In the bankruptcy of the Santa Barbara News-Press, much hinges on the ownership of the company’s two buildings: 715 Anacapa Street downtown and 725 South Kellogg Avenue in Goleta, which were assessed in 2000 at $27.5 million. When the daily paper’s parent company, Ampersand Publishing LLC, went into Chapter 7 last July, it declared it had $116,000 in assets and $5 million in liabilities. The two buildings had been transferred by owner Wendy McCaw to herself in 2014 through two separate LLCs, a transfer that was to be heard at the bankruptcy court on Wednesday morning.
Judge Ronald Clifford had a bad case of laryngitis, gained during seder festivities earlier, he said. He felt fine, he assured the two attorneys present, Michael D’Alba of Los Angeles firm Danning Gill for the bankruptcy trustee, and Zachary Elsea of Los Angeles law firm Eisner LLP, who represented the two limited liability corporations (LLCs) that held the two buildings. The trustee had built a case that the two buildings belonged in among bankruptcy assets under an Internal Revenue Service statute of limitations, while the LLCs disagreed, with both sides offering different interpretations of the same case law.
The judge commenced the hearing by saying he had spent the previous week in discussions with the court’s Committee on Conduct, including with the presiding judge, over the fact that the bankruptcy debtor, Wendy McCaw, owned the building in which they sat. In fact, McCaw had bought the building in 1995 for about $8 million after Macy’s closed down the I. Magnin that had stood at 1415 State Street since 1947, a high fashion store that previously had boutiques at the city’s Potter and Biltmore hotels in the 1920s.
A bankruptcy trustee’s job is to make the creditors whole, to see that what they are owed gets paid to the extent possible as quickly as possible. On Wednesday, however, the bankruptcy court was concerned with integrity. Judge Clifford told the attorneys that the judges had decided they were “comfortable” keeping the case in the Santa Barbara court rather than moving it to a different court, eyeing the attorneys as he said, “You were aware of the ownership?” They both agreed they were. Satisfied with the disclosure, the judge said he would hear oral arguments and rule on the Motion to Dismiss the fraudulent transfer allegations on June 5.
The delays in the case continue in the testimony track, as well. The News-Press accountant was to supply information on February 1, which was then extended to March 14, April 4, and April 25. This Thursday’s session was again continued, this time to June 6.
