04/14/2008 404 Chapter 11 Final Report and Account, filed by Kenneth C. Henry. (Henry, Kenneth) (Entered: 04/14/2008)
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Doc 404
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IN RE:
CASE NO. 07-50935
CHAPTER 11
HON. WILLIAM S. HOWARD
PRO MOLD, INC.,
DEBTOR.
FINAL REPORT AND DECLARATION OF KENNETH C. HENRY, CHAPTER 11 TRUSTEE
I, Kenneth C. Henry, hereby declare and state as follows:
1. I am the President and CEO of RTL Advisory Group, Inc., a restructuring, turnaround and liquidation firm located in Louisville, Kentucky (relocated from Los Angeles, California, on January 1, 2006). Unless otherwise indicated, I have personal knowledge of the facts set forth in this declaration, and if called and sworn as a witness, I could and would testify competently thereto.
2. Pro Mold, Inc. ("Pro Mold"), a company that does injection molding of thermoplastics, filed its voluntary petition in bankruptcy on May 16, 2007. On October 5, 2007, I was appointed the Chapter 11 Trustee for Pro Mold.. I was requested by the U.S. Trustee to determine if Pro Mold can get back on its feet.
3. By way of background, John Murphy III agreed to sell his ownership of Pro Mold to Plasticon for $3,500,000, of which $2,500,000 was paid in cash. Plasticon executed a promissory note for $1,000,000 to the Murphy Trust, secured by a pledge of the Pro Mold stock and a security interest in the equipment and fixtures of Pro Mold. In April 2007, Plasticon missed its $125,000 semi-annual installment payment due the Murphy Trust on the Plasticon note. Pro Plas, LLC, an assigner of the Murphy Trust, filed suit on the Plasticon note and sought to sell the Pro Mold stock owned by Plasticon and to sell Pro Mold's assets. The parent company, Plasticon, also filed chapter 11 bankruptcy on May 16, 2007. Plasticon and its CEO, J. Turek, took $100,000 two days before the chapter 11 filing. Ellen Arvin Kennedy, with her colleague Taft A. McKinstry, both of the law firm of Fowler, Measle & Bell, represented both companies, Plasticon and Pro Mold. Because of the potential fraud that I think and believe is and has been going on since the ownership changed hands, Ms. Kennedy and Ms. McKinstry should have recused themselves from representing Pro Mold.
4. The Pro Mold building is owned 20% by John P. Murphy III, and his two sons own 40% each.
5. I started my case on October 9, 2007, and headed to St. Louis, Missouri, where the Pro Mold facility is located. I traveled to St. Louis four times, October 9 — 12, 2007; October 16 — 18, 2007; October 30 — November 2, 2007; and November 13 — 15, 2007.
6. On November 13, 2007, I had a meeting with G.T. Cozad, Commercial Real Estate, and his investor, Paul Behrens. I was looking for potential buyers and/or bidders at a §363 sale.
7. I was preparing an Asset Purchase Agreement to establish conditions for buyers and bidders.
8. I was seeking a "stalking horse" for the sale of the entire company and not just the equipment.
9. On November 20, 2007, we distributed ads for the auction of Pro Mold to:
Birmingham Business Journal, Charlotte Business Journal, Cincinnati Business Courier, Columbus Business First, Kansas City Business Journal, Nashville Business Journal, Philadelphia Business Journal, and Pittsburgh Business Times.
10. There were four possible buyers/bidders for the §363 sale that I was hoping to make:
Cliff Johnson Chico, California
Kevin Frailey New Albany, Ohio
Tim Clark Cincinnati, Ohio
Paul Behrens Hazelwood, Missouri
I had 44 days from October 9th to November 15, 2007, when the court reduced the amount of time for the auction. None of the potential buyers/bidders had enough time to complete their due diligence. As a result, I agreed to the "Compromise and Settlement Agreement" with John P. Murphy III Revocable Trust No. 1. Following the "Compromise and Settlement Agreement," I withdrew all potential buyers/bidders for the §363 sale.
11. Included in the Compromise were the Stone, Leyton & Gershman Professional Corporation. Here are some interesting statements made by the Stone, Leyton & Gershman Professional Corporation:
a. "Cash and Collectible Accounts Receivable beginning as of May 16, 2007 and ending October 30, 2007" — The amounts listed are all numbers that were wrong!
b. "The damage to Pro Mold prior to the appointment of the Trustee makes conversion to Chapter 7 necessary" — Then why did the Stone Leyton firm ask for a Trustee to be appointed?
c. "A substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation" — A good part of that belongs to John P. Murphy and his three notes and interest. He told me he would provide $150,000 for DIP financing but soon said he cannot afford it! He must have spent the $2.5 million like a "banshee"!
d. "While the Chapter 11 Debtor has not filed any of the monthly operating reports on time..."; "...Pro Mold has not filed operating reports for July, August and September 2007" — That is not true. All of the operating reports through October were filed. Furthermore, we have filed operating reports for November and December 2007, as well as January and February 2008.
e. "While in Chapter 11, Pro Mold repeatedly violated this Court's Chapter 11 Operating Order and Cash Collateral Order" — By whom?
f. "Legal fees for Murphy already surpass $200,000 and continue to grow" — It is no wonder — the attorneys were constantly filing extraordinary pleadings over and over that most of us could care less about reading.
g. "The current Trustee is unwilling to operate the business in a Chapter 7" — For me, that is true!
12. The Compromise and Settlement Agreement provided $100,000 for professional compensation and reimbursement of expenses. This $100,000 was put into a money market account at the bank before I submitted my Second Interim Application for Compensation, and later my Amended Second Interim Application.
13. I have amended Exhibit A to the Amended Second Interim Application for Compensation and Reimbursement of Expenses for Kenneth C. Henry to exclude the $685,000 Sale of Assets from the statutory trustee fee calculations. Exhibit A, Trustee Fee Calculations, is attached hereto. This new calculation shows the total statutory trustee fee payable is $53,489.96, and adding the unpaid expenses, the Balance Payable is $54,355.72. I trust that $54,355.72 is sufficient for Mr. Hanrahan to drop his objection to the trustee compensation requested.
14. The frustration of this entire case was caused in large part by the brief time that I was given to try to get Pro Mold back on its feet — only 44 days — as well as the Stone, Leyton & Gershman Professional Corporation's attempts to manipulate this case, including pressuring me into the Compromise and Settlement Agreement, which ultimately lost the four possible buyers/bidders for the §363 sale. Furthermore, in November the Murphy Entities filed their motion to convert the case to a chapter 7, which resulted in the court shortening the time for me to do my job.
15. As a result on March 17, 2008, I sent a letter to Mr. John Daugherty and Mr. Philip Hanrahan at the Office of the U.S. Trustee, resigning as the Chapter 11 Trustee for Pro Mold, Inc., effective March 20, 2008. This, in itself, is something I have never done in 26 years of my career.
16. My mistake was agreeing to the Compromise and Settlement Agreement, as I should have continued with my Chapter 11 Trustee work for Pro Mold, Inc., and not buckled to the pressure of the Murphy entities and their attorneys, Stone, Leyton & Gershman Professional Corporation.
17. Now we have a Chapter 7 Trustee, and the professionals that worked on the Pro Mold case will have to wait to be paid until the Trustee finishes his work, which could be years!
I declare under penalty of perjury that the foregoing is true and correct, and if called as a witness, I could and would competently testify thereto.
Executed this 14th day of April, 2008, at Louisville, Kentucky.
Kenneth C. Henry
EXHIBIT A
TRUSTEE FEE CALCULATION |
