A Halloween Story From Condor Capital

Boo!

Lawyers for Condor Capital owner Stephen Barron are spooked. Long Island New York subprime lender Condor Capital is charged by the New York State Department of Financial Services with bilking customers out of as much as $11 million in overpayments and other schemes. Now its lawyers are concerned by the growing expenses a court-appointed receiver is costing the company as it struggles through its legal troubles.

The court-appointed receiver, Denis O’Conor of Alix Partners LLP, is overseeing the books and revamping the accounting at Condor as the court sets out to determine the future of the company, and whether or not Condor’s primary lender, Wells Fargo, get its $200 million back once all the fines and overpayments are settled.

But that’s another spooky Condor story.

For now, as detailed in a letter to the presiding judge, attorney Leah Mary Campbell of the New York City firm Katten, Muchen and Rosenmen LLP is objecting to the receiver’s bills to the company.  If she’s right, the bills are a bit nightmarish.

Among the invoices submitted to Condor from the receiver on October 24, for example, was a charge of $363,037 in fees.

“Somehow, even with the progress cited by the receiver on the calculation of refunds, payment of those refunds, and what has effectively been a slow winding down of Condor’s business given the inability to originate new loans, the receiver’s professional fees continue to grow with each month ($280,000; $328,800; $328,000; $339,500; $351,000),” according to Campbell’s letter to the judge.

Total “professional fees” sought by the Receiver to date are $1,627,300 for a five month period.

Specifically, she objected to certain items in the latest invoice, such as a $35,000 fee for the work of what’s called a “Financial Advisory Associate.” Campbell charges that as with previous submissions, the receiver has not provided sufficient detail to determine who fills different positions for which payment is sought — including who this “Financial Associate” is.

Campbell writes that when she looked over the previous three invoices submitted by the receiver, it appeared the “Associate” was likely someone named W. Wei. But, she says, that W. Wei also appeared in the first two invoices and there was no indication that there was any such “Financial Associate” position at that point in time.

“If W. Wei was simply part of the support staff in the first two invoices, Condor submits it is unreasonable to promote this person to a Financial Advisory Associate and hence charge Condor even more fees, even assuming W. Wei is in fact working more hours during those periods,” Campbell wrote.

But that’s not all.

The defendant’s firm is also objecting to a 2% administrative fee, which it says is unreasonable. Campbell writes that to date, the receiver has sought a total of $32,562 for “conference calls, postage, internal copy costs and phone/internet access” over a five month period.

She says the receiver has never calculated the actual costs of these items, but she assesses this fee at 2% of the salaries for the receiver and his staff. It would be surprising that copies, postage, internet access, and phones would rise to this amount, she tells the judge. At its most basic level, she argues, it makes no sense.

This has apparently caught the attention of Judge Colleen McMahon, who handwrote on the court registered letter “I agree, that continuing expenses at this level are concerning.”

Exactly how accurate these charges are and how concerning they are to the Judge will likely get played out in the coming days as the Condor saga continues in a Manhattan court room.