U.S. Attorney renews call
for trustee at Summit

The bankrupt telecom firm says
the move would hurt the company
by scaring off customers

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By Tim Ruel
truel@starbulletin.com

The U.S. Attorney's Office has renewed its call for a court-appointed trustee to replace the management of bankrupt telecommunications firm Summit Communications Inc.

The move follows the December filing of an examiner's report that said Summit's financial situation was worse than company leaders were saying.

A hearing on the appointment of a trustee is scheduled for Jan. 24 before U.S. Bankruptcy Judge Robert J. Faris.

The examiner, bankruptcy trustee Mark Yee, supported an earlier motion by the government to appoint a trustee to investigate Summit's finances.

Yee would not be able to serve as a trustee in this case, since he served as examiner.

A trustee is needed, in part, to review and collect questionable payments that went to Harry Johnston, Summit's former president, and to Harry's son Grant Johnston, who is Summit's current president, Yee's report said.

The Johnstons say the report contains inaccuracies that could have been cleared up before the document was filed in court. Grant Johnston said Summit was given the 17-page report only hours before it was filed.

The Johnstons accused the government of going on a fishing expedition for wrongdoing after revelations about the firm's tax problem.

When Summit filed Chapter 11 reorganization bankruptcy in February 2002, it owed more than $1 million in unpaid taxes, penalties and interest, according to claims by the state and federal government. Summit has since paid one-fifth of its bill to the Internal Revenue Service, the company has said.

Summit plans to respond to and rebut the examiner's report at the upcoming hearing, Grant Johnston said Friday.

The company strongly objects to the examiner's recent public comparison of Summit's situation to that of Enron and WorldCom, describing it as "defamatory and damaging."

"His comments may have caused a substantial and irrevocable economic loss to Summit," Johnston said. Clients and vendors are showing concern, he said.

Even if Yee believed his comments to be accurate, "you don't say something like that until you have proven they are true," Johnston said.

The appointment of a trustee will only hurt Summit's financial condition, and its creditors, because it will ward off customers, Johnston said.