Court-Appointed Trustee/Examiner (Plan
Administrator) Services
During the early 1970’s Han
Swyter organized several limited partnerships each of which was to purchase and
develop real estate into flex-industrial/warehouse buildings.
Mr. Swyter privately syndicated these ventures and arranged for total
invested equity per partnership ranging from $150,000 up to approximately
$500,000. Mr. Swyter arranged for
the design and construction of 6 buildings, four of which were located in
Columbia
,
MD
, one was in
Baltimore
,
MD
and one was in
Lorton
,
VA.
In all cases, the membership
composition of each partnership differed, but there were several partners that
participated in multiple partnerships. Mr.
Swyter organized a corporate general partner that contracted with a real estate
property management company, wholly owned by Mr. Swyter, to manage the
day-to-day affairs of each of the partnerships.
During the early 1990’s, one of the partners, who actually had invested in all
six (6) partnerships, initiated investigations regarding the value of the
management services being provided by Mr. Swyter’s 100% owned property
management company and the consideration being paid for those services.
Eventually the investigating partner initiated litigation against Mr.
Swyter and his 100% owned management company, claiming excessive compensation
was being paid for the services rendered. Mr.
Swyter countered that his 100% owned management company was not merely a real
estate property management company, but claimed that he was also providing
investment and financial management services.
After several years of litigation and arbitration, the investigating
partner eventually received a monetary award.
To avoid the awarded judgment, Mr. Swyter actually sought protection
under Chapter 11 of the Bankruptcy Code. The
Bankruptcy Court eventually directed Mr. Swyter to engage the services of an
independent, third party property management company.
Nonetheless, Mr. Swyter organized a new corporate management company that
was owned by individuals closely aligned with Mr. Swyter himself.
In the interim, Mr. Swyter filed a plan of reorganization which proposed
the liquidation/sale of the assets of five (5) of the limited partnerships.
The Court, upon motion brought by the limited partner, was considering
forced liquidation of the entire “Swyter portfolio”.
Swyter’s bankruptcy counsel proposed the appointment of a third-party Plan
Administrator whose responsibilities were set forth in an Appointment Order to
“immediately assume all managerial control and authority of the Partnerships
and…to undertake the orderly sale and liquidation of the assets of … the
partnerships…and to make orderly distribution of sales proceeds generated …
and to otherwise determine and resolve any matter … with respect to … [the]
Partnership[s].” The Order further
stated that the Debtor “shall be deemed to have resigned as general partner of
the Partnerships”. Nothwithstanding
such resignation, the “Debtor expressly reserves and shall retain the general
partner’s economic interests and distributions from the Partnerships”.
As of the date of appointment, one of the buildings had already been sold and
the net cash proceeds had been deposited in an account co-mingled with other
partnership cash proceeds as well as the management company’s cash assets (the
“Custodial Account”). Another
building had been sold, the cash proceeds of settlement had been previously
distributed and the balance of the purchase price was represented by a secured
promissory note. The 3 buildings
owned by the remaining 3 partnerships were substantially leased and were being
operated by Mr. Swyter’s management company.
In our capacity as Plan Administrator we undertook the following actions:
1. We conducted several
interviews with Han Swyter and an individual employed by Mr. Swyter’s property
management company. In addition, we
reviewed applicable documents under the control of the Debtor.
In addition we also obtained and reviewed the Debtor’s confirmed Plan
of Reorganization.
2. We reconciled the
Custodial Account and opened individual checking accounts for each of the
partnerships with only the Plan Administrator having signatory control.
3. We engaged the
services of the individual employed by Mr. Swyter’s property management
company to manage the buildings through the completion of the sales process.
4. We engaged the
services of real estate brokers for the remaining properties in Columbia,
MD
and Baltimore,MD.
5. We offered the
Lorton, VA property for sale through our own network of potential purchasers in Virginia
.
Within eighteen (18) months of our original appointment, we negotiated and
closed the sale of all three (3) buildings, received full and final payment on
the secured promissory note and distributed all of the proceeds of sale.
The distributions to partners, including Mr. Swyter, totaled over
$16,000,000. As substitute General
Partner, we coordinated with the accounting firm previously engaged by the
partnerships, the preparation of all required tax returns for each of the
partnerships.
During the Court hearing at which we presented our Final Report, the Bankruptcy
Court Judge publicly thanked us for our timely and cost-efficient efforts.