Bankruptcy

Creditors Committee's Counsel's Fees Cut For Failure To Disclose Ties With Client

By Scott Riddle

From Law.com -

Nearly $75,000 in legal fees have been blocked by a federal judge who complained that a Long Island, N.Y., law firm was "purposefully vague" in disclosing that its lead attorney in a bankruptcy case was the son-in-law of the executive of one of several unsecured creditors it was representing.

Had the court known in 2002 about the relationship, it might have been "reluctant" to appoint Berkman, Henoch, Peterson & Peddy of Garden City to represent a committee of creditors in the Chapter 11 case, wrote Stephen D. Gerling, chief judge of the Northern District Bankruptcy Court.

In a 2002 affidavit, Berkman Henoch attorney Ronald M. Terenzi stated that an unnamed partner in the firm who would be primarily responsible for representing the creditors "is related to and [sic] officer and shareholder of one of the general unsecured creditors of the Debtors."

In fact, Gerling wrote in In Re: Matco Electronics Group Inc., 02-bk-60835, Berkman Henoch attorney Douglas Spelfogel was the son-in-law of Joel Girsky, the chief executive officer of Jaco Electronics Inc., one of the creditors in the action. The judge said it also appears that Spelfogel's wife, Wendy, later became in-house counsel at Jaco. ...

He added, "Fed.R.Bankr.P. 2014 is not intended to condone a game of cat and mouse where the professional seeking appointment provides only enough disclosure to whet the appetite of the [U.S. trustee], the court or other parties [of] interest, and then the burden shifts to those entities to make inquiry in an effort to expand the disclosure."

Full post as published by Georgia Bankruptcy Blog on February 07, 2008 (boomark / email).