Judge puts case under special overseer
NEW ORLEANS -- A judge decided Friday to place a movie studio involved in an investment dispute with some members of the New Orleans Saints under a special overseer after the studio's head ignored her order to appear at a hearing.
Louisiana Film Studios LLC is the target of an involuntary bankruptcy suit filed by several members of a group of 27 investors -- including past and present Saints -- who bought what they thought were $1.9 million worth of state movie tax credits.
On March 31, the buyers were due to be paid $1.33 for each $1 invested, but state officials said studio CEO Wayne Read never applied for the credits. Read previously said he intended to repay the buyers after finding other investors for the studio in the New Orleans suburb of Jefferson Parish. He said he did not apply for the credits because of confusion about which studio startup expenses qualified.
In court, U.S. Bankruptcy Judge Elizabeth Magner said she had been contacted Friday by Read via e-mail. The judge said Read told her that he had been unable to hire an attorney and would not be present. Magner said she sent word back that his attendance had been ordered.
The judge said she will discuss Read's failure to appear with the U.S. Marshals Service.
Shortly after the hearing ended, Read issued a statement through a spokesman, Allan Katz, saying he would be meeting with three potential investor groups within the next week in an attempt to raise capital to pay back the tax credit buyers and pay off other creditors.
Read said he hoped new investors would bring in a new management team.
"I hope to be in a position to present a final plan to the court by late next week," Read said.
Under court procedure, the Office of the U.S. Trustee will appoint the overseer, who will be in charge of safeguarding the studio's finances and tracking down assets that could be used to pay off creditors, including the tax credit buyers.
William Steffes, lead attorney seeking the involuntary bankruptcy, said that the overseer could, in turn, tap someone with studio experience to try to salvage the operation and qualify it for tax credits.
Steffes said one potential asset is $452,000 Read paid Jan. 21 to an Illinois doctor to settle a loan for a New Orleans movie project -- Mardi Gras Studios -- that never got off the ground. Steffes said that payment came after all of the money for the tax credits had been delivered to Read. Under federal law, that money could be taken back for distribution to the studio's creditors.
On July 22, Saints linebacker Scott Shanle, former punter Mitch Berger and recently cut Saints long snapper Kevin Houser, who has since signed with the Seattle Seahawks, filed the involuntary bankruptcy suit. Another creditor in the suit is a construction company half-owned by Houser's wife claiming it is owed nearly $700,000 for work on the studio.
On Friday, Magner granted a motion to allow defensive end Charles Grant and tight end Jeremy Shockey to join the suit. According to a list obtained by the AP, Grant was the largest single investor in the credits, paying $425,000; Shockey paid $85,000.
Other tax credit buyers included Saints coach Sean Payton, quarterback Drew Brees and former star Archie Manning, according to authorities.
Houser has said he told at least some of the Saints about the tax credits, but does not believe it had anything to do with his release from the team. The Saints have refused to comment on Houser's release and the tax credit case.
After a Saints practice late Friday, Payton called the judge's decision "good news."
"There were so many of the players and coaches that were involved in it ... but I'm kind of not really paying attention to it right now, and I think I'm hoping for everyone that we get the issue resolved," Payton said from Saints training camp in Metairie, La.
Copyright 2009 by The Associated Press