A federal bankruptcy judge is scheduled today to decide whether to allow three executives of Property Mortgage Co. and an affiliate in Sherman Oaks to seek temporary immunity that would protect them from criminal prosecution for six months while they help devise a reorganization plan for PMC.
Meanwhile, PMC already has gotten bankruptcy court approval to sell the building that houses the famous Bistro restaurant in Beverly Hills for $4.5 million. The proposed buyer is Jenkins Properties International, a real estate firm owned by Dr. Horace Jenkins, an orthopedic surgeon in Glendale.
PMC, along with some of its investors, acquired the building recently after foreclosing on the previous owner, a partnership called 313 Stratford.
PMC's immunity request will be weighed by Bankruptcy Judge William J. Lasarow in Los Angeles. PMC, one of the major mortgage brokers in the state, has been operating under protection from creditors under Chapter 11 of the federal bankruptcy laws since Feb. 14 after running out of cash.
The 20-year-old company mainly arranged mortgage loans for residential and commercial real estate using cash provided by several hundred investors, and PMC's collapse left the investors without access to the about $150 million that they had plowed into the company and a subsidiary, SLGH Investments Inc.
PMC's lawyers are asking that the court allow the companies' executives to seek temporary immunity from the U.S. attorney's office or other authorities to protect them against any criminal prosecution because the executives otherwise "may be unwilling to cooperate and provide the necessary assistance," PMC's lawyers said in court papers.
"The result may be that the debtors' reorganization efforts may fail before they are provided an adequate opportunity to succeed," the lawyers said.
The executives involved are Elliott Fine, PMC's president; his son Jeffrey Fine, secretary of SLGH; and Stanley Glickman, vice president of PMC. (After PMC's Chapter 11 filing, the court appointed Jeffrey F. Katzer to run PMC as its chief executive officer, but he is not involved in the immunity request.)
Maureen Tighe, coordinator of the U.S. attorney's bankruptcy fraud task force in Los Angeles, said the agency as a matter of policy does not confirm nor deny ongoing investigations. She did say that the U.S. attorney receives immunity requests routinely, but that it's unusual for the request to first go through the Bankruptcy Court.
One of the PMC lawyers, Hydee R. Feldstein, said she was not aware of any probe of the executives by the U.S. attorney or other authorities, although she added that PMC is negotiating with the state Department of Real Estate concerning the agency's desire to audit PMC's books.
Rather, she said the company is seeking the immunity because "there's obviously some angry people" who invested in PMC, "and in an angry climate people say things."
She declined to be more specific other than to say that "there are a number of people who have made statements regarding the possibility of criminal prosecution" against the PMC executives. "We want to create a business environment where the individuals can work for a limited amount of time. Whatever liability they have, they have."
Katzer and the court-approved committee representing PMC's creditors also approved of PMC's request. But Leon L. Vickman, a lawyer who claims to represent some of PMC's investors, termed the request unusual and has asked Judge Lasarow to reject it.
In papers filed with Lasarow, Vickman claimed that the executives' help is not needed for PMC's reorganization. He also asserted that it would be to PMC's advantage not to use their help "since it is clear from their request for immunity that there may be a possibility of criminal wrongdoing that would color their advice to the debtor to protect themselves."
PMC lawyers are also asking Judge Lasarow to extend an injunction that blocks creditors from suing PMC's executives in an effort to get their money back. Chapter 11 normally protects the company from creditors' lawsuits, but PMC also wants its executives protected for six months so they aren't distracted by litigation while they work on the reorganization plan.
Otherwise, "the result may be a 'race to the courthouse' for recovery against the individuals," PMC's lawyers argued.
That sort of civil protection for a company's executives in Chapter 11 is not unusual, but trying to get them immunity from criminal prosecution through the Bankruptcy Court is uncommon, said Dean G. Rallis Jr., a bankruptcy lawyer in Pasadena who's not involved in the PMC case. "There's going to be a confrontation of policies underlying criminal law versus bankruptcy law," Rallis said.
But Feldstein said the bankruptcy laws do have a specific provision "that contemplates this kind of a request."