At bankruptcy hearing Premier Resorts of Utah director said he didn’t foresee crisis
July 7, 2009
More information was gleaned about the collective account into which all money from Premier Resorts of Utah (PRU) was "swept" at Monday’s bankruptcy hearing, but the biggest questions remain unanswered.
The sweep account
The company’s Statement of Financial Affairs given to the U.S. Bankruptcy Court listing its assets and liabilities failed to clarify the company’s relationship to the parent company Premier Resorts International (PRI).
Section 3C, titled, "Payments to Insiders," simply stated that revenues were swept into a centralized inter-company sweep account under the corporate umbrella of PRI and expenses were paid from the same account.
On July 1, PRU submitted more details to the court on its "Payments to Insiders," but the workings of the sweep account are still ambiguous.
Creditors hoped to learn how much of the sweep account revenues came from Park City and where the money that should have come back to local condo owners actually went.
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But all that was accomplished in Monday’s four-hour hearing was that Trustee Steven Bailey of Ogden and attorneys for creditors were able to request more specific information from the company on its accounting and assets as well as obtain lists of possible witnesses for future inquiries.
Early on Bailey said he had anticipated that result from Monday’s questioning. He acknowledged that many there wanted to know where the money went but he prepared them to be disappointed.
Nevertheless, he said, "I intend to leave no stone unturned regarding where all monies in the sweep account came from and went."
He also encouraged creditors to file claims by the appropriate deadlines and classify them correctly. But he also warned them that his job was not going to be an easy one.
"Don’t expect a check in the mail next week," he said. "We’re quite a ways out on this."
Bailey began the hearing for PRU’s Chapter 7 bankruptcy (which follows the company’s inability to pay condo owners for February nightly rentals) by making clear that the purpose of the hearing was to ask questions of the debtor, not to point fingers.
Question after question is what happened during the four hours as the trustee and various attorneys grilled Bradley Goulding, director of PRU and chief financial officer of PRI, on his accounting practices.
The questions largely revolved around the sweep account that Goulding acknowledged many entities under PRI contributed to, and had expenses paid from.
The parent company
Goulding and his attorney Kenneth Cannon tried to stave off questions about PRI affiliates other than PRU, but Bailey assured attendees that he found the accounting of PRI and all its affiliates equally important to PRU’s practices.
"The position I’m going to take is that all other entities were brought in by proxy with that sweep account," he told Goulding.
The questioning revealed that Goulding and PRI president Barbara Zimonja, who was not present, were 50/50 partners in Premier Hospitality Corporation, which wholly owned the stock of PRI, which wholly owned the stock of PRU.
That fact irked Park City attorneys Joe Tesch and Joe Wrona as they tried unsuccessfully to get Goulding to account for all of the financial decisions made within PRU. Goulding often responded to questions about budgets, bank accounts and payments by saying he could not recall, was not sure, or that his own accountants and controllers could answer better.
The "sweep" account was handled through Wells Fargo Bank. All money deposited by PRU was sent to the account. Any checks written by PRU were from a zero-balance account and the money came from PRI. Affiliates in other states also used the Wells Fargo system. Goulding said the bank closed those accounts without prior notice sometime after bankruptcy was declared.
When asked the ratio of money from PRU that went into the account versus what came out, Goulding said it was difficult to answer since each affiliate’s profitability and overhead costs were in constant flux. He asserted that profits from PRI’s Utah operations were down more than those in other states, and said some of them were money losers last winter.
These comments were in answer to accusations that PRI was using Park City profits to keep other affiliates afloat. Cannon asserted that developments made by the North Myrtle Beach affiliate received no funds from the sweep account. He said that entity, Premier Holdings of South Carolina, is separate even though Goulding is its principal agent.
Goulding said in response to questioning that he was unaware PRU lacked the funds to pay owners before late March. He also said he sincerely believed the company could be saved by outside investment through May.
Wrona argued before the trustee that documents given to potential investors during that effort to save PRU from bankruptcy listed bank accounts containing tens of millions of dollars. Bailey requested to see all such documents at future hearings scheduled about two weeks from July 6.
At the hearing, Bailey also announced that auctioneer Rob Olson will soon sell off the company’s assets to pay creditors.
His associate, attorney Danny Kelly, also clarified confusion over the "lifting of the stay" on June 24. He said the court only approved the lifting for unit owners, not for homeowner associations and other entities with commercial contracts. He said those contracts would need the court’s permission to terminate.
Bailey also said that companies had been seeking to purchase the names and addresses of unit owners, presumably for marketing purposes, and those lists will be sold through auction as assets.