bernard d. bollinger (sbn: 132817)...repfund apartments iii in connection with the sale of the...

BUCHALTER NEMER A P R O F E S S I O N A L C O R P O R A T I O N

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BN 8493412v1

BERNARD D. BOLLINGER (SBN: 132817) Email: [email protected] JEFFREY K. GARFINKLE (Cal. State Bar No. 153496) Email: [email protected] RICHARD P. ORMOND (Cal. State Bar No. 207442) Email: [email protected] ANTHONY J. NAPOLITANO (Cal. State Bar No. 227691) Email: [email protected] BUCHALTER NEMER A Professional Corporation 18400 Von Karman Avenue, Suite 800 Irvine, CA 92612-0514 Telephone: (949) 760-1121 Facsimile: (949) 720-0182

Attorneys for Joint Equity Committee of Investors

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

SANTA ANA DIVISION

In re

REAL ESTATE PARTNERS, INC., and its Related Entities,

Reorganized Debtors. Affects:

All Debtors Real Estate Partners, Inc. Real Estate Partners Income Fund I, LLC Real Estate Partners Income Fund II Real Estate Partners Income Fund III Real Estate Partners Unit Investment

Business Trust I Real Estate Partners Unit Investment

Business Trust II Real Estate Partners Equity Fund Real Estate Partners Growth Fund

Case No. 8:07-bk-13239 TA

(Jointly administered with Case Nos.: 8:07-bk-13239 TA through 8:07-bk-13246 TA Chapter 11

THE JOINT EQUITY COMMITTEE OF INVESTORS’ POST-CONFIRMATION STATUS REPORT FOR THE REORGANIZED DEBTORS; DECLARATIONS OF BRADLEY LARSEN AND RICHARD KIPPERMAN

Case 8:07-bk-13239-TA Doc 627 Filed 07/25/12 Entered 07/25/12 15:10:48 Desc Main Document of 12

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0713239120727000000000001

Docket #0627 Date Filed: 7/25/2012


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1POST-CONFIRMATION STATUS REPORT FOR THE REORGANIZED DEBTORS

TO ALL PARTIES-IN-INTEREST PLEASE TAKE NOTICE OF THE FOLLOWING:

The Joint Equity Committee of Investors (the “Committee”) appointed in the above-

captioned jointly administered bankruptcy case of Real Estate Partners, Inc. and its seven

affiliated investment funds (collectively, the “Reorganized Debtors”), respectfully submits this

Post-Confirmation Status Report for the Reorganized Debtors as follows:

A. Confirmation of Debtors’ Plan of Reorganization

On March 8, 2011 (the “Confirmation Date”), the United States Bankruptcy Court,

Central District of California, Santa Ana Division, entered (i) an order [Docket No. 504] (the

“Confirmation Order”) confirming the Committee’s Joint Chapter 11 Plan Amended as of

February 23, 2011 [Docket No. 500] (the “Plan”), (ii) the corresponding Findings of Fact and

Conclusions of Law and Order in Support of Confirmation of the Committee’s Joint Chapter 11

Plan (the “Findings”) [Docket No. 506], and (iii) an order substantively consolidating the

bankruptcy estates of the Debtors [Docket No. 507]. Pursuant to the Plan and the Confirmation

Order, the Plan became effective in accordance with its terms, and the Effective Date1 occurred

on March 9, 2011 (the “Effective Date”).

B. Post-Effective Date Litigation

1. The Coldwell Banker Action.

On April 2, 2010, the Committee commenced an action in the U.S. District Court, Central

District of California, presently designated as Larsen, Inc., et al. v. Coldwell Banker Real Estate

Corporation et al., Case No. SACV 10-00401 AG (MLGx) (the “Coldwell Action”). The

Committee alleged in the Coldwell Action that the Debtors, with the knowledge of the Coldwell

Banker defendants, used the Coldwell Banker name in a fraudulent securities scheme designed to

steal nearly $55 million from some 1,600+ investors across the United States. The Coldwell

Action seeks recovery from the Coldwell defendants for their knowledge of and complicity in the

Debtors’ fraudulent scheme. On November 15, 2010, special litigation counsel in the Coldwell

Action filed a first amended complaint replacing the Committee as plaintiff, and pursuing the

1 Capitalized terms not defined herein shall have the meaning given to them in the Plan.



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Coldwell Action as a class action with various investors being named as the plaintiffs and class

representatives for the 1,600+ investors.

Following mediation between the parties, on June 6, 2012, counsel for the plaintiffs in the

Coldwell Action filed a Notice of Proposed Class Action Settlement [Docket No. 192] providing

notice that a settlement had been reached with Coldwell Banker and its affiliates. Under the

proposed settlement, which is subject to final review and approval in the U.S. District Court

where the Coldwell Action is pending, Coldwell Banker will pay to the 1,600+ investor class

$9,250,000.00 distributed in three separate payments due on September 30, 2012, June 30, 2013

and September 30, 2013. Declaration of Brad Larsen, ¶ 2.

2. State Court Malpractice Actions.

On August 24, 2009, the Committee commenced on behalf of Debtors’ estates a third

action, pending in the California Superior Court for the County of Orange, designated as Real

Estate Partners, Inc. v. Bolduc, et al., Case No. 30-2009-00295919-CU-BT-CJC (the “State Court

Action”), asserting claims against a number of professionals who are alleged to have provided

wrongful advice and counsel in connection with the solicitation process, the purchase and sale of

various properties and assisted in the preparation of and reconciliation of the books and records of

Debtors. The State Court Action is still in the discovery and dispositive motion phase. Recently,

the Superior Court entered on July 13, 2012 its Order Granting Motions for Summary Judgment

Filed by Greenberg Traurig, LLP and John Giovannone [Docket No. 549].

3. The Thompson Claim Objection.

On May 16, 2008, Thomas Thompson, an insider of the Debtors, filed a Proof of Claim

against REP (the “Thompson Claim”), asserting an unliquidated claim based upon his interest in

the Debtors and upon contingent indemnity rights against the Debtors. On April 30, 2009, Mr.

Thompson’s affiliated entity, Thompson Real Estate Group (“TREG”) filed its Proof of Claim

against REP (the “TREG Claim”), asserting an unliquidated claim based upon contributions or

indemnity claims arising from legal action taken by the Committee.

On February 22, 2011, the Committee filed its Motion for Order: (I) Disallowing and to

the Extent Allowed Equitably Subordinating Claims of Thomas Thompson; and (II) Disallowing



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and to the Extent Allowed Equitably Subordinating Claims of Thompson Real Estate Group (the

“Disallowance and Subordination Motion”), which sought to disallow the Thompson Claim based

on Thompson’s inequitable conduct vis-à-vis the Debtors and to disallow the TREG Claim based

upon inequitable conduct and as untimely. To the extent that either claim was allowed, in whole

or in part, the Disallowance and Subordination Motion, sought to equitably subordinate the

Thompson Claim and TREG Claim based upon the Thompson and TREG’s inequitable conduct

vis-à-vis the Debtors.

The Committee, Thompson and TREG resolved their respective claims and entered into a

settlement agreement whereby Thompson and TREG conveyed all of their rights, title and interest

in the Debtors or any entity affiliated with the Debtors to the Debtors’ estates, and released all of

their claims against the Debtors, the Debtors’ estates or the Committee. The only asset that

Thompson and TREG retained was the right to pursue any claims or other actions that they may

have had against Pacific Coast Capital Partners related to monies allegedly due the Debtors or

REPFund Apartments III in connection with the sale of the Terracina property, located in

Phoenix, Arizona (the “Terracina Action”). In connection with the settlement, Thompson and

TREG agreed to split the proceeds from the Terracina Action with the Debtors’ estates. The

Bankruptcy Court approved this settlement agreement pursuant to its Order Granting Motion to

Approve Compromise of Controversy Pursuant to Federal Rule of Bankruptcy Procedure 9019(a)

[Docket No. 555] entered on June 10, 2011.

Thereafter, TREG commenced an adversary proceeding in this Bankruptcy Court to

pursue the Terracina Action designated as Thomson Real Estate Group v. REPFund Terracina

Apartments, LLC, Adv. Proc. No. 8:11-ap-01404. The parties reached a settlement in that

adversary proceeding that ultimately netted $37,850 for the Debtors’ estates. The Terracina

Action was dismissed on March 30, 2012.

4. Claim Objections.

The Committee filed objections to the proofs of claim filed by the Arizona Department of

Revenue, Pamela Counts, and Richard M. Hewitt P.C., which were sustained by the Bankruptcy

Court in fourth quarter of 2011.



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5. Appeal of Final Fee Application Orders.

On May 9, 2011, Buchalter Nemer filed its Final Application for Allowance and Payment

of Professional Fees and Reimbursement of Expenses as Counsel for the Joint Equity Committee

of Investors [Docket No. 529]. Other professionals filed their final fee applications as well

including Winthrop Couchot, P.C., as counsel for the Debtors, and Squar Milner, as accountants

for the Debtors. The Securities and Exchange Commission filed objections to the final fee

applications of Buchalter Nemer, Winthrop Couchot and Squar Milner, among others. Over a

period of seven months, these parties submitted supplemental briefs to the Bankruptcy Court and

engaged in meaningful dialogue in an attempt to resolve the SEC’s objections. Ultimately,

Buchalter Nemer, Winthrop Couchot and Squar Milner agreed to reduce their requested fees by

5.847% after an extensive final hearing on the matter before the Bankruptcy Court.

On January 25, 2012, the Bankruptcy Court entered its Order Granting Final Fee

Applications of Buchalter Nemer, PC; Winthrop Couchot, PC; and Squar Milner LLP [Docket

No. 601], which incorporated the 5.847% reduction in fees for each claimant. Dissatisfied with

this result, the SEC appealed the Final Fee Application Order in the case designated as Securities

and Exchange Commission v. Winthrop Couchot, PC, et al., Cal. C.D. Case No. SACV12-00224-

AG. The appeal is currently pending.

C. Post-Effective Date Asset Sales.

Through its interests in REPFund Apartments VIII, Debtors hold a 10% interest in

Seacrest San Clemente LP, which holds an interest in the Seacrest Apartments, a multi-family

housing complex located in San Clemente, California. In September 2011, the Committee and

the Reorganized Debtors supported a sale of the Seacrest Apartments, which netted a return to the

Debtors’ estates of approximately $3,191,171. See Declaration of Richard Kipperman, ¶ 4.

D. Claims Administration and Payments.

Class 2A consisted of the holders of allowed claims arising from the provision of labor,

professional services, and materials to or for the benefit of Debtors prior to the Petition Date.

From a review of Debtors’ books and records, their schedules to their bankruptcy petitions and

the Proofs of Claim filed to date, the Reorganized Debtors have paid a total of $78,355.24 to the



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Class 2A claimants.

Class 2B consists of the SEC’s allowed claim in the total amount of $53,014,865.12

pursuant to which the non-insider 1,600+ investors are entitled to receive a distribution. The

Reorganized Debtors have not yet made any distributions on account of the Class 2 B claim. It is

anticipated that the Reorganized Debtors will make an initial distribution on account of the Class

2B claim by fourth quarter of 2012.

There may be residual administrative expense claims for the pre-Effective Date fees and

costs of the Debtors’ professionals depending on the outcome of the appeal and whether the

professionals intend to pursue a substantial contribution claim for the 5.847% reduction in fees

that took place in connection with the resolution of the Final Fee Application. Depending on the

outcome of the appeal and any forthcoming motion to allow substantial contribution claims, the

Reorganized Debtors may need to pay up to an additional $200,000 in administrative expenses.

E. Post-Confirmation Tax Liabilities.

Reorganized Debtors are current on their post-confirmation tax liabilities.

F. Ability to Comply with the Terms of the Plan.

Reorganized Debtors will continue to be able to comply with the terms of the Plan.

G. Plan Consummation and Final Decree.

Reorganized Debtors have substantially consummated the Plan as described above and

will continue making payments as provided for in the Plan. Depending on the outcome of the

SEC appeal, the Committee anticipates filing an Application for Final Decree in the fourth quarter

of 2012.

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /



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Dated: July 25, 2012 BUCHALTER NEMER, a professional corporation

By: /s/ Anthony J. Napolitano. ANTHONY J. NAPOLITANO

Attorneys for the JOINT EQUITY COMMITTEE OF INVESTORS


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28BUCHALTER NEMER

I R V I N E

DECLARATION OF BRADLEY B. LARSEN

I, Bradley B. Larsen, declare and state.

1. , 1 am the Chairman of the Joint Equity Committee of Investors appointed in the

above-captioned jointly administered chapter 11 bankruptcy cases. I am also a member of the

class of plaintiffs in the action pending in the U.S. District Court, Central District of California,

designated as Larsen, et al. v. Coldwell Banker Real Estate Corporation et al., Case No. SACV

10-00401 AG (MLGx) (the "Coldwell Action"). This Declaration is submitted in support of the

Post-Confirmation Status Report for the Reorganized Debtors.

2. I participated in the mediation with Coldwell Banker and its affiliates, and

following the mediation between the parties, on June 6, 2012, counsel for the plaintiffs in the

Coldwell Action filed a Notice of Proposed Class Action Settlement [Docket No. 192] providing

notice that a settlement had been reached with Coldwell Banker and its affiliates. Under the

proposed settlement, which is subject to final review and approval in the U.S. District Court

where the Coldwell Action is pending, Coldwell Banker will pay to the 1,600+ investor class

$9,250,000.00 distributed in three separate payments due on September 30, 2012, June 30, 2013

and September 30, 2013.

I declare under penalty of perjury that the foregoing is true and correct, is of my own

personal knowledge, and if called as a witness, I could and would testify competently with respect

thereto.

Executed on July 19, 2012, in Longview, Washington.

ABradley B. LaVsen

POST-CONFIRMATION STATUS REPORT FOR THE REORGANIZED DEBTORS



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DECLARATION OF RICHARD KIPPERMAN

I, Richard Kipperman, declare as follows:

1. I am the Responsible Person for Real Estate Partners, Inc. (“REP”); Real Estate

Partners Income Fund I, LLC (“REP Income I”); Real Estate Partners Income Fund II, BT (“REP

Income II”); Real Estate Partners Income Fund III, BT (“REP Income III”); Real Estate Partners

Unit Business Investment Trust I (“REP Trust I”); Real Estate Partners Unit Business Investment

Trust II (“REP Trust II”); Real Estate Partners Equity Fund, BT (“REP Equity Fund”); and Real

Estate Partners Growth Fund, BT (“REP Growth Fund”) (collectively the “Debtors”) in the

jointly administered chapter 11 bankruptcy case pending in the United States Bankruptcy Court,

Central District of California, Santa Ana Division, and designated as In re Real Estate Partners.,

et al., Case No. 8:07-bk-13239 TA (lead case). I have personal knowledge of the matters set forth

herein, and if called as a witness, would testify competently thereto.

2. I am President of Corporate Management, Inc. (“CMI”), which was founded in

1986 to serve the fiduciary needs of creditors and debtors in multiple arenas from assignments to

bankruptcies to receiverships. I have served as a State and Federal Court receiver, and have filled

almost every role in the area of bankruptcy for more than two decades and in over 30,000 cases.

Currently, I hold appointments as chapter 7 trustees, chapter 11 trustees, examiners, post

confirmation liquidating agents, liquidation trustees, litigation trustees, responsible natural

persons and receivers. I have held, or I hold and take out special masters, referees and

provisional directors. I have been involved in the operations and sale negotiations of many types

of businesses, as well as real and personal properties.

3. This Declaration is submitted in support of the Post-Confirmation Status Report

for the Reorganized Debtors.

4. Through its interests in REPFund Apartments VIII, the Debtors hold a 10%

interest in Seacrest San Clemente LP, which holds an interest in the Seacrest Apartments, a multi-

family housing complex located in San Clemente, California. In September 2011, the Committee

and the Reorganized Debtors supported a sale of the Seacrest Apartments, which netted a return

to the Debtors’ estates of approximately $3,191,171.


This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012 F 9013-3.1.PROOF.SERVICE BN 12069914v1

PROOF OF SERVICE OF DOCUMENT I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 1000 Wilshire Blvd., Suite 1500, Los Angeles, CA 90017 A true and correct copy of the foregoing document entitled (specify): THE JOINT EQUITY COMMITTEE OF INVESTORS’ POST-CONFIRMATION STATUS REPORT FOR THE REORGANIZED DEBTORS; DECLARATIONS OF BRADLEY LARSEN AND RICHARD KIPPERMAN will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On July 25, 2012, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On July 25, 2012, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Honorable Theodor C. Albert United States Bankruptcy Court - Central District of California 411 West Fourth Street, Suite 5085 Santa Ana, CA 92701-4593

Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on July 25, 2012, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. 07/25/2012 SANDRA I. ALARCON /s/ SANDRA I. ALARCON Date Printed Name Signature


This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012 F 9013-3.1.PROOF.SERVICE BN 12069914v1

VIA NOTICE OF ELECTRONIC FILING (NEF)

Richard L Barnett [email protected], [email protected]

Jared W Beilke [email protected]

Bernard D Bollinger [email protected], [email protected];[email protected]

Jay Y Chiu [email protected]

Dennis Connelly [email protected]

Dawn M Coulson [email protected]

Jeffrey K Garfinkle [email protected], [email protected];[email protected];[email protected]

Oscar Garza [email protected]

Robert P Goe [email protected], [email protected];[email protected]

Eric D Goldberg [email protected]

Jeffrey T Gwynn [email protected]

Michael J Hauser [email protected]

Garrick A Hollander [email protected], [email protected];[email protected]

Alexandra Kazhokin [email protected], [email protected]

Sandra W Lavigna [email protected]

Douglas G Levin [email protected]

Peter W Lianides [email protected], [email protected];[email protected]

Aaron J Malo [email protected]

Anthony J Napolitano [email protected], [email protected]

Michael R Newhouse [email protected]

Samuel A Newman [email protected]

Thu Nguyen [email protected]

Timothy R Pomeroy [email protected]

Bruce G Schweitzer [email protected]

Benjamin Seigel [email protected], [email protected]

Adam M Starr [email protected]

Timothy F Umbreit [email protected]

Timothy F Umbreit [email protected]

United States Trustee (SA) [email protected]

Gilbert B Weisman [email protected]

John R Weiss [email protected]

Joseph M Welch [email protected], [email protected];[email protected]

Dennis J Wickham [email protected], [email protected]

Marc J Winthrop [email protected], [email protected];[email protected]

David L Woods [email protected]


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