Quick Response Assistance in the Replacement of a General Partner
Counsel for a family investment partnership that was embroiled in a dispute with its long-serving general partner asked Lightfoot Group to provide rapid response services to help the partnership replace the general partner with a younger, inexperienced family member. Lightfoot’s team was able to respond quickly and was involved in key portions of the transition to the new general partner and refocusing of the partnership activities.
Among the services Lightfoot provided were the following: (a) in concert with partnership counsel, developed a transition plan to cover important areas; (b) made trips to the former general partner’s offices to secure key documentation and bank account access; (c) implemented portions of the transition plan that included helping to secure assets, open new accounts, and interview replacement asset managers; (d) helped the partnership to re-evaluate and reformulate its asset strategy; and (e) monitored the partnership’s activities and continued to advise the general partner and its counsel and work through remaining contested issues, including with third parties.
Fast Response Team for BOD Requesting a Company Shutdown
The board of directors of a diversified company needed a fast response team to assist it in quickly winding down its investment in a money-losing specialty printing company. In addition to a fast response, the board also wanted a turnkey engagement wherein, in addition to finding and liquidating the company assets, the team needed to settle all liabilities and debts of the printing company, and return to the board the net proceeds received in the wind down.
Jim Hart traveled to the printing company’s location and directed all on-site and follow-up aspects of the successful wind down and liquidation. On-site activities included finding and recovering dispersed company assets; face-to-face trips to customers to collect receivables; and negotiation with employees, vendors, the landlord and the bank to settle all liabilities and payables. Follow-up activities performed after leaving the closed company included coordinating with counsel for the collection of all disputed and unpaid receivables, negotiation and sale of the assets and printing equipment, and reporting to the board with an accounting of all funds received and disbursed during the engagement.
Financial & Business Adviser – Beneficiaries in Complex Estate Dispute
As an experienced court-appointed Receiver, James Hart of Lightfoot Group was asked by counsel to provide advisory services to several beneficiaries of a large family estate. The beneficiaries were questioning the poor business performance of the executor, a family member who was tasked with running dozens of operating businesses and administering over one hundred real estate properties that included raw land and income producing properties.
The Lightfoot Team was able to assist the beneficiaries with the following specific services: (a) performed a forensic accounting and business review of the estate and businesses, (b) provided an affidavit critical of the executor’s business acumen and handling of the estate’s assets, (c) assisted in litigation against the executor with the goal of securing an early transfer of assets to the beneficiaries, (d) provided due diligence on various businesses and real estate prior to asset turnover, (e) was present during the asset turnover, and (f) helped create an initial business plan for the assets received by the beneficiaries.
These services assisted the beneficiaries and their attorneys with hands-on business advisory services that enabled the beneficiaries to optimize their outcome in a highly sensitive matter that pitted family members against each other while under media scrutiny.
Successor General Partner – Boeing 737 Asset Disposition and Cash Distributions
An attorney for certain limited partners in a long-lived equipment leasing partnership that owned lease rights to three Boeing 737 aircraft asked James Hart for assistance in helping the investors avoid litigation and receive an unexpected close-out distribution from the partnership. Although originally designed to provide tax benefits to the limited partners, if the aircraft remained in service for a certain number of years, these partners were owed residual lease benefits. When the equipment unexpectedly stayed in service well after the realization of the tax benefits, most limited partners were unaware of the required distribution. In response, Mr. Hart formed a successor entity to the original general partner and took over management of the partnership’s assets.
During the pendency of this matter, Mr. Hart worked with legal counsel including transportation counsel to arrange the sale of the residual lease rights at a favorable price to the investors. The Advisor also continually communicated the status of the partnership’s activities to all investors and their counsel while working to re-establish contact with investors who had moved or passed away.
These efforts resulted in the sale of the residual lease rights and the pro-rata distribution of several million dollars to investors, who in many cases were pleasantly surprised at receiving a large distribution check.
Receiver of Carpet Distributor – Forensic, Litigation, Bankruptcy 363 Sale
Allegations of international embezzlement led to the appointment of a James Hart as a court-appointed Receiver for a foreign-owned, U.S.-based carpet distributor. The Chairman of the Company’s Board of Directors was alleged to have looted the carpet company. At the same time, two European companies had sued the carpet company for millions of dollars in unpaid inventory as well as copyright and trademark infringement. In addition to taking control of the carpet company’s operations, Mr. Hart performed a forensic exam of the carpet company’s books and records and quickly moved to resolve the litigation against the carpet company.
The exam confirmed the allegations against the Chairman of the Board and also revealed that the carpet company was insolvent. After holding a warehouse sale to fund the necessary travel expenses, Jim Hart and the attorneys for the parties were able to settle the litigation against the carpet company by traveling (during off-hours) to Belgium and meeting with representatives of the two entities in litigation against the carpet company.
In the settlement that was reached one of the litigants bought all of the assets of the carpet company while a portion of the proceeds was paid to the other litigant. The sale was effectuated by putting the carpet company in bankruptcy and selling its assets in a Section 363 sale in which the entire bankruptcy process and sale was completed in approximately three months.
Receiver of Charitable Foundation – Business Stabilization, Dispute Resolution
After beneficiaries of an $80 million charitable foundation trust were unable to obtain answers to queries concerning its finances, they sued certain of the Foundation’s Trustees alleging breaches of fiduciary duty, fraud and self-dealing. The beneficiaries also moved a Superior Court to replace the Trustees with a court-appointed Receiver. After listening to the evidence presented, the Court appointed James Hart of Lightfoot Group as Receiver over the Trust.
At the time of the appointment of the Receiver, the Trust, which owned primarily non-income producing real estate, was reeling from the effects of the Great Recession. This situation was exacerbated by the previous conversion of the Trust’s non-real estate assets into real estate-oriented assets which resulted in a virtual 100% concentration in real estate assets just prior to the real estate Crash. In addition, the Trust was a party in several large law suits whose monthly legal costs greatly exceeded available liquid assets. Accordingly, in addition to forensically examining the Trust’s books and records, the Receiver was also tasked with stabilizing the entity and addressing the large unpaid debts left by the Trustees.
The Receiver dealt with these problems by reducing headcount, arranging deferred payment plans with vendors (including unpaid professionals), rightsizing the cash flow from a money-losing apartment complex, cutting the remaining timber, and selling off less valuable real estate in order to cover costs and expenses. This kept the Trust viable, while allowing time for the real estate market to recover and increase the value of the Trust’s remaining real estate.
Receiver for Fabricator – Business Stabilization, Forensic , and Litigation
James Hart of Lightfoot Group, LLC was appointed by a Superior Court as a Receiver over a multi-generational family-owned business involved in ongoing litigation between family members. At the time of the appointment, feuding siblings, who had been in litigation for the previous two-plus years, had diverted the attention of company management away from running the business, depleted the company’s working capital, and were driving away customers.
The Receiver was tasked with stabilizing the business, keeping the effects of the litigation away from the business, and examining financial records for the purpose of determining how much money and assets had been paid to family members over the past five years. During the pendency of the receivership, the company was stabilized and a forensic exam was conducted with the results reported to the Court and the parties. The report clearly showed which family members had benefited from the business and to what degree.
Using the exam results as a starting point, the Receiver worked with the family to bring an end to the underlying dispute. A mediator was also brought in to further settlement attempts, and eventually, this effort resulted in an overall settlement of all the litigation which had plagued the company.
Receiver of Publicly Traded Mortgage Company – Management and Dispute Resolution
Litigating shareholders in a $100 million dollar publicly traded mortgage company led to a request for, and the appointment of, a neutral Receiver to safeguard the Company from the effects of the dispute. A James Hart of Lightfoot Group, LLC was appointed as the Receiver by a Superior Court Judge.
While serving as Receiver, Mr. Hart coordinated with various legal counsel for the Company involved in: (a) the main shareholder dispute, (b) ongoing customer litigation, (c) SEC inquiries, and (d) a threatened bankruptcy filing. In addition, the appointment of a Receiver breached a covenant in the Company’s $100 million warehouse line of credit, which brought a demand for the immediate payment of the outstanding balance. As a result, the receivership began with the added burden of a requirement to seek daily forbearance from the lender in order for the Company to continue its operations.
The Receiver and counsel were able to use ongoing litigation fatigue, coupled with the extensive financial damage incurred by the Company as a result of the shareholder dispute, as a basis for eventually helping the parties to resolve the underlying dispute.