Two Liberty House
boards, jockeying for
control, attempt
a reconciliation
A Liberty House attorney
By Peter Wagner
tries to establish peace
between the two boards
of directors
Star-BulletinLiberty House's two boards of directors may be close to settling their differences.
Attorneys for the opposing boards -- one appointed by Liberty House owner JMB Realty Corp. and the other by the Bank of America Group, the retailer's major creditors -- met Thursday to discuss reconciliation.
The combatants were at opposite sides during a hearing before U.S. Bankruptcy Judge Lloyd King yesterday, but the proceeding was marked by overtures.
Ronald Marmer, an attorney representing JMB, acknowledged efforts in recent weeks by Liberty House attorney Bruce Bennett to broker a peace between the parties.
"He's done an admirable job to get us quite close," Marmer said.
Attorney Thomas Moloney, whose firm Cleary, Gottlieb, Steen & Hamilton of New York has been counseling the bank's board, asked King to help find common ground.
King, presiding over the Liberty House Chapter 11 bankruptcy and a separate civil dispute between the two boards, declined, suggesting another third party be found.
The two boards have been battling for control of Liberty House since its March 19 bankruptcy filing. The bank's board, repre
senting creditors owed more than $140 million, has claimed to be the legitimate board.
JMB's board, in existence before the Bank of America Group tried to replace it, has refused to relinquish control.
Meanwhile, King yesterday rescinded his earlier approval of the hiring of Cleary, Gottlieb to represent the bank's board of directors.
King granted a request by JMB to disallow the New York firm because of its outside representation of major creditors in the Liberty House bankruptcy.
"This is a conflict and it must be recognized," said King, who in July had approved the hiring of the firm as a routine matter.
Some of the firm's clients include Bank of America NT&SA; Merrill Lynch, Pierce, Fenner & Smith; Oaktree Capital Management LLC; Sanwa Bank; Capital Management LLC; and Canyon Partners -- members of the lending group that appointed the new board.
Cleary, Gottlieb, which has about 530 attorneys and whose partners charge up to $520 an hour, has submitted bills to Liberty House totaling $446,054.67 through Aug. 31.
Liberty House filed for Chapter 11 bankruptcy on March 19, after defaulting on more than $170 million in loans by the Bank of America group. The company subsequently secured a $50 million financing package from the same lending group.
The retailer, which has closed 16 shops and specialty stores this year, recently asked for a time extension -- from Nov. 13 to Feb. 28 -- to file its reorganization plan. King is to hear that request Nov. 2.
