Re: 3/12/06 - Asbury Park Press: Case closed
Case closed
Bankruptcy trustee Donald Conway has spent nearly a decade unraveling Robert E. Brennan's complicated financial empire and has succeeded in recouping $62 million for creditors, many of whom were defrauded investors.
Posted by the Asbury Park Press on 03/12/06
BY MICHAEL L. DIAMOND
BUSINESS WRITER
To Donald F. Conway, a soft-spoken Princeton accountant and trustee in charge of Robert E. Brennan's bankruptcy case, tracking down Brennan's assets to pay off creditors must have been like filling a giant bucket one drip of water at a time.
Conway said there were numerous times when the trail would run cold. Then there would be a break. Pieces from disparate parts of Brennan's vast empire would come together. The picture would become clearer, and the bucket would slowly fill up.
"For me, it was a skill that was acquired through experience and a lot of hard work and being persistent," Conway said at his Princeton office one day last week. "You don't find things right away. It's complex to find assets that are hidden, and you have to be patient."
Conway's patience has paid off. More than a decade after Brennan filed for bankruptcy, the case likely will come to an end after a hearing next month.
It was a case that doomed Brennan, 62, the former Brielle and Colts Neck resident who gained fame by pitching inexpensive stocks in television ads for his company, First Jersey Securities. He filed for bankruptcy in August 1995, shortly after a federal court judge said he defrauded investors and fined him $75 million.
Federal investigators eventually determined that Brennan didn't disclose everything he owned on his bankruptcy petition. He was tried and convicted of bankruptcy fraud. And he is serving a 12-year sentence at the federal prison at Fort Dix.
Conway, named trustee of the bankruptcy case in 1997, has located more than $80 million in assets. After fees, he distributed $62 million to creditors, or about 43 percent of the $143.3 million that Brennan owed. Among them: the U.S. Securities and Exchange Commission and the state of New Jersey, which were to pay back investors who lost money in some of the stocks Brennan's company sold them.
"I think he did a very good job," said Jeffrey Herrmann, an attorney for a class of about 11,000 investors. Herrmann received a distribution of a little more than half of the $55 million his clients were owed. "There was nothing sitting around that could be easily obtained."
Herrmann said he never envisioned the case would take as long as it did. But Conway persevered, he said.
"A lot of it is just persistence and just the sense that something very wrong happened here," Herrmann said. "I'm speaking representing investors, but I think the trustee had the same sense. There was a need to obtain as much (money) as possible because so many people — literally over 10,000 — had claims here. It was a matter that was worth being persistent."
SEC had stake
"It's one of the most egregious retail securities fraud cases, and Brennan's extremely crafty in concealing his assets," said Alistaire Bambach, chief bankruptcy counsel for the SEC in New York. The SEC received about $30 million, which is being distributed to another class of investors. "We all would have liked to have gotten more money back, but I think we all got everything we could get."
Conway tracked down Brennan's assets around the world. He unraveled complicated business structures. He repatriated overseas trusts. And he seized control of Brennan's empire.
Conway ran a world-class golf course, a private airline company and a casino cruise ship. He was the majority shareholder of two public companies. He learned about the world of art and horses and antiques and real estate.
On paper, he said he spent 11,000 hours on the case. But "you're constantly thinking about it," Conway said. "It's not 9-to-5, five days a week. It's all consuming."
Maybe not what you'd envision as the job of an accountant.
Conway, a Hopewell resident who declined to give his age, is a principal with the Princeton accounting firm, the Mercadien Group.
He grew up on Long Island and attended Brooklyn Technical High School, a school for students concentrating in math and science. And he attended Hofstra University in Hempstead, N.Y., to study accounting, mainly, he said, because a local bank offered scholarships to students as long as they studied accounting.
After he graduated, one of his firms assigned him to do the audit on the New York Mets, before the Mets asked him to join in 1970 as chief financial officer. The task earned him a National League championship ring that he wears — imprinted with the motto "You've Got To Believe" — from the 1973 team.
In 1978, he moved from Shea Stadium next door to the newly built national tennis center to take over as executive director of the United States Tennis Association and director of the U.S. Open.
In 1986, he traveled to the Soviet Union to negotiate the participation by American tennis players in The Goodwill Games, a sports festival created by Ted Turner as an antidote to the Olympic Games that were boycotted in the 1980s by both the United States and the Soviet Union.
On Conway's office wall are photographs of himself with President Reagan, Nancy Reagan, tennis star Boris Becker and a roundtable of sports executives that included the former commissioners of Major League Baseball and the National Basketball Association.
It was a resume that stood out when a committee of Brennan's creditors in 1995 searched for an accountant to advise them. "Being an accountant, he also had the acumen of a smart businessman," Herrmann said. "It was a nice combination."
At the start, Brennan's bankruptcy didn't bode well for creditors. Brennan filed for Chapter 11 reorganization and was a debtor-in-possession, which kept him in control of his assets.
Shifting assets
But through forensic accounting, Conway learned that instead of turning over his assets to the bankruptcy court, Brennan was transferring them offshore to a company called UK Foods.
With that information, the bankruptcy court removed Brennan in 1997 as debtor-in-possession and named Conway trustee. To have a debtor removed is an unusual move in a Chapter 11 bankruptcy case, and usually happens only when debtors don't follow the court's guidelines, said Brian Thomas, a Stafford attorney who works as a bankruptcy court trustee, but isn't familiar with the Brennan case.
"I knew it was going to be a challenge, but I didn't realize the extent to which he had deliberately structured his financial empire to make it difficult to recover the assets," Conway said.
Conway and his colleagues waded through documents that sometimes had tantalizing clues that questioned the papers' legitimacy. On one document produced in the case, Mercadien Group accountant Elizabeth LaCorte said she found an area code that didn't exist at the time it was dated.
And they sifted through paperwork that traced Brennan to other assets. For example, they found that the mortgage on the Palm Beach Princess, a casino cruise ship docked in Florida, was held by entities that were controlled by Brennan's offshore trusts. The mortgage was in Panama and written in Spanish, Conway said.
"It's a jigsaw puzzle," LaCorte said. "You get all the pieces of the puzzle and make them fit, and it can be frustrating because you wonder if anything really is what it appears to be."
Breaking it down
A task that large could be mind-numbing, but Conway said he broke the case down into smaller goals. After he reached one goal, he moved to the next.
He operated the Palm Beach Princess for a short time before selling it for more than $14 million. He made Brennan's Due Process Golf Course in Colts Neck profitable and sold it at an auction for $20 million. He gained control of two overseas trusts worth $17 million. He sold Brennan's shares in two public companies for more than $5 million.
He took over Brennan's Juno Beach, Fla., home and found a buyer for $3.3 million. He sold two statues of thoroughbreds for $350,000. He sold commercial property in Wall Township for more than $1 million. And he sold two Picasso-designed decorative plates at a Sotheby's auction for about $16,000.
Not that he got everything. Conway, for example, handed over the rights to another trust —— worth about $3.2 million, but tied up in a Caribbean court —— to the New Jersey Bureau of Securities.
Now, more than a decade after Robert Brennan filed for bankruptcy, it is coming to an end. Conway will receive about $3 million for his work. Was it worth it?
"It was an interesting and challenging experience," Conway said. "I guess the question is, would you do it again? You'd think long and hard about it."
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[photo]
As the trustee of Robert E. Brennan's bankruptcy case, Donald Conway (above) had to track down Brennan's assets as he attempted to recover money for Brennan's creditors.
BRENNAN'S MILLIONS
Here is a list of some of Robert E. Brennan's assets that were liquidated:
Due Process Golf Course, Colts Neck — $20 million.
Palm Beach Princess cruise ship, Florida — $14 million.
Two overseas trusts — $17 million.
Home in Juno Beach, Fla. — $3.3 million.
Commercial property, Wall Township — $1 million.
Two thoroughbred statues — $350,000.
Two decorative plates designed by Picasso — $19,000.
Copyright © 2006 Asbury Park Press. All rights reserved.
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