Claiming self as biggest creditor, Rogoff objects to outside firm
The latest development in former Alaska Dispatch News owner Alice Rogoff’s bankruptcy case has her objecting to hiring a Seattle law firm for the trustee on the grounds that it would cost money that wouldn’t then go toward the $16.6 million she says the estate owes her.
A flurry of filings from Nov. 7-15 begins with William Artus, attorney for Chapter 7 trustee Nacole Jipping, making a motion for a rule 2004 examination. That process would allow attorney-client privileges to pass to the bankruptcy trustee.
The motion asks for all loan documents, guaranty documents and security documents to be handed over for a deeper look at Rogoff and the Alaska Dispatch News’ separate and joint finances.
Rogoff, married to billionaire David Rubenstein, owned the Alaska Dispatch News for three years from 2014-17 before filing bankruptcy on Aug. 12. The newspaper was sold to the Binkley Co., a month later and the company has returned the paper to its original name, the Anchorage Daily News.
Artus also asked the judge’s permission to bring an attorney onboard to help in the effort to recover funds. The money would go to satisfy Rogoff’s debts to unsecured creditors worth just more than $2.3 million for dozens of individuals and businesses.
Artus asked to hire special counsel Bush Kornfeld LLP to represent the trustee “in analyzing and potentially pursuing avoidance actions.”
The bankruptcy estate currently has no assets, Artus wrote. The Binkley Co., which purchased the Alaska Dispatch News on Sept. 11 for $1 million, had first pick at the assets. What’s leftover amounts to two presses that aren’t easy sells, unused paper products and miscellaneous equipment.
The estate would not be responsible for paying the proposed special counsel’s fees unless it obtains a recovery for the estate, he added, because Bush Kornfeld would be working on a contingency basis.
Artus must receive the judge’s permission before hiring special counsel.
Bush Kornfeld LLP is a Seattle law firm specializing in Chapter 11 proceedings. The firm was named one of U.S. News Best Law Firms for 2012-15, according to its website.
But Rogoff’s attorney, Cabot Christianson, filed an objection. He stated that the judge shouldn’t allow the trustee to hire Bush Kornfeld because “the proposed employment does not provide a benefit to the general unsecured creditors collectively, and unreasonably confers a small benefit to a small portion of the unsecured creditors while imposing a large cost to the bulk of the unsecured creditor body.”
Rogoff is the largest “unsecured creditor body,” according to Christianson. She has filed a proof of claim in the amount of $16.6 million, contending that’s how much the now-bankrupt entity Alaska Dispatch News LLC owes her. The sum is for Rogoff’s net cash infusions into the operation in 2015, 2016 and 2017.
“All of the due-to-Rogoff amounts are cash loaned by her to the company for operating expenses. No portion of the claim is for the cost of acquiring the newspaper in 2014,” Christianson wrote.
Christianson reached for a $100 analogy to show how the breakdown would be unfair to his client: Rogoff would be in line for 88 percent of any recovery amount while her unpaid creditors would get 12 percent. Therefore, she would be deprived of a higher percentage of proceeds if another attorney is brought on board and consumes 33 percent of whatever money is recovered as a contingency fee, he contended.
Artus responded that this argument seems to prefer that dozens of smaller creditors receive “zero recovery,” as “better than a limited recovery.”
And that’s at odds with the trustee’s legal role to be thorough in looking at all avenues for finding funds to pay Rogoff’s bills to dozens of people and businesses, he said.
Artus also broadened his legal arguments to get toward separating what is Rogoff’s personal loan and what was a loan made for the business. He responded to Christianson’s claim on Nov. 15 that it appears Rogoff borrowed the ADN purchase money from Northrim Bank for her own benefit.
“It appears that Ms. Rogoff caused the debtor (Alaska Dispatch News LLC) to liquate $14.5 million” by selling the Anchorage Daily News building on Northway Drive to GCI, Artus wrote.
“In other words, the value of the real estate was removed from the debtor and used for the benefit of Ms. Rogoff without any apparent corresponding benefit to the debtor,” Artus argues.
Longtime Anchorage Daily News staff, such as former managing editor Pat Dougherty, have argued that selling the building where the press was located and staff had worked since 1986 was the first step in a series leading to the huge financial losses for the company under her ownership.
The sale of the Northway Drive building forced the Rogoff to eventually rent three facilities: one for her staff, another for a new press and, in order to continue to use the old press, a lease on the building housing the press that she sold to GCI.
A key question is whether selling the building benefited the limited liability corporation or Rogoff.
In order to acquire stock through her own subsidiaries, Roggoff personally borrowed $13 million from Northrim Bank to help finance the purchase, Artus argues.
That money from Northrim Bank, added to the $14.5 million for the Northway Drive building paid by GCI, plus about $7 million of her own money was how Rogoff purchased the Anchorage Daily News for $34 million, she disclosed in court filings.
“Ms. Rogoff caused the Debtor to guarantee her personal obligation to Northrim Bank without any apparent corresponding benefit to the Debtor (Alaska Dispatch),” Artus wrote in reply to Rogoff’s objection.
According to bankruptcy rules, Rogoff didn’t make a capital contribution because the money she provided came as loans that the Alaska Dispatch would be obligated to repay, Artus argued.
“While the accounts were in the name of the debtor’s parent, AK Publishing LLC, the debtor’s own declaration makes it clear that, regardless of the names on the accounts, the accounts were the debtor’s. Rogoff testified to this at a recent meeting that AK Publishing LLC has no revenue of its own. Any suggestion that the accounts do not constitute property of the Estate ignores the substance of Ms. Rogoff’s own sworn statements,” Artus wrote in his filing.
Christianson had essentially argued in his $100 analogy that Rogoff should be the priority to be paid back if any funds are recovered at the end of the Chapter 7 process, Artus contended.
But the trustee’s role is to represent “all of the estate’s creditors and is charged with maximizing the recovery of estate property for creditors as a whole,” he wrote. Her primary job is to “marshal and sell the assets, so that those assets can be distributed to the estate’s creditors.”
It’s not Rogoff’s responsibility to decide which bills get priority, Artus argued.
“Every unsecured creditor is entitled to be paid its pro rata share of whatever the trustee can recover, whether the creditor holds 1 percent or 99 percent of the total amount of allowed claims.”
Artus makes an additional claim that Rogoff appears to have redirected at least $14.5 million of the Alaska Dispatch News LLC’s assets “for her own use, only to then provide funds back to the severely undercapitalized debtor and assert a claim in favor of herself.”
He assets that Rogoff “caused the debts while operating a business that did not earn enough revenue to pay its debts.”
The court can ultimately determine that Rogoff’s claim should take a lower priority over the unsecured creditors. In any case, it’s the trustee’s role to fully investigate the financial affairs of the failed Alaska Dispatch and until then, “the ultimate allowance or priority of any particular claim cannot be determined,” Artus wrote.
A court hearing was set for Nov. 27 to decide on employing Bush Kornfeld as special counsel.
A deadline of 10 a.m. Dec. 6 was set for the financial documents in the rule 2004 to be handed over to the trustee.
Naomi Klouda can be reached at [email protected].