Judge Issues Mild Rebuke to Diocese

By Elizabeth Hardin-Burrola
Gallup Independent
October 12, 2015

http://gallupindependent.com/

U.S. Bankruptcy Judge David T. Thuma issued a mild admonishment to Diocese of Gallup attorneys for barring the public and the media from a diocese property auction in Albuquerque Sept. 19.

However, in a hearing Wednesday, Thuma declined to invalidate the auction sale or order a new sale, citing concerns that money spent advertising a new auction couldn’t guarantee higher sales prices, which would actually hurt the clergy sex abuse claimants who are the primary creditors in the case.

“The court intended the auction to be a public auction,” Thuma said. “The auction was public in the sense that it was advertised to the public and any member of the public was invited to bid. It wasn’t public in the sense that non-bidders, such as the press or non-bidding members of the public, were not allowed to observe.”

‘Not nefarious’

The Gallup Diocese had hired George H. “Hank” Amos III, CEO and president of Tucson Realty & Trust Co., and Todd Good, CEO and president of Accelerated Marketing Group, to publicize and conduct property auctions for the diocese in Phoenix and Albuquerque. Both Amos and Good conducted a similar property auction for lead bankruptcy attorney Susan Boswell when she directed the Diocese of Tucson’s bankruptcy case a decade ago.

At the Albuquerque auction, Good barred Meredith Edelman, a doctoral scholar conducting research, and a Gallup Independent reporter from observing the event. Good claimed he had a policy of only allowing qualified bidders into his auctions.

After Edelman and the Gallup Independent wrote letters of complaint to Thuma, the judge issued a notice to show cause Friday and set a hearing date for Oct. 19. Diocese attorneys requested the hearing be moved up because sales from the Phoenix auction were scheduled to close by Oct. 12.

“In my 33 years of conducting auctions, it is, and has been, my custom and practice not to admit non-bidders to an auction,” Good said in a statement submitted to the court Tuesday evening.

"This is because non-bidders do not increase bid prices. Rather, they have the potential to distract legitimate potential buyers, disrupt the auction, or chill bidding.”

At the hearing, diocesan attorney Lori Winkelman repeated Good’s assertion and said his actions were “not nefarious or selective in any way.”

Dollars and cents

“The only result that can come from having the sale unwound is harm to the creditors,” Winkelman argued. “That would result in additional cost and it would also result in potentially losing bidders.”

Winkelman said Boswell had notified James Stang, the legal counsel for the Official Committee of Unsecured Creditors, about the incident, and Stang had not expressed an objection to how the auction was conducted. The committee represents the interests of clergy sex abuse claimants in the case.

Ilan D. Scharf, an attorney who also represents the committee, admitted the situation left the committee “in a quandary” and “stuck with a Catch-22” situation. “So, your honor, while we’re disappointed that these two individuals were excluded from the auction,” he said, “we think that it would be a mistake to unwind the auction from a dollars and cents perspective.”

Phoenix attorney Robert E. Pastor, who represents more than a dozen clergy abuse claimants, agreed that “quandary” raised a number of concerns. One concern, he said, was diocesan attorneys hadn’t provided the court with attendance sheets from the auctions.

“To be clear, I’m not objecting, but I’m not blessing this sale either,” Pastor said. “I think the exclusion of the two witnesses is problematic given the promise to be truthful and transparent, and given the sensitive nature of this proceeding.”

Two definitions

After a brief recess, Thuma explained his findings, which he said were based on statements made by the individuals barred from the auction and written declarations by Good and Boswell.

Although Thuma admitted he had “intended the auction to be a public auction,” he spent time dissecting the meaning of “public auction,” which he said was not defined in the bankruptcy code or rules. The term was “susceptible to two definitions,” he explained.

Citing case law, Thuma said a public auction could mean the public and the press could attend even if they have no intention of bidding. But it could also mean, he said, the public was invited to bid at the auction.

“Under that construction, excluding non-bidders does not destroy the public nature of the auction,” he said of the latter meaning. “There’s no question in my mind that if the press had come to me before the auction and said, ‘Can I attend, I won’t disrupt, I just want to observe,’ I would clearly have let them do that. And I’m sorry that didn’t happen.”

Thuma, however, did not address the fact that the different possible meanings of “public auction” were not clarified in any of the auction documents.

Thuma said the manner in which auction was conducted was “OK under case law,” but he did call the exclusion of the public and the press “a political miscalculation or maybe an error in judgment.”

If he could redo the auction sale with little or no expense, Thuma said he might invalidate the auction and order a new one. But because it would cost money to re-advertise a new auction at the risk of getting even lower prices, Thuma said he would not invalidate the sale.

“I guess I will admonish counsel if we do have other auctions to make sure that the press can attend,” he told the diocesan attorneys. He also reminded them to “err on the side of keeping this an open proceeding.”