Legal & Liquidation Services — Kevin Padrick Complaint
I have been dealing with a lawyer, Kevin Padrick, who knowingly took advantage of a business, Summit Accommodators, Inc. dba Summit 1031 Exchange, that was having liquidity problems by selling himself and his companies, Obsidian Finance Group, LLC, services to them. He told them his company would help facilitate 1031 exchanges, fund the exchanges, and liquidate the assets for top dollar to earn their high hourly rates and 15% commission. The shareholders of the company were not familiar with bankruptcy law because their company was not in danger of bankruptcy for the last 15 years. It was only when the real estate market collapsed that they found themselves with a liquidity problem. They couldn't get temporary loans, the could liquidate property, they couldn't get paid back on loans owed to them. However, when they declared bankruptcy, they still had $13.6 Million in the bank account. Kevin Padrick, Senior Principal of Obsidian Finance Group, LLC, saw the cash in the bank and decided that a few million of the cash should be his. Instead of helping the debtor facilitate the exchanges and liquidate the assets, he and his company did nothing except stall and go to the other side (creditors' committee) with priviledged information (debtor's gave him) claiming he had done all the research and somehow convinced them to give him the job as Chief Restructuring Officer. Originally, this was a bankruptcy that was a debtor in possession with a Chief Restructuring Officer (CRO) in charge of the restructuring efforts. Obsidian Finance was supposed to be working for the CRO. Obsidian Finance or Padrick did not communicate with the CRO or the debtors. Instead, they communicated with the creditors. All of a sudden, the Court said their needed to be a trustee and Kevin Padrick was appointed as bankruptcy or liquidating trustee.
The CRO had already figured out there was no Ponzi scheme and he was doing his job working with all the parties and liquidating properties. He approved $750K of sales before he was dismissed. Obsidian Finance & Kevin Padrick charged the bankruptcy estate $184K to get their Senior Principal the job of Bankruptcy Trustee. Then simply by transferring the remaining cash (cash not distributed to creditors) OR $6 Million, Kevin Padrick charged the estate 3% or approximately $1/2 Milllion for a simple bank transfer & money in checking when he got the job. Then Kevin Padrick hired legal counsel, Tonkon Torp, to harass innocent people until they run out of money and energy and give up their interest in properties where they put their hard earned money in and have every right to still own that interest. Tonkon Torp is charging the estate $270K of which most is for services that bring no benefit to the creditors, but hike up their hours and legal fees earned. The more time they waste, the more money they are able to charge. Total charges between these 3 entities is almost $1 Million in just 5 months. The only amount of money they have brought into the estate is $10K. Pursuant to 11 U.S.C.See Top 10 Worst Companies in Bend, ORSection 330 of the United States Chapter 11 bankruptcy code, (3) in determining the amount of reasonable compensation to be awarded to a Trustee or professional person, the Court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including...
(A) time spent on such services (Who gets paid $184K to land a job)
(B) the rates charged for such services (Kevin Padrick's rate is $600/hour and all he does for the hourly rate is waste time, allege things without proof, and harass innocent people until they throw up their hands and give them their property)
(C) whether the services were necessary to the administration of, or beneficial at the time at when the service was rendered. (Who gets $164K to transfer money from one bank account to another???? The remaining is simply 3% of what was in the Summit 1031's bank account when Kevin Padrick took over the job as Trustee)
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed (Kevin Padrick makes it look like it is more complex than it is, he does nothing to make things move quickly, he ignores and loses offers on properties ($900K worth so far), and he has caused the majority of the delays in this case)
(E) with respect to a professional person, whether the person is board certified (Kevin Padrick is an attorney so he does fit this part of the code)
(F) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners (The attorneys are trying to finish the 1031 exchanges and the estate is paying for their learning curve...The attorneys have charged $125K more than a Qualified Intermediary would charge for the same work)
(4) (A) The Court shall not allow compensation for...
(i) unnecessary duplication of services (I identified almost 200K is for duplication of services)
(ii) (I) services that are not reasonably likely to benefit the debtor's estate (Kevin Padrick knows this is not a Ponzi scheme and there was not any Embezzlement, but he is trying to use this to drum up claims against innocent third parties. The fees that have been charged to go after innocent third parties is $111K. By the time everyone figures out there was no Ponzi Scheme or Embezzlement, Kevin Padrick will be $6Million dollars richer and on his way to benefit from someone else's misfortune. He has only netted the estate $3K, but has charged the estate almost $1Million. How is this benefitting the creditors? It seems that it is mostly profitable to Kevin Padrick, Obsidian, and Tonkon Torp for providing absolutely no value to the estate)
(ii)(II) necessary to the administration of the cased (This if for the Court and/or US Trustees Office to determine)
On 7/2/09, I filed an objection to these fees. To view this objection, go to http://www.summit1031bkjustice.com/?page_id=1196.
There is also a taping of Kevin Padrick & Obsidian Finance's presentation to interested parties and shareholders included on this site at http://www.summit1031bkjustice.com/?page_id=254. At this presentation Kevin Padrick does not want us to take notes, does not tell us who sent him to the creditors' committee, and does not tell us how he is going to bring value to the estate. From this presentation, it is difficult to tell what type of professional competence would warrant costing the estate $1 Million in Attorney and Professional Fees.