Former USA Springs law firm hired to pursue Swiss lender

A bankruptcy court judge in Manchester on Thursday approved the trustee's request to hire USA Springs' former law firm to chase down money allegedly owed by Switzerland-based Malom Group Ltd., brushing aside questions raised by Malom.

USA Springs' bankruptcy trustee, Timothy Smith, asked the court for permission to hire Boston-based Riemer & Braunstein in an attempt to enforce the court's previous $60 million judgment against Malom. The firm would be charged with working with Swiss authorities, who are investigating a massive fraud case against Malom. The law firm would only be paid if it is able to recover some of the money.

USA Springs filed for Chapter 11 reorganization in the summer of 2008, after struggling with residents and environmentalists for nearly a decade to get a permit to withdraw groundwater and build a water bottling plant near the Barrington-Nottingham border. The company eventually obtained the permit, but ran out of money before completing the plant and spent the next three years searching for financing.

Malom seemingly came to the rescue last year, promising to raise $60 million, if the debtor would pay a $1.2 million fee up front – something a USA Springs investor agreed to do.

The Swiss firm never came up with the financing, offering a variety of explanations: the Swiss detention of two of its executives on suspicion of fraud, and its inability to sell some dubious Brazilian bonds. The $1.2 million was not returned.

Earlier this year, attorney Alan Braunstein, at the time USA Springs' attorney, obtained the judgment against Malom. But he soon quit as the company's attorney, citing "irreconcilable differences" with his client, partly over the handling of the Malom matter.

The court then pulled the plug on the USA Springs reorganization plan, converting it to Chapter 7 liquidation and appointed Smith as trustee.

Thus far, Smith has not been able to sell the estate's assets, but he has asked to retain Peter Sutton, another partner in Braunstein's firm, to work with Swiss prosecutors on any civil and criminal proceedings in Switzerland against Malom or its executives.

In a motion filed last week, Malom's attorney, William Gannon, said that it would not object to the appointment, but raised the issue of the law firm's objectivity, alluding to the fact that the firm had quit because it could not communicate with USA Springs. In addition, he said, the company has sent a series of "threatening and abusive emails" to the law firm that "may make it difficult for the proposed special counsel to be objective" in its search.

Judge J. Michael Deasy did not allude to Malom's motion when he granted the order to retain Riemer & Braunstein.