairs that the Debtor does not have."
But Spraker showed little patience about complaints on difficulties retrieving documents. He proposed that since the trustee, Jipping, now has access to Alaska Dispatch bank records and even email, it is up to all the attorneys to agree on how they will access the financial information.
After the 2004 examination documents have been thoroughly combed through, then a public 2004 exam will be scheduled at a later date to be determined by Jipping and her attorneys, Spraker said. At that time, Rogoff will be asked questions in court based on what is found in the financials.
In overruling Rogoff's objections to having her finances examined in the 2004 proceeding, the judge is allowing a new phase into Rogoff's finances as it relates to decisions that may have caused the companies' debts.
Artus had written that he read Rogoff's objection to having her finances examined as a look into details "that may uncover fact that would lead to liability on the part of Ms. Rogoff, individually."
Artus also clarified that Jipping isn't asking to examine Rogoff's personal finances.
But this is proving a sensitive point since Rogoff's divorce from billionaire David Rubenstein was finalized on Dec. 8. Rubenstein's established wealth is $3 billion.
The divorce settlement amount was not made public.