Bankruptcy Trustee Alleges Orrick Partner Helped Divert Debtor Money
A bankruptcy trustee’s suit alleges a partner at Orrick, Herrington & Sutcliffe conspired with four former executives of an ailing mortgage lender to divert assets to a new company.
The partner, Karen Dempsey, is accused of helping Thornburg Mortgage executives use the lender’s money to fund the new, secret business venture, Reuters reports. The suit also accused Dempsey of helping the executives pay themselves thousands of dollars in bonuses outside of bankruptcy court, the American Lawyer reports.
The suit claims both Dempsey and the Orrick law firm were part of the conspiracy, according to Reuters. Pamela Phillips, the San Francisco lawyer representing Dempsey and the law firm, said the allegations are “outrageous” and the trustee had not reached out to the law firm before filing suit.
“We think the bankruptcy trustee is looking for a deep pocket rather than addressing the actual facts at hand,” Phillips told Reuters.
The suit claims the executives switched law firms so they could carry out their plan. The complaint names two law firms that bowed out of the case, according to the American Lawyer story. They are Kirkland & Ellis and the Delaware firm Pachulski Stang Ziehl & Jones. Thornburg later hired Venable; it ended up filing a complaint making similar allegations against Thornburg’s chief operating officer Larry Goldstone, one of the defendants in the trustee’s later suit, the American Lawyer says. Venable now represents a Thornburg subsidiary in the bankruptcy.
Many of the initial allegations surfaced when a partner advising creditors at Quinn, Emanuel, Urquhart, Oliver & Hedges received an anonymous letter from a Thornburg employee, the American Lawyer says. The letter alleged the executives were requiring Thornburg workers to devote their time to the new company, SAF Financial.
