Exchangers

By Summit 1031 Bankruptcy

July 2009

To Summit 1031 Exchangers:

I am so sorry your money has been caught up in the Summit 1031 Bankruptcy. You have reason to be very upset. You trusted Summit 1031 with your money and suddenly the company is in bankruptcy court. It is an unfortunate situation for all, but mostly for the exchangers. Summit 1031 owed exchangers $27.8 Million, but they only had $13.6 Million in cash. There shortfall was $14.2 Million. How could this have happened? It is upsetting and you want answers, but mostly you want all your money back! I can understand the anger you have. Who wouldn’t be angry? You have every right. You also deserve to hear the truth about what has happened.

MY GOAL: Are there better solutions to getting your money back to you? I want to know and I want to do what I can to make that happen. If you want to save yourself almost $1 Million, then listen up! On September 2, 2009, there is a hearing on the fee applications. The fees haven’t been authorized by the court yet. Make sure your money is being used wisely and in your best interest.

Who am I? My name is Stephanie Studebaker-DeYoung. Unwillingly, I have acquired an interest in, and more knowledge on bankruptcy (BK) than I ever wanted to know because Summit Accommodators, Inc. (Summit 1031) filed Chapter 11 bankruptcy in December 2008. I am affected by the results of this action two-fold…

1. I am an investor in 4 of the LLC’s where the principals’ interest has been transferred to the Trustee of the Summit Bankruptcy.

2. I am the daughter of Mark Neuman, one of the principals of Summit 1031. This situation has been challenging, but has brought me much closer to my dad, and I am grateful for that.

Did you know the principals of Summit 1031 always wanted to turn over their assets to help pay off their debt to you? They never intended for this to happen and have always wanted to do what was right by their clients. However, since the company filed for Chapter 11 Bankruptcy, this has been practically impossible. All that seems to be going on is rising professional and attorney fees. I just submitted an objection to fees amounting to almost $1 Million [ http://www.summit1031bkjustice.com/?page_id=1196 ]. A short form of this objection can be found in a complaint I filed with the Complaints Board [ http://www.complaintsboard.com/complaints/legal-amp-liquidation-services-c225684.html ]. I am doing this to help minimize the cost, help maximize the value back to the exchangers because it is what the principals and I want.

I know you have no reason to trust me, but if you want to know more about what is happening to your money, I will post the information on this website.

I don’t think the principals of Summit are not to blame. Their business was not able to pay you back. They should have to deal with whatever consequences they get, but based on the truth or at least the complete facts and circumstances that led to their bankruptcy. They did not intend for this to happen and they just want you to get your money back. They have been, since DAY 1, wanting to give all they had to cover the shortfall. They transferred practically everything they owned personally to help pay you back, but with the outrageous legal fees and the falling market it will be tough.

Please know that if they could go back and do a better job at getting your money to you they would, but now your money is in the hands of Kevin Padrick and I want you to be aware of what he is doing to get your money back. I think Terry Vance was doing a better job and would do a better job and maybe you would not have to pay Kevin Padrick and his team of professionals the $1 Million of professional and legal fees they have submitted in their fee application. This is only for 5 months worth of work. Kevin Padrick is supposed to have this job for 5-7 years. At this rate, it will be at least $11 Million for the duration of his tenure as bankruptcy trustee.

Please read for your information only.

I have become an advocate for awareness, the truth, and a person’s right to know. I believe that in the absence of the truth, all of us stand helpless to defend ourselves, our families and our health, which is the greatest gift we have. Often times we don’t think about or worry about or understand what is happening to another until it happens to us. Deceits have no boundaries. When it comes to cover-ups and the legal system, we are all up for grabs. It is through communication with you, applying our common sense, searching for information and documents, finding the right lawyer and standing united that we can fight back against an enemy we can’t always see, until it is too late. The purpose of this website is to shed some light on the Summit 1031 bankruptcy events, so that our community can obtain more awareness on what has happened, as well as finding what it can do to address the problems in ways that are more constructive and less costly.

I think you should know that your money is being used to pay attorneys to navigate through our legal system. I have been told many times by the legal professionals that there is a “process” we don’t understand, but they do. This process involves a large amount of legal fees. Summit 1031 was in trouble, but they still had $13.6 Million in cash. The principals were directed to retain the following attorneys using this cash:

Hiring Sussman Shank [ http://www.sussmanshank.com/home.asp ] – Corporate Bankruptcy Attorney – Retainer $250,000
Hiring Obsidian Finance Group, LLC [ http://www.obsidianfinance.com/index.asp ] – “Liquidation Experts” – Retainer $100,000

Summit 1031 contracted with Obsidian Finance [ http://www.summit1031bkjustice.com/wp-content/uploads/2009/05/obsidian-agreement1.pdf ] because Kevin Padrick, Obsidian’s Senior Principal [ http://www.obsidianfinance.com/about_team_principals.asp#kevin_padrick ], told the 4 Summit principals that their company could “…move quickly, engage the insurance companies almost immediately, work fast enough perhaps so [they] could preserve some exchanges.”

Summit Accommodators’ principals explained the whole situation to Obsidian in detail, including specifics on many individual properties and LLC’s that had significant value. Kevin Padrick told Mark Neuman, Brian Stevens, Tim Larkin, and Lane Lyons that he understood exactly how to handle the situation. Padrick said his company had been very successful handling situations like Summit’s with a large investment portfolio to liquidate. He understood the complex services like exchanges and their related tax consequences, mitigating costs and funding issues.

Padrick said his company had extensive knowledge on exchanges and would be able to handle completion of the in-process exchanges. Of course, this was an important issue to the principals. They had a specific interest in getting exchanges completed quickly in order to help the exchangers, as well as avoid additional liability. Padrick stated he had connections to all sorts of financial resources from which he believed he could arrange funds to take care of exchange fund shortages in the interim, until the hard assets could be liquidated. Getting interim cash would help complete the exchanges on a timely basis. Wouldn’t you hire him if he told you this if you were in a similar situation?

“Click here to view the types of services Obsidian agreed to do for Summit” [ http://www.summit1031bkjustice.com/wp-content/uploads/2009/05/oascha.pdf ]

Sussman Shank advised the Summit 1031 (Corp) to hire the following additional attorneys:

Hiring Hovet and Boise - Summit 1031’s Criminal Attorney – Retainer $35,000

Summit Accommodators, Inc. needed a criminal attorney in case the corporation was charged with a crime. Susan Ford, partner in Sussman Shank [ http://www.sussmanshank.com/showattorney.asp?Show=48 ], told the principals not to worry. She said that as soon as bankruptcy was declared, everything would become transparent. Hovet and Boise said there was only a 50% chance that this would get on the radar with the US attorneys. Even if it did, their goal would be to get any charges stopped at the corporate level. That would keep those principals out of harm’s way. Mark, Brian, Tim and Lane didn’t realize they were in criminal trouble. They thought they were in bankruptcy trouble…but that’s what the criminal counsel told them!

Terry Vance - CRO (Chief Restructuring Officer) [ http://www.summit1031bkjustice.com/wp-content/uploads/2009/05/definitioncro1.pdf ] - Retainer $50,000

In entirety, Sussman thought $435,000 would cover the cost of this whole ordeal. Where would this money come from? Sussman looked at the cash balances in Inland Capital, the lending company that owed Summit 1031 money, and instructed the principals to wire the funds to the attorneys ASAP instead of paying Summit 1031 back. The principals have not authorized any more professional or legal fees. It is now up to you and I to make sure these fees don’t go through the roof.

Now we are 6 months into the Bankruptcy and the total fees incurred and to be paid out of exchanger funds is $2.2 MILLION [ http://www.summit1031bkjustice.com/?page_id=1097 ]. This is $370,000 per month in legal fees. Wow, the monthly amount is more than most families make in a 5 years!

It took $2.2 Million to wrestle away assets these principals were willing to hand over since Day One. “Click here to find out why this cost is so high.” [ http://www.summit1031bkjustice.com/?page_id=1196 ]

Apparently, the cost is typical in cases like this, which is why the creditors are estimated by Padrick to eventually only get 20 cents on the dollar, if that. This is hard to understand when the number Summit 1031 started with was a “hole” of $13 million. Now Padrick says the “hole” is $40 million.

A rough accounting of the “shortfall” is as follows:

Summit owed 27.8M to exchangers.
Summit had 13.6M of this in cash.
Principals turned over approximately 11.8M of liquidation equity on their investment properties in today’s economy after 6% commissions to realtors.
Summit has 10M Bond and 3M E&O Insurance.
Outside loans owed to Inland are 1M.

Total dollar amount the principals & Summit 1031 pledged to the bankruptcy estate is approximately $25.4 Million. This amount is 2.4 Million less than the original “hole” and does not include the $10 Million Bond and the $3 Million E&O Insurance.

Most of you are probably not into accounting, like me, but if you break it down to simple math, I am not sure why the exchangers would not get most, if not all of their money back. Maybe it is because Padrick wants a large chunk of the “hole”. Maybe this is what he has wanted since the very beginning. I don’t know what happened, but everyone is spending money on attorneys and no one is being paid back. Many of the LLC members have had negative dealings with Obsidian and have had to hire attorneys in an attempt to get some communication from them. Since neither I nor anyone else seems to be able to communicate with the people in charge of this (Obsidian), I thought I would try to talk to you, the people to whom my dad’s company, Summit 1031, owes money. All my dad and his partners want to do is to pay you back. I want to help wherever possible because I know these men never meant for you to not get your money back. However, I alone cannot keep the fees reasonable, you need to be aware of what is going on in the case and help make the attorneys and professionals who have taken over accountable for their time and their charges. It is too late to change what has happened, but it is not too late for you to get your money back.

If you have questions, concerns, or need further information, you should contact the counsel for the Creditors’ Committee. The legal counsel is Perkins Coie. Their contact person is named below:

Jeanette Thomas at Perkins Coie “Click here for her contact information” [ http://www.perkinscoie.com/jthomas/ ]

You could also contact the US Trustee’s office. They would be able to answer any other questions you may have.

Robert D. Miller Jr., Acting United States Trustee [ http://www.usdoj.gov/ust/r18/r_directory.htm ] - Jake.D.Miller@usdoj.gov
Pamela J. Griffith, Assistant US Trustee [ http://www.usdoj.gov/ust/r18/p_directory.htm ] - Pamela.Griffith@usdoj.gov

If you don’t know how you are going to get your money back, you should inquire. You are why we are here. YOU are owed money and the “other side”, the principals, would more than anything love to get that to YOU.

Please choose where you would like to go next…

1. Click here to view a taping of the Kevin Padrick & Obsidian’s presentation [ http://www.summit1031bkjustice.com/?page_id=254 ]

2. Click here to view the Objection to Fees I filed in an attempt to save the bankruptcy estate almost $1 Million dollars [ http://www.summit1031bkjustice.com/?page_id=1196 ]

3. Click here to view the postings of the events taking place in this case since December 2008 [ http://www.summit1031bkjustice.com/?page_id=367 ]

4. Click here to see what has been reported on the front page of the Bend Bulletin [ http://www.summit1031bkjustice.com/?page_id=167 ]

5. Click here to learn how Summit 1031’s business plan failed [ http://www.summit1031bkjustice.com/?page_id=381 ]

6. Click here to find out what has happened since Summit 1031 declared Chapter 11 Bankruptcy [ http://www.summit1031bkjustice.com/?page_id=650 ]

7. Click here to view the matrix of attorney and professional fees [ http://www.summit1031bkjustice.com/?page_id=1097 ]