Lawyer defends allegations of excessive attorneys’ fees in bankruptcy case

A Guam-based attorney has defended the payments of over $200,000 in attorneys’ fees and court costs to bankruptcy trustee Robert J. Steffy Sr., who is handling the bankruptcy case of garment factory Advance Textile Corp. that has been dragging on in federal court for more than three years now.

Attorney Wayson W. S. Wong, lead counsel for Steffy, also described the opposition to their request for another $46,058.55 in attorneys’ fees as an “unfounded desperation attack” on them by the people that they have cornered for a scheme that involved transfers in fraud of creditors.

Calling himself an experienced bankruptcy counsel, Wong said he understands that he needs to spend a substantial amount of time preparing the bill, reviewing, revising downward and sometimes upward, the fees and costs charged for the case.

As trustee’s counsel, he needs sufficient time in finalizing that billing so that it can be reviewed and accepted by the court, the trustee, the U.S. Trustee’s Office, the nine other attorneys in the case and be subject to the concerns of 103 creditors who may review about such billing, said Wong in court papers in support of Steffy’s attorneys’ fee.

“Surely, keeping everyone properly informed is important and necessary in any bankruptcy case, and it is reasonable and necessary to charge for that,” the lawyer pointed out.

Case law, Wong said, provides for the trustee’s counsel to be compensated for time spent to attend any hearing on the fee application.

He said upon careful scrutiny, the federal court should see that all of the arguments against the charges for billings and status reports “are without merit.”

Wong explained that their involvement in the case started in August 2003.

He said the first year they primarily spent obtaining information, especially about the $1.2 million in receivables shown and the questionable transactions by former ATC president Paul Zak and former ATC general manager Kidong Choi.

The second year was primarily spent in pursuing investigations of Zak and Choi, handling the fire damage claims and investigating questions about the title to the ATC factory, Wong said.

The third year, the lawyer said, has primarily been spent pursuing Zak and Choi for claims by the estate and settling them, trying to obtain recovery for the valid general creditors, settling the remaining fire damage claims, and pursuing Zak, former ATC director Dr. Bruce Wasserman, and others on the transfers in fraud of creditors.

“When viewed from this perspective, all of the work done has been reasonable and necessary for the estate,” the Guam lawyer stressed.

He noted that with each fee application, they prepared and filed a detailed status report as to what they did and why to justify all of the legal efforts made for this case.

Court records show that Steffy’s request for another payment for attorneys’ fee in the amount of $46,058.55 was opposed by Dr. Terry Dawson, Dr. Wassserman, and Tracy Anderson.

Dr. Dawson, who is based in Alabama, claimed to be a creditor of ATC. He said he invested in the purchase of common stock and made loans to ATC in the form of notes.

Dawson said trustee’s legal cost eroded the value of the debtor’s estate with nothing to show for its efforts except consistently asking for more money.

The estate, he said, should have been liquidated years ago.

Dr. Wasserman, who claimed to have mortgaged interests in ATC property, also opposed the trustee’s alleged excessive attorneys’ fees and costs.

But in Steffy’s response to the opposition, Wong said Dawson and Anderson are the men who worked with Zak in devising the scheme that involved transfers in fraud of creditors.

Wong said he believes that Zak has been involved with Dawson and Anderson to file such oppositions.

The lawyer said Zak was the one that put ATC into Chapter 11 bankruptcy proceedings and filed all of the mortgages to transfer alleged security interests out of the ATC estate in the weeks before the bankruptcy to bring about the trustee’s transfers in fraud of creditors claim.

Wong said Zak was then ATC president and he was assisted by its general manager, Kidong Choi.

Wong said Zak was also the one who ran ATC into the ground during the Chapter 11 proceedings by evading payment of taxes to the CNMI.

The trustee’s counsel said Dawson was a director and former ATC president, while Anderson has been a director and its chief executive officer.

Wasserman, Wong said, was also a director of ATC.

“So again, one should ask, why are these men opposing the fees claimed by the trustee’s counsel. It certainly is not because they could have received anything as general creditors, even if counsel had not been paid a penny,” he said.

Wong stated that the real reason probably is to try and derail their (trustee’s counsel) pursuit against Zak, Wasserman and the scheme they all concocted.