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Reuters: Trustee Seeks to Oust Law Firm, Adviser in GSC Banrkuptcy

January 09, 2013, 07:32 AM
Filed Under: Bankruptcy

Reuters reports the U.S. Justice Department wants a bankruptcy court to strip law firm Kaye Scholer and financial adviser Capstone of more than $10 million they earned through the bankruptcy of investment management firm GSC Group Inc.

The firms covered up key business relationships that may have served to inflate their fees, according to court papers filed on Friday by the U.S. Trustee Program, the DOJ arm that oversees bankruptcies.

GSC, founded by former Goldman Sachs Group partner Alfred Eckert, declared bankruptcy in August 2010, hampered by a liquidity squeeze and declining asset values brought on by global recession. The case in U.S. Bankruptcy Court in Manhattan culminated in the 2011 sale of GSC's assets to lender Black Diamond Capital Management.

GSC tapped Kaye Scholer and Capstone as legal and financial advisers, respectively. Robert Manzo, the trustee in charge of liquidating certain GSC assets in the wake of the sale, was listed in court filings as a Capstone employee, the U.S. Trustee said in its filing.

But Manzo was actually an independent contractor with whom Capstone had signed a fee-sharing agreement, information the firms kept from the court in violation of bankruptcy laws, the U.S. Trustee claims.

The regulator is asking the court to deny the request, vacate the retentions of Capstone and Kaye Scholer, and force the firms to disgorge money already earned.


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