FRM creditors, trustee battle over fee


Creditors and the trustee in the $88 million Financial Resources Mortgage Inc. bankruptcy fraud case are arguing over whether the trustee is entitled to $240,000 -- about four times the amount that remains in the company’s coffers.Wednesday’s filing, and the trustee’s application last month, indicates how dire the situation is. Steven M. Notinger, trustee for the bankrupt estates of FRM and CL&M, loan servicing company, said there is only $60,000 in the estates’ account, yet he is trying to get a handle on 500 outstanding loans purportedly worth $88 million, without a general ledger but through bank transactions alone.Yet while Notinger argues that the two Lakes Region firms are the center of a giant Ponzi scheme, “some investors have been very aggressive in trying to get around the trustee in order to collect ‘their’ loans without having to deal with or pay anything to the bankruptcy estate,” he said in the filing.Indeed, the trustee has had to go to state court to intervene, arguing that all this should be sorted out by the bankruptcy court. He also has forced numerous trusts (over 80 last month) into that court.All this costs money: $240,139.50 in legal fees and $6,586.14 in expenses as of Feb. 25, to be exact. Notinger wants the court to approve payment of at least half that amount -$120,000 – even though that’s twice the amount available.Notinger said he understands the situation and is only asking for a $50,000 payment on an interim basis.About 15 creditors, representing The Shaheen & Gordon Parties, don’t begrudge Notinger the $50,000, but said it was premature to approve more, when “there exist insufficient funds for the requested payment.”The problem, they said, was whether all the work expended by the trustee was “necessary to the administration of or beneficial” to the estate. The creditors argued that in some cases the investors’ money was expended on legitimate loans.However, “a significant portion of the Trustee’s time has been expended in furtherance of his claims that all loans extended by all lenders in connection with the Debtors’ enterprise are illegitimate and that notes and mortgages held by specific lenders should be the property of the bankruptcy estate” -- a view that the investors contest, and the court has yet to rule on.Besides, they said, “the interests and the needs of the Trustee must be balanced against the interests and needs of the creditors, many of whom have suffered a life-altering catastrophe as the result of the failure of the Debtors’ enterprise.” – BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW
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