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We are here today in the American College of Bankruptcy series of oral histories. Today our topic is going to be the United States Trustee Program, its origins and its early underpinnings. We have a distinguished panel here today joining us. I will be moderating today and hopefully

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assisting this panel to explain to you all of the early days of the of the US Trustee program. My name is Jean Fitzsimon. I'm a bankruptcy judge in the Eastern District of Pennsylvania. I also have a history of the United States Trustee program, although it postdates

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all of these gentlemen. I was at the Department of Justice and recruited to go to Chicago to take on the United States Trustee pilot district there in 1983. I also was involved in writing the US trustee report of the Attorney General to Congress and

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in drafting the legislation to expand the US trustee program nationally, but that was all after these fine gentlemen got the program started. I'm gonna turn first to Rick Levine, the first executive director of the Executive Office for United States Trustees. Thank you and including my

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own family, you are the only one that ever got the title right, so I, I appreciate it. I was the first director and council of the executive Office for United States Trustees. I had been in the Department of Justice from 1969 and 1970 doing

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criminal related things, and the relevance of that is I became friendly with a person of the department then named Chuck Ruff. Nine years later, I saw an advertisement for the position of Inspector General of the Department of Justice and that Chuck Ruff had by that time

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become the Deputy Attorney General of the United States and was in charge of filling that vacancy. I had been doing bankruptcy work at Hall and Dorr for 9 years before that. So I contacted Chuck and said that looks like a very interesting job, and that would be

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exciting. I miss the government. And he said, well, I'm glad you missed the government because we have another new opportunity that opened, and that's how I became involved with the Executive Office for US Trustees. So I was the director, as I said, and then. I cleverly

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appointed myself as counsel, one of my better appointments, in my own mind, and that's how I came to this position. The only thing that followed with that is that, the attorney general then asked the Chief Justice to put me on the rules committee,

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not by virtue of my brilliance necessarily, but, by virtue of the fact of what my position was, and that happened. So during the period we'll be talking about I was on the rules committee. For federal rules of bankruptcy procedure and also the director and council.

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And next to you is your colleague and I'm Frank Dicello and I was the first US trustee for the Eastern District of Virginia and the District of Columbia. My route to that job, prior to my appointment

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I was with the tax division of the Justice Department and I began to do more and more bankruptcy work. And eventually related to tax and eventually I worked with Ben Savaletti and particularly with Levita Coleman at the Attorney General's advocacy institute

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where they went around and trained US trustees or US attorneys and assistant US attorneys on smaller bankruptcy matters where they could represent the government and when the The US trustee program was enacted and notice went out for these positions. It was natural for me to apply

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and and I did and I was fortunate to get the appointment as the first US trustee in Virginia and DC. Excellent. And Irving? I'm Irving Picard. I was the first US trustee in the Southern District of New York, which ran from the tip of Manhattan

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to the northern stretch of Poughkeepsie. I had come out of the SEC where I did bankruptcy reorganization work for about 4 years and then 3.5 years I was an assistant general counsel and involved in the legislative process that gave us the

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Bankruptcy Reform Act of 1978. And, I knew a lot about what the US trustee program was supposed to be because institutionally it was something that the SEC was against and um. So, when there were openings posted, I applied and,

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I guess they say is, that's the whole story. Excellent. Well, what I'd like to do now is ask Rick to give us a little bit of the background on how we got to having a US trustee program to begin with. All right.

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And there are two backgrounds. There's one published in the congressional reports. The history of this program is not published in the traditional kind of congressional reports because ultimately. The US trustees were instituted by the Bankruptcy Reform Act of 1978 to be effective in 1979.

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And most, although there were initial very thorough reports, the statute in its final form was handled backstage by simultaneous statements on the floor of the House that Senator DeConcini and Congressman Edwards, introduced into the record, so there was never a report, by any conference

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committees. So a lot of the history of this is lost in the memory or is still there in the memories of the people that were there then. There were a couple of things that Congress was worried about. In my own home state of Massachusetts,

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bears the guilt for some of this. The average Chapter 11 case would have 3 co-receivers, 3 co-counsel to the co-receivers, and creditors committee, involving co-counsel to the creditors committee and a secretary to the creditors committee who was also happened to be a lawyer. So

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in any sizable case, you, on the one hand, the good news was the work was being spread evenly among the practitioners. Number 2, however, there was much more work being spread than some people thought was there to be spread. Nevertheless, that was the practice

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where and the receiver was in lieu of a debtor in possession, except in some of these jurisdictions as in my own you had a debtor in possession and a receiver simultaneously and then you had a set of lawyers there well as well. I understand

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this was also the custom in Chicago and New Orleans, so you had this system throughout the country where there were these overlapping, in hindsight peculiar sets of appointments, even if you didn't have these co-receivership things, you certainly had any appointment that was going

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to become involved approved by the bankruptcy judge or made by the bankruptcy judge directly, so that was one problem that was perceived that the judges in trying to learn about the case. We're conducting ex parte conversations. There was no criticism in the legislation that there was

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anything unethical about this. It was, it was inevitable if a chapter 11 was filed. The judge, somebody, and in those days there was no US trustee, so it was only the judge who had to be sure was the insurance being paid if there were vehicles were

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there uh you know registrations, if it was a business, was it making money? Well, the only way to impart that information was the lawyer for the debtor would go in and chat with the judge and tell him maybe or her, but there weren't many of the

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latter and explain what was happening in the case. And although in hindsight we would regard that as wildly inappropriate now ex parte communications in those days it was the only way to do it. If you had a large creditor, you would certainly invite them into

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the judge's office too, but by definition you weren't getting everyone in that office. So there were those discussions which the very fact that the judges were charged with the administration of cases. You necessarily had some parties but not all talking to the judges and necessarily fully

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half of what was being discussed was more was probably not admissible if you were doing a contested trial because the judge would ask frankly what is the future of this case, what's happening, you know, depending on who the judge was. Some judges had a very

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high interest in gossip, some were much more businesslike and again this was. As these judges wore a hat which the legislation had assigned to them, so anyone looking at these tapes 40 years from now should not think that there was this rampant impropriety. It was the

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system because Congress said. As it had never said otherwise, you judges decide cases and also handle administration. Well, there were, however, a number of scandals over the years in the bankruptcy courts arising directly out of the administrative role of judges. In fact, as early as I

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think the 1940s in the Donovan report, the strong recommendation was to take the judges out of administration. And create a bankruptcy administration to avoid the appearance if nothing else. Yes, and it took a while. The second issue was that if a judge appointed a functionary,

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that judge was then going to be ruling, whereas when there did appear what we would now call contested proceedings, we didn't have that phrase then, but when there were contested proceedings that there was felt to be in an impropriety or a,

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even subconscious bias that how would the judge wouldn't the judge be more likely to rule in favor of somebody that that judge had appointed than otherwise, I, and even more dramatic fees, if the judge might rule or not rule on the merits, there

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was certainly more likely it was felt to rule in favor of their fees. I personally always thought that that was an exaggerated worry because as my understanding is US district judges appoint attorneys to handle to represent criminal defendants who are insolvent and I've never

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heard to this day of a judge favoring their appointees. I guess the fee issue is more subtle because the fees for handling indigent defendants are so small that that's probably not a major issue, so the idea developed. And we'll talk about a little later in

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the program after we get a chance to hear from my colleagues here about some of the other aspects of where this. Program was placed, but the idea was to draw a bright line and for the first time remove judges from any responsibility at

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all for anything that sounded administrative. If it was administrative appointment of trustees, worrying if cases were solvent or insolvent, appointing creditors committees. Anything at all, and let us not forget chapter 7s and chapter 13s. We talk about chapter 11s because the three of us

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before and after we became US trustees are mostly involved in that, but chapter 7s and chapter 13s. Were very, very major programs in some states like New York, and Irving may remember the statistic. I remember when he became the US trustee the prior year we

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had 10 chapter 13s in all of the Southern District. In that same year there was something like 10,000 or 5000 or something in Birmingham, Alabama, so there were variations around the country, and this all had to be paid attention to who was monitoring the chapter

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13 trustees. What I discovered with great amazement in Birmingham, for example, the US the Chapter 13 trustees operated a bank. You actually went in and there were teller windows and it said pay here and you could have mistaken the office you were in as being

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a bank and you had tellers giving you receipts, when the money was sent in. So all of these things were scandal possibilities. You had a handle, I think, in Birmingham. They actually called it a handle like it was a racetrack. Of something like $20 million

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a year and that's in 1979, so all of this. Congress wanted to have the judges judge. And have the administrative thing on its own. Do the, you know, do the administration and so that's what they had in mind when they enacted

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this law and the US trustees were a compromise between those who wanted a separate agency and those who felt like they didn't want another government agency, so we'll, we'll put a program together and put it somewhere and put it somewhere and yeah, I'll, I could talk

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about that now, but I thought we, a little bit more went from when, you know, Irving's and, Frank's perceptions when they first got involved. And then we'll circle back because the history of how it got to where it is. And how that worked

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out. Spoiler alert didn't work out that great, that it was in the Department of Justice is something we can talk about Very good. And how did the DOJ set the program up initially? And then, well, what they set up, which is what led

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to these guys' appointments, um. Ben Civiletti was then the deputy attorney general, but it was well known at the time that Griffin Bell was planning to retire. So Ben, when we started was the deputy attorney general, he had a brilliant young lawyer, Lovita Coleman Junior,

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who was really a super intelligent person, so she. And she was his senior assistant. So as when he was deputy PS when he became attorney general, which he did shortly after all this, she became his senior assistant there, but there were two other

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people, I forgot their names. One was a person who was an expert at what we call GSA type services, and another fellow was stolen by the Attorney general from the executive Office of US Attorneys. The three of them set up the program before

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I was a gleam in anybody's eye, and they took guesses at the they took relatively OK guesses, but they had limited basis to work with because none of them knew what a bankruptcy had been. You know, Ben came to this job and he

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as attorney general designate he was hardly going to spend his time in this minutiae, but for example, the difference between a 7 or a 13 was not anything that they particularly knew. How much staff would a US Trustee's Office need? How much. How many people

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should you have? How many offices do you need more office to one region which covered in some cases 3 or 4 states, or in the West, Colorado and Kansas, is one office enough for there? Well, maybe 2. And the budget was critical because whatever guests

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they had to put in, as you know, the federal budget's locked in to the extent anything they do on budget these days can be called being locked, but the process is about a year and a half forward, not the votes, but the process. So once you

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submit your budget, anything above that is something special, something that you have to get exceptions for. So they took a guess on that how much staff, how much money. And what was the timing like here Rick? I think it was the last starting about 6 months

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before the program became effective we had a budget. Based on a guess, and that budget was gonna have to last, the program became effective October 1, and that was a fiscal year beginning October 1, so it was gonna have to last for a year after that

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when they really didn't know how many people they were going to need. They did. The good news is those people were very smart and they did start the interview process. One could comment, so anyone looking at this 40 years. Maybe won't remember me one could

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comment on the wisdom of picking US trustees before picking the director of the program who was supposed to supervise these US trustees and might have had an opinion but nevertheless they started the the interview program and then I was hired. And then I did have a

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chance with one exception where the president had his own views, but for the other 9 US trustees, I actually was given the chance to express contrary views, but I didn't, and these gentlemen as you see are here, so that's, so that's how it

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was set up, the, as you'll hear later, the Well, that, that's, that's it on that, and I don't know how Irving and Frank heard of the program and what attracted them to it and if they even knew all of this. I tried to keep a

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a happy front because I thought that would help morale. Well, before we get into the. Details of the early days in terms of how you were perceived and how you were received I'd like you to talk a little bit about how you got training, how you

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got training for your people, how did any of that work, Frank, can you. Irving, I guess maybe I, I, I'll start by saying You said how you got training for your people, with difficulty with with difficulty because you didn't have people, I, I

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was sworn in. And there was a debate going on as to whether the office would be at this point in Northern Virginia or DC or in Richmond, Virginia, and. The debate had been won. It was won very quickly, and it would be placed in Alexandria, Virginia,

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which is close to Washington DC and 90 miles north of Richmond and then about 150 miles from Norfolk and Newport News where there were courts. And so they had no office space and they gave me an empty courtroom in what is the pension building. And

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there was no furniture in it. There was a phone on the floor, and I, two weeks before the program began, I hired a secretary in there weren't Starbucks that I can recall, but interviewing her in a, and that was the only authorized position.

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So she, she walked into the courtroom the same day I did. The, the pension building had been the, the. Superior Court for the District of Columbia and they'd gotten a new building so you had all these old courtrooms and they ripped off most of the

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benches and the chairs and everything, so they were just shells of courtrooms, beautiful shells of courtrooms with a big atrium in the middle. And I think I was number 32. I can't remember, and I opened the doors and there was a phone on the floor and

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a few minutes later the secretary came in and said, Where do I sit? And I said, Same place I'm sitting and it was the floor. So we built this program from the bottom up, but, but that, that moved rapidly and, and we got space. But, but

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right at the beginning there was, there, you know, it, it took a while. Did you actually have staff on, on the first of October or no. And I mean I had the one secretary and you had a caseload, however, you had a caseload and you

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had a caseload and. And, I should say we had meetings. I, I tried to remember this, we had meetings before, a couple of orientation meetings before with, with Rick and, and others. But None of us had ever functioned in this role before, so that it

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was, it was a different experience. You went out and it was not at all clear as the discussion, I think, will evolve what our powers exactly were. We knew some of them, but we didn't know all of them and, and so you were doing

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a job and you knew or you thought you knew what your powers were and the judges may have agreed or disagreed. I mean, you didn't know. I came at it somewhat the same way, but, I started with the viewpoint that I felt a

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little bit like Mr. Justice Douglas and Abe Fortas probably did in 1938 when the Chandler Act was passed and then they got to implement it as part of their role at the SEC in the early years, and it must have been great fun,

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getting in on the ground floor and helping develop something so I sort of looked at the program that way, when I got into it. But I think I had some of the same experience as Frank. I did have an assistant appointed

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for the first day, and that to me was very important because the first day happened to be Yom Kippur of 1979 and I wasn't gonna be in the office, so someone had to be there, and in any event, our first office

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was the chambers of a judge who had retired on September 30th. Because he didn't want to learn the new code. As a judge, he wanted to learn it as a private practitioner. And so we used his chambers and my assistant Neil Blackshear

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and I we did the typing we typed the the creditors committee list and we did a lot of the things that that filed in the courthouse every once in a while we were able to use one of the judge's secretaries and after

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about. Two months or so we hired a. An assistant, a legal assistant type, and then by it, it took, it took us about I would say 6-7 months and we had our allotment of 8 or 9 employees. But we then after about 3

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months or so we were able to move across the street to the federal building and we took over Department of Justice space that had been used by the IUBM task force because the case had just settled and they were abandoning the place and I guess they

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still had rent to pay to GSA so they were delighted to have us come in and use the space and so we had about 5 or 6 offices for the 8 of us. And that's how we got off the ground. So training was seat of

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your pants. Would that be safe to say? Well, what I like in, in New York, of course, over the years it there was always a reputation. There was always creditors committee, participation in cases which was not necessarily the case in other parts of the

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country, so. There was a little bit of a history of of what to do, but of course this was a new coat, so this was in a sense you're right, it was seat of the pants, but as I said, we got in on

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the ground floor, we had a chance to make it up as we went along. Sometimes we'd fall on our face and we'd have to pick ourselves up. It wasn't unusual in my office if we made a mistake, we, we filed something with

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the court and said we made a mistake and we tried to write it. That happened to me specifically very early on in appointing a creditors committee, and I went to court the next day and asked the judge to disband the committee so that I could then

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appoint two separate committees for the two companies which were really very different companies and should not have had a common committee, so I think we, we learned. By, by trying things and if they worked, we continued them. If they didn't work, well, we went on

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and tried something else. And as Frank did say, we had a number of meetings, both in August and early September of '79 in Washington where we talked about some of the things that we were going to do and how we would operate and then

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during the year we, we also had meetings with the group of 10 of us would get together plus our assistants would get together and talk about issues and. See what one person may be doing in his district that someone else could do or often what

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I might be doing, everybody said well we can't do that where we are and something that they may be doing. I wouldn't have tried in New York because it just wouldn't have worked, particularly in the first year. And I credit Rick particularly. We had meetings,

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weekend meetings, 2 and 3 day meetings, and Rick was there with a gong so that he would try to limit the conversations, literally a gong, a gong, literally a gong, but they were wonderful meetings in which you, you got different perspectives on what you

00:26:25.520 - 00:26:40.170

were doing. They were just absolutely critical just discussions as Irving instead of of how you do certain things or can you do certain things. I mean there was a discussion at what point do we really have authority to convert a case, to move to

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convert a case. It wasn't absolutely clear in the statute, so we got down to the very basics and I say, what do you mean we don't have authority to do that? We don't have any power if we can't got the authority to do that, and,

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and then there were the 4 o'clock phone calls, to in the afternoons to Irving to. Arnie Cavatos to Dolores to the different US trustees around the country saying what do you do and how do you do it so we operate it but I would add

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one other part and that that's the focus on us. Probably the biggest step in the 1st 90 days on the job was going out and talking to the panel trustees and the lawyers who didn't have the training we had, who knew they had a new law

00:27:22.599 - 00:27:37.170

and had never dealt with anybody like us, and they wanted to take a measure of us, and they wanted to know the real nitty gritty how am I affected by this? Am I going to be on your panel? What do I have to do? I spent

00:27:37.170 - 00:27:52.369

years figuring out. How to handle this judge now who are you and what are you gonna do to me? and that was a that was a big piece of just going out and selling the program at that at that level and and also asserting the authority

00:27:52.369 - 00:28:07.660

that you had, uh, and coming away and I can't can't underestimate how much time that took. One thing I'd like to add to what Frank said was when I was designated and I found out when an FBI agent came to get me off the

00:28:07.660 - 00:28:27.739

beach on Cape Cod one August day. I After I called Washington to confirm that I had to get down there for a meeting, I made appointments with both the chief district judge in the Southern District of New York, the chairman of the district

00:28:27.739 - 00:28:43.410

court's bankruptcy committee, Judge Weinfeld, and, each of the bankruptcy judges, including the two who were going to retire, and I made appointments to visit with them and basically said, look, I'm the new kid on the block, but I'm not coming in to overturn everything.

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And give me the list of the people who you use as trustees because that was going to be initially the group that we could look to and we would then expand it we bring new people in as we but this way on day one we

00:28:58.869 - 00:29:13.550

had a group of people and also we could test them to do the things that we thought they should be doing and if I, I had one elderly gentleman who when we called him in and said he wasn't doing this, this and this, he says,

00:29:13.599 - 00:29:27.270

well, I never did it before and I'm not gonna do it again. Well, of course we didn't assign him any more cases, um, and we told the judge, who was his friend, that this was the thing and the judge said, you know what, if, if that's

00:29:27.270 - 00:29:41.959

how you're going to run the program, that's fine, but thanks for telling me. So we tried to communicate with people. I met, I, in addition to the judges, I met with law firms. I had people like Larry King and some of the other people in

00:29:41.959 - 00:29:59.930

New York, who arranged for me to meet people and, and, and helped support the program and, , I think all of, all of that worked together to, get the judge if you get the judge behind you I think you. You've really made

00:29:59.930 - 00:30:18.030

progress because you were taking over as Rick mentioned earlier, part of what they had been doing and I can't imagine that they were all very happy about that. Meanwhile back at the ranch, I'm glad that, they mentioned the. The training that we

00:30:18.030 - 00:30:36.599

had provided, the training was intense. I'm old school and what's more important is everyone went along with it because it was a new program and people were very enthusiastic. These two came from a government background, one the executive branch, one the non-executive branch, whatever you

00:30:36.599 - 00:30:53.170

call the SEC, but, I don't remember my administrative law. the, we had people who had never worked in government in their lives. And the enthusiasm was such we had one weekend we rented a an old house 200 years old from the Smithsonian in

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Elkins, Maryland I remember and everyone, it was two nights and everyone would wake up and by something like 8 or 9 in the morning we would start the sessions. The gong would be there at the end of each piece and then it went to 9 p.m.

00:31:06.250 - 00:31:25.109

and we talked and we just kept going and people were really into it. And The interchange helped and it helped build the program because for example I would be trying to explain my bureaucratic method why you couldn't get furniture as quickly as you wanted. Dolores Copel,

00:31:25.420 - 00:31:39.260

who is in Colorado and Kansas who had no government experience, somehow got the number, the phone number of the director of the Bureau of Prisons and called up Norm Carlson, the director, and said, Where's my desk? And he was he's a great guy he was

00:31:39.260 - 00:31:53.930

a great guy and he thought it was he thought it was charming and got her to the desk, but no one was hung up with bureaucracy number one because I was taking that on my head. And these guys are very savvy. All 10 of them

00:31:53.930 - 00:32:10.569

were savvy in different ways and were able to meander through this morass. What they didn't know was, well, they knew some of this. And if I can revert to how it got into justice and then what the Justice Department did to get this thing going.

00:32:11.589 - 00:32:30.800

The written record has a muddled section of why the administrative office wasn't the house. If you ask anybody that was there at the time, it is because there was a unanimous view that the administrative office was not. Capable of handling a complicated program of any kind,

00:32:31.219 - 00:32:49.660

let alone the US Trustee program, so it started from the premise of anything but the administrative office. That could have been an embarrassment because I had to work with the administrative office after I took office because they were in charge of statistics. Number 2, the

00:32:49.660 - 00:33:06.410

Department of Commerce, which was felt to be not conflicted, the fear was the Department of Justice representing agencies might be a litigant. In front of courts and might be on a different side from a US trustee. A US trustee might want a case dismissed, and the

00:33:06.410 - 00:33:20.650

government in its capacity as a tax creditor, for example, may feel otherwise. So that was put on the table. But the Department of Commerce, which was regarded as more neutral, said there's no way, whatever this thing is, we don't want it. So they shunted it. By

00:33:20.650 - 00:33:38.069

default It was left with the Department of Justice. Ben Civiletti was not thrilled. He from time to time said if I could do anything to spare Levita Coleman, his assistant, from having to have too much connection with it once I took office. I guess that's a

00:33:38.069 - 00:33:57.469

compliment to me in a sense. But it was not something that, was first and foremost. The good news is, and you know, again we're talking for history. You get in the political system what you can make or something like that. It sounds semi clever.

00:33:58.310 - 00:34:18.819

We were fortunate to have had a couple of rabbis who thought of nothing but the program. Peter Rodino was chair of the Judiciary Committee. He was not an insignificant figure. Don Edwards, Caldwell Butler, and Dennis De Concini, again, 30 years from now, if

00:34:18.819 - 00:34:36.699

anyone's watching this, those will be names they may not have heard of except for Rodino because of his prosecution, his, his handling of the Watergate hearings on the House side, but, they were invaluable and. Most important. Not on a substantive issue, but on the

00:34:36.699 - 00:34:55.979

budget was Joe Early. Joe Early was a congressman from Worcester, Massachusetts, and Joe Early was the chair of the Appropriations Subcommittee for Justice, the State Department, and one other that I now forget, and he was in the position to always protect us and what happened is

00:34:55.979 - 00:35:09.129

because of our relations with him, we got the extra money as soon as I was appointed. So all the errors that had been made we were able to put in a supplemental amendment and bring the budget up to what it should have been and in fairness

00:35:09.129 - 00:35:28.159

I don't mean to denigrate the Department of Justice. Ben may not have wanted it there, but once it was there, he signed off supplemental budgets had to be signed by the president. We developed an extraordinarily close relationship with the OMB. They whisked it

00:35:28.159 - 00:35:41.399

right along and anything we needed, even if it was from the president, OMB being the Office of the Office of Management and Budget for those of a certain age, the Bureau of the Budget, but more lately Office of Management and Budget, and they're the gatekeepers of

00:35:41.399 - 00:36:02.250

anything financial or administrative in the government, and, so we got everything. So we were tolerated by the department. We were supported when asked. It just wasn't anything. Major in their in their consciousness but that's that's what happened and with that whenever we had a

00:36:02.250 - 00:36:17.209

meeting either the attorney general Ben Civiletti or the deputy attorney general Chuck Ruff would be there to say hello and meet with the people, to show support at the department. It was just we had I had to do a lot

00:36:17.209 - 00:36:32.899

more arm wrestling within it and I should add one thing since I already said there was criticism of the AO. There was awkwardness by the director of the AO who I think felt as Irving had made a comment before about another view where the SEC lost

00:36:32.899 - 00:36:50.729

out, that director wasn't happy, but he was very cooperative and he had a young assistant, Frank Zabe, who later became the head of the bankruptcy department and between them and especially Frank, who I talked to all the time, were amazingly gracious. And that helped too,

00:36:50.739 - 00:37:04.580

because there was no schism and it was quite clear to me. That no one was whispering mischief in the ears of the judges and that's what I wanna talk about next, the judge's reaction to this and you've heard some of it from Irving and Frank.

00:37:06.090 - 00:37:20.689

They on their own either liked it or didn't like it. I'm, I went around the country. My very first trip was visiting. As we called it humorously, Clevin Clee and Levin, as soon as I was appointed, I flew across the continent to meet them and ask

00:37:20.689 - 00:37:37.989

them their opinions on what their statute was because I cared and I knew that they were very highly regarded. But then I went around the country and met judges, and the reactions were amazing. The judges in Alabama said. This program will fail because we had appointed

00:37:37.989 - 00:37:52.149

a blind US trustee and since the job of a US trustee was of a US trustee was to look someone in the eye and gauge if they're honest. A blind man couldn't do that, so that was a particularly stupid appointment by, excuse me, by us. That

00:37:52.149 - 00:38:07.060

was his attitude. Judge 2 in Texas said, said, I, I went to visit the judges where I thought it would be helpful to say that part of our function was. No more administration and he says, you know, I have a back door to my office that

00:38:07.060 - 00:38:23.050

everyone in Fort Worth knows anybody on any case at any time can walk in and ask me for advice. And he was a gentle man and a nice man, and he says that mean I can't do that anymore? I said, I'm afraid so, Judge. He says,

00:38:23.219 - 00:38:37.989

oh, OK. They were some judges, in one this district I won't mention by name, but it was a district where all the judges were at each other's throats all the time, really with nasty battles, and they decided that my job was to come in

00:38:37.989 - 00:38:53.979

weekly and mediate their personal disputes. You will hear, I think, I think Irving already mentioned at least one judge thinking of of the US trustee is a law clerk comment on everything. And my job was in part to disabuse the judges of this. I could

00:38:53.979 - 00:39:08.229

do that from a perch in Washington, but how it was on the ground is another story. And to support the US trustees and try to set policy, hopefully some of which they listened to and some of which they didn't, but that was the beginning. The

00:39:08.229 - 00:39:25.260

beginning was selling this program and making sure the judges were not gonna resist. Some judges didn't like us. We had a very unfavorable ruling in a creditor committee appointment like our first month out. Where it was clear the judge really, really had a personal animus for

00:39:25.260 - 00:39:42.699

the US trustee. Well, that happens, but basically I, I did meet with judges. I'm not sure even now if I. Would have met and I'm interested to hear Frank and Irving's views on this. Sometimes they met with judges regularly, like judges' meetings like part of

00:39:42.699 - 00:39:58.310

the organization of the justice of the judiciary system. If that came to me today, I'm not sure how I feel about that. Why are we as litigants should be at those meetings, but some other party who somebody who represents banks and is in court as

00:39:58.310 - 00:40:14.860

much, should that person be at those meetings? I don't know. I really, really wanted an independence and on one occasion I flew. To a particular judge and made an appointment with him as a judge I knew. And said, I understand you're calling in the US trustee

00:40:14.860 - 00:40:29.750

and you're discussing things that go closely to cases, and I'm here to say. That's really against our rules and I'm gonna have to tell this US trustee to stop it and I just wanted to tell you so it won't be embarrassing in case it doesn't stop

00:40:30.169 - 00:40:46.370

he was resentful he calmed down later but that was that line to me was very, very, very strong and I, I didn't have an interest in. Now, one other story and then I'm gonna let these guys have a chance. I did get calls from

00:40:46.370 - 00:41:01.669

judges. I got a call from the Kansas judges demanding that we move the Kansas office. And I figured I was gonna stand my ground, because we put that off, my predecessor committee in Topeka, and I knew Topeka was the capital of Kansas and wherever the

00:41:01.669 - 00:41:18.459

heck Wichita was that made no sense. Well, on that one, I was wrong. I, I mean I got an earful from them and it was right. Topeka isn't Kansas, isn't Wichita. On the other hand, Frank's crowd got me on the phone. The judges from Virginia. And

00:41:18.709 - 00:41:31.959

mysteriously a very nice man, Roger Whalen, who was then the DC judge, I'm not sure why he was in the conversation except it was the same region, and they were talking to me where the offices in Virginia should be, so I got an earful there. Those

00:41:31.959 - 00:41:44.199

kind of meetings were fine. We weren't talking about case stuff. We were talking about where our officers should be placed. And I was determined we would never have an office with only one person and everyone said that was bad management, so you had to have the

00:41:44.199 - 00:41:57.419

personnel to have 2 or 3 people before you said with a snap of the fingers, I'm gonna have an office in wherever it was. So there was a lot of this, but we talked to the US trustees every day. They were great. They put up with

00:41:57.879 - 00:42:11.050

my rulings, my edicts, my interference, most of the time, sometimes they didn't. So anyway, I don't know Frank, why don't you tell us a little bit about your relationship with your judges and how you got off on the right or wrong foot with, them,

00:42:11.129 - 00:42:27.969

both Virginia and DC? Well, Roger Whalen was the judge and longtime judge in DC. He had a small caseload. He'd had, you'd get some significant cases because it was Washington, but a very small Chapter 7. Chapter 13 practice at the time he was very

00:42:27.969 - 00:42:45.889

supportive of it intellectually very supportive of it. Martin Bostetter was the bankruptcy judge in Alexandria. He loved the whole idea of getting rid of the administrative part of the case. Nobody could have been happier. He was tremendously supportive. He called me in the minute, you

00:42:45.889 - 00:42:58.060

know, I was appointed and said, I look forward to working with you. I remember he had his panel. He says, Do you want my recommendations or not? And that's exactly where he went, he said, you know, they've worked for me for years. Do you want,

00:42:58.179 - 00:43:20.479

want my evaluations or not? And I said, I'll absolutely take your evaluations on your panel. Blackwell Shelley was in Richmond. And he had some reservations about the program but was generally supportive, but his reservations you felt them. Albani was in,

00:43:20.649 - 00:43:39.219

was in Norfolk. You know he never came out and said I don't like the program but a lot of vibes, so it was that was a more difficult situation for us. Bassiter was the chief judge in the Eastern District, and the judges would

00:43:39.219 - 00:43:55.239

meet quarterly, and he invited me to the last hour or two of those quarterly meetings. That was not an agreed upon. I think Judge Bonnie let me know right off the bat he thought that was a bad idea. But I went and we talked general,

00:43:55.449 - 00:44:11.169

you know, general things of administration. They'd ask me how I was doing things. They were just, that was basically it. Or was I getting support? Was I having trouble? What was happening. I think a telling story of that they, they, they looked at

00:44:11.169 - 00:44:31.310

me but they really didn't know. What this animal was and how it was going to function and Judge Bonnie on several occasions expressed some reservations. I don't think this is gonna work, etc. etc. I'm sorry, Judge Shelley. And 1 about 6

00:44:31.310 - 00:44:49.919

months into the program, Judge Shelley invited me to Richmond for lunch. And he said, you know, I have. Expressed to you my reservations. I have probably made your life somewhat difficult, he said. I need you to understand something. He said if a trustee goes away with

00:44:49.919 - 00:45:05.250

the money, if a case craters in Richmond, where I've lived my whole life. The Richmond News leader is not going to say US Trustee screws up his job. It's going to be Shelley can't control his bankruptcy court. He, he's done a bad job. And he said,

00:45:05.489 - 00:45:15.889

so. What I've had to deal with is and, and I like you, and I think you've done a good job, but he says I worry about the next guy, and he says, I, this is a new program, and I didn't know what

00:45:15.889 - 00:45:30.629

you were gonna do except I was losing a lot of control to insure my own good name. And I thought my gosh that's a an interesting and a very candid comment and and so we would meet after that. He was always a strong supporter and

00:45:30.810 - 00:45:44.989

and it came in but it you know I was so very enthusiastic and I hadn't seen it from the other perspective and, and I think that's where a lot of these judges were in some sense concerned because the public didn't know who we were. Well,

00:45:45.050 - 00:46:02.320

you had 4 very different judges. You only had 4 judges to contend with. Irving, you had a bit more in New York, and I think you had stronger personality. We had, we had, it was an interesting group because we had 5 judges sitting. Well, when the

00:46:02.320 - 00:46:19.510

program started, we had 4 sitting in Manhattan. We had 1 in White Plains, and we had none in Poughkeepsie. For about 4 or 5 months, so the White Plains judge would go up to Poughkeepsie, and he needed some extra support from us because of that,

00:46:19.949 - 00:46:40.080

but I found I just like to just shift the chronology a little bit. The meetings that we had. With the judges on on a pretty regular basis were very general meetings. The issue was what can we do together to make the system

00:46:40.080 - 00:47:00.350

work. How can we all do a better job? What local rules do we need, and then when they. Three months in when they appointed a rules committee, they said, well, you're gonna be on the rules committee, which was fine, and that

00:47:00.350 - 00:47:18.389

was those were the kinds of meetings we had nothing, we didn't talk about a case or who, who made a mistake or who should, you should have done it different that that never came up, um, so I found that the judges were very supportive.

00:47:18.879 - 00:47:34.560

I think part of it may have been because I went around early to talk to them, but I think too that they just saw we weren't coming in to overturn everything that had been done for years, that maybe we had some new ideas, but,

00:47:34.639 - 00:47:47.929

and we were trying them and as I said earlier if they didn't work we dropped it and tried something else, if we made a mistake. We said we made a mistake. We took the judge off the hook, if you will, if he did something

00:47:47.929 - 00:48:06.560

because we said X, and it turned out we should have said Y. But I think that a lot of what went on in the early period is as Frank said was people wondered what we were gonna do now we had

00:48:06.560 - 00:48:31.129

an anomaly. The court in Poughkeepsie had 2 or 3 counties from the Northern District of New York so that people who were close to Poughkeepsie. Didn't have to run up to Albany, so the judge wore some of his cases were US trustee cases and some

00:48:31.129 - 00:48:51.870

weren't. And when the new judge got appointed there, I. You got into getting a lot of calls and saying if you had this issue in the Southern District what would you do? And I said, Judge, You're administering those cases. That's not part of my

00:48:51.870 - 00:49:09.669

bailiwick, he said, yeah, but you got to give me a hand here. So we had a little bit of that, and, you know, sometimes I might say, well, take a look at the XYZ case and then he could go in and look at

00:49:09.669 - 00:49:29.639

the file, but it, that was the one judge who probably was. Need a lot more attention even if it was a Southern District case. He needed a lot more attention than the other judges, and I, I don't, in saying attention,

00:49:29.719 - 00:49:46.469

I didn't mean that the other judges ignored us and just may he was. He just called a lot and wanted help or you gotta send somebody up for this hearing I have on Friday and things like that and you know sometimes it might have

00:49:46.469 - 00:50:02.919

been an important issue and we did send somebody but sometimes it was a substantive issue and really didn't relate to the work of our office that was I think one big thing that we had to. Make the judges understand that while we might comment on

00:50:02.919 - 00:50:19.780

disclosure statements or we might comment on fees because those were areas we should and I hate to say it but the SEC I think really fell down on the job in some of those areas in in some cases so we were we

00:50:19.830 - 00:50:36.719

we picked up the slack there but we we worked very hard and made the judges understand that we weren't gonna come in. And say oh if that loan is gonna dip loan is gonna be at 3% that's not a good rate we would come in

00:50:36.719 - 00:50:53.810

and ask questions about was it shopped or if we saw a provision that was gonna tie up the hands of a Chapter 7 trustee if the case converted we might comment on that but in terms of the specifics of a loan. That wasn't really our

00:50:53.810 - 00:51:11.179

bailiwick, and that took a little time and effort to get judges to understand. Could you remind me of something? I, I'm sorry, I didn't mean to interrupt, something I'm intrigued with that your comment goes to. One of my concerns had been whether if there was

00:51:11.179 - 00:51:31.600

if there was an active creditors committee. Why the US trustee should get involved at all. In any substantive issues other than fees, which happened to be in the statute. So the example you just gave might have been a, a sale order or some kind of

00:51:31.600 - 00:51:47.080

motion, and the question, that you asked is, well, you, you're not shopping whether the rate was right, you, you weren't commenting on whether the rate was right, you were commenting on whether it was shopped. Now if it was a chapter 11 case at the beginning

00:51:47.080 - 00:52:02.699

of the program at least and I know what I said but that doesn't mean it happened in the districts, why was the US trustee. Even being heard on the subject because it's a matter of process and procedure and I, I think the role of was that

00:52:02.699 - 00:52:21.139

we wanted to make sure that the process and procedure was carrying out carried out properly so for example, if you're having a sale. Did you give notice? I think that would be a perfectly appropriate question for you as trustee to ask. What kind of notice

00:52:21.139 - 00:52:38.310

I think Rick's question really goes to why if there's an active committee that should be their concern. Why would that be, but sometimes they didn't focus on those kinds of things. And if not, what was the US trustee's interest? But why, why would you want to

00:52:38.310 - 00:52:59.580

permit a sale? To go through Where there's no, there was no auction, for example, if the creditors are happy. Well But maybe some creditors were and some creditors weren't, you know, just to give you an example, later in life, I represented clients who

00:52:59.580 - 00:53:19.439

were on creditors committees and sometimes they were the minority and they kept getting outvoted 4 to 3, well. That didn't necessarily mean that they were very happy with what the committee did, so I, I just, now that may have been substance, so but the point

00:53:19.439 - 00:53:40.540

is that sometimes, you look at these cases and certainly in the early days in New York, you had industries and the industries were organized, the textile industry for example. And there were 2 law firms generally that represented the creditors committee. One did it today

00:53:40.540 - 00:54:01.489

and the other did it tomorrow, and you know they had. They were, there were things they may not wanna say because they didn't want to lose the industry, so I, you know, as I said, we wouldn't go in and say that's the wrong price,

00:54:01.580 - 00:54:23.189

we would just wanna make sure was it publicized the bankruptcy rules provide for notice for sale. And there's there's I I would suggest to you very strongly that the even back in those days, private sales weren't looked that favorably and the idea

00:54:23.189 - 00:54:40.969

was to open it up. Now if there wasn't proper notice someone could appeal that. And then you know there'd never be a sale because the patient would die on the vine so you were creating transparency so we were trying to create something and um

00:54:40.969 - 00:54:58.649

just trying to make sure that you know we we were the we were the watchdogs if you will, and, trying to make sure that process and procedure was being fairly and properly carried out if, if there were if they gave 21 days notice. You

00:54:58.649 - 00:55:15.830

wouldn't hear from us on notice if if there'd been an ad in the newspaper. We didn't care about the sale, but it's those, those cases where there weren't. And even though New York had a history of having active creditors committees, we had a lot of small

00:55:15.830 - 00:55:33.250

cases where there weren't any creditors committee. You, we would call, we would cajole, we couldn't get people interested in serving. Now case was small. Maybe they didn't want to lose any more money, whatever their reasons were, and in some of those cases we had to be

00:55:33.250 - 00:55:52.909

a bit more vigilant. Let me get back to the judges for just one final note, which is you two had a mixed bag admittedly but by and large fairly supportive judges. Were there any of your colleagues in the pilot program who had exactly hostile courts

00:55:52.909 - 00:56:07.250

that they were facing. Yeah, I yes, one of them, I don't know that you have to tell me which one, but I mean I think it would be instructive. I wish I brought a necrology with me so we could comment on who's still alive

00:56:07.250 - 00:56:25.639

and not involved. We did have, we had one judge that I referred to earlier who wrote regularly antagonistic opinions. It was a particular US trustee who was very up front of loud, a in your face personality and that didn't sit well

00:56:26.419 - 00:56:41.770

we had the judges in Alabama who were outright didn't want a blind US trustee. They had done things their own way. In fact, the district judge who had said that to me. boasted about the fact that he had been a bankruptcy judge in the 40s

00:56:41.770 - 00:56:55.939

or 50s and he took credit for invent or maybe the 30s even, but he took credit for inventing chapter 13's. Because they just decided they just in in Birmingham were not going to give discharges if you didn't pay your debts in full, notwithstanding what any statute

00:56:55.939 - 00:57:09.699

said. And therefore in their courts it was as if there was Chapter 13, and whether this is true or not, he believed it to be true. Therefore, Chapter 13 was passed to catch up with him. So they had a very independent attitude. Just to, could you

00:57:09.699 - 00:57:24.760

fast forward one moment, and of course the Northern District of Alabama is not in the national South Carolina. Is it North Carolina or North Carolina, yeah, yeah, that was a problem, and we did have, you know, then we had the, then we had,

00:57:25.139 - 00:57:45.379

uh, one in the Midwest where there was a 4-judge district, and they really were impatient with the US trustees program and it got to the stage. Where I decided to make a stand. And I filed a motion to enjoin the judges from receiving, looking at having

00:57:45.379 - 00:57:58.580

access to any operating reports of debtors that were filed with the US Trustee, and at my request this they did to be nice, of course the word nice is all in quotes, uh, they arranged for 4 hearings 45 minutes apart. So here, because there were 4

00:57:58.580 - 00:58:12.780

separate cases, so Judge A, the hearing was a 10, the next one was a 10:45, you know, I'm making the same argument. My US trustee in that district was really reluctantly trailing along behind me because that person had to live with these judges after I went

00:58:12.780 - 00:58:30.050

back to Washington. And of course we got 4 decisions basically telling me to pound sand. Uh, but at least they were cordial, so I, I, you know, and you've heard from Frank as to his, his relationships and Irving's were, were quite good. Uh, then there were

00:58:30.050 - 00:58:46.750

others that, uh, so I would say all in all the judges, given that the nature of the legislative history was to take away from them even though our mission was to help them. It could be perceived as an insult to some of them who were told

00:58:46.750 - 00:59:06.889

stop handling administrative matters for all these reasons, and I would say 95% of them were really on board. Jean, and remember going back to the legislation, uh, if you, the, the commission issued a report, the commission, the, the National Bank National Bankruptcy Commission issued a report

00:59:07.310 - 00:59:29.129

in 1972 or 1973 with a recommendation. Well, the judges didn't like that recommendation. So they, Proffered their own bill and so for a number of years in the mid 70s you had Congress looking at two bills. And so you, you, you know, at, at the end

00:59:29.129 - 00:59:44.919

of the day there was some compromises made and they came up with one. So you, if you look at the history you can also, I think, understand a little bit where the judges were coming from and not. Not being that happy about certain things going on

00:59:44.919 - 01:00:05.739

in the program, well, and just as a historical aside, the district judges, if you will recall, appointed the railroad um trustees, and that was a very important perk to them. They appointed the bankruptcy judges or um. Refereees as they were known in those days, that was

01:00:05.739 - 01:00:25.620

a very important appointment to them was someplace they could put occasionally a brother-in-law down on his luck as well as obviously meritorious appointments as well so I think it was a very difficult thing for the courts to think of there being a Department of Justice interloper

01:00:25.620 - 01:00:43.810

in their system. But on the other hand it did give them the ability. To act as real judges, uh, I clerked and that mattered to the bankruptcy judges, but not so much to the district judges. That is, that is very true. Just again to show you

01:00:43.810 - 01:00:59.219

how things have changed, I clerked for a federal court when I got out of law school. It was in Connecticut. In that building there were 2 US district judges. One week a month a US Court of Appeals judge and a bankruptcy referee that was the entire

01:00:59.219 - 01:01:18.179

judicial population of that courthouse, a very young kid, uh, John Newman, who was the US attorney and the law clerks for the judges, we were it. There was a private judge's dining room. There was a private judge's elevator. There were private judges parking spaces. The bankruptcy

01:01:18.179 - 01:01:37.120

referee was banned from all of those, which would indicate a one attitude. I think one of the things this did do is say to bankruptcy referees, and they became judges. We're going to entrust you with the stuff we do now. Did Chief Justice Burger believe that?

01:01:37.459 - 01:01:52.669

We certainly know the Article 3 judges opposed a lot of that, but a lot, you know, now the opinions were being published regularly, so it did have that benefit, and I was pleasantly I thought I was going to have more arm wrestling to do. Uh, that

01:01:52.669 - 01:02:09.030

I had. Now I'd like to uh switch over to a fun topic. I know we have talked about the ups and downs of dealing with uh the various courts around the country, but I know from personal experience that there's a bit of history between the executive

01:02:09.030 - 01:02:26.709

Office for US Trustees and the US trustees themselves. Rick, would you care to comment? No, but I will, uh, the. I was told when I took this job from different Senate staffers, and I don't mean Rich and Ken that I referred to earlier. But there were

01:02:26.709 - 01:02:45.510

other folks involved as well who said it was always the intention that the executive office functions something like the executive Office of US Attorneys where that office has no control over what the US attorneys do substantively. There may be arguments about the criminal division or the

01:02:45.510 - 01:03:03.989

civil division or the tax division and justice, but the executive office doesn't have, uh, that kind of control. Um, the problem was, uh, I'm not modest or shy, and #2, I know how to read a statute. And I didn't see, and I to this day don't

01:03:03.989 - 01:03:23.590

see such a Such a provision in the statute, and I certainly didn't see it then. I thought the system was new. We were trying to address. A nationwide issue. And as far as I could discern, the only way you address a nationwide issue is with 100%

01:03:23.590 - 01:03:44.449

consistency on all things if possible. Whether I admitted the if possible at the time when I started is another story, and I think these, these, uh, folks had to themselves tell me from time to time. Uh, that, uh, 100% that works in Kansas isn't going to

01:03:44.449 - 01:04:01.540

necessarily work in New York or the District of Columbia. But nevertheless, I started with that premise. We did the educational programs that you've heard about, and those were very widely, they were, they were enthusiastically engaged in by all of us. Remember, some of the people that

01:04:01.540 - 01:04:18.179

were US trustees and assistant US trustees had never laid eyes on a bankruptcy or a bankruptcy court before they took this job. The people that were hired were hired because they were really smart, really good, and really adaptable if they happen to have some bankruptcy expertise.

01:04:18.840 - 01:04:36.399

Uh, a lot of bankruptcy expertise as Irving did or, uh, some, uh, you know, some really, uh, refined expertise as Frank did or no expertise as Dolores, uh, didn't, that was fine, uh, we would, we would live with that and train people because we were all

01:04:36.399 - 01:04:51.830

learning together. So from that point of view, necessarily, if you had 25 people in a room or whatever it was, or 30 or your, the subject matter was going to be brought. This is how you sell something. It was new to all of us because the

01:04:51.830 - 01:05:11.729

statute, the, the old statute, uh, hadn't been affected. Remember, we had some learning curve time because the new statute only became effective for cases that were filed on and after October 1, 1979. So actually the day we were sworn in, there was no caseload. The next

01:05:11.729 - 01:05:27.949

day there was a caseload and, and then it began to accumulate, but the first day those cases started off on their own and finished on their own. There wasn't a retroactive application of the statute. Uh, so that was #1. #2, we tried to market to the

01:05:27.949 - 01:05:44.370

judges as a unit. We had meetings where we invited judges to. So they could learn what we were about. Uh, we had one where we invited a judge from each district. Uh, it was hard to tell in some of the cases, the judges the district selected

01:05:44.370 - 01:05:59.149

were clearly people who were about to retire. In other cases, uh, like, uh, I remember particularly Dick Hill in New Jersey, he was very enthusiastic about this, and he would come, uh, to a lot of the meetings, so there was, there was a variation that way.

01:06:00.360 - 01:06:18.879

Um. The reason I took. I assigned myself the job of counsel. was because I wanted the ability to try to control as a law firm partner would control the quality of the legal work that went out because we were being seen by judges and the public

01:06:19.060 - 01:06:35.800

being measured by what we put on a piece of paper and I had had enough experience to know that pleadings could vary in quality. For these two, I didn't have to really worry, but there were others who, uh, you know, if you're new to this sort

01:06:35.800 - 01:06:48.120

of thing, if you're a US trustee but you weren't a litigator, the way you draft a pleading may be different, you know, you don't use exclamation points and you don't use italics, and it's not enough to repeat something 5 times because that doesn't do it, and

01:06:48.120 - 01:07:02.449

it's not enough to say. You know, the US trustee maintains that X. No, you don't maintain your document is what you maintain. I just make the statement. So I was trying to teach from my best abilities good writing as well, but also to make sure the

01:07:02.449 - 01:07:20.580

legal points were handled. So I developed a system which I stole from newspaper reports of what. Then, uh, naval CNO Elmo Zimwald started. He had things called Zgrams where he'd send Z-grams out to the senior navy officers that they all could see his comments about others.

01:07:20.689 - 01:07:34.139

So I developed trusteegrams and all the trustees in their offices had to, if time permitted, submit pleadings to me, and I would comment on them and copy it to all of them with a little thing on the first page. I said, don't take it personally. These

01:07:34.139 - 01:07:53.229

are quibbles, uh, or maybe quibbles, and, uh. In front of me to my face, people seem to find it, uh, useful, whether people groaned and hoped that there would be nothing but good, you know, a really good writing. Uh, as these two was, and I'm not

01:07:53.229 - 01:08:05.360

saying that because they're sitting here, uh, we're on camera, so they have to be polite, but the reality was that, you know, obviously the pros are always gonna be pros, but those who are not pros can't be blamed for being not pros because it wasn't their

01:08:05.360 - 01:08:21.700

training, so that's what this was intended, uh, to develop. Uh, I did spend a lot of time with the judges, as I said earlier, uh, mostly judges where the US trustees asked me to become involved. Just because of distance. I didn't get out to California as

01:08:21.700 - 01:08:37.299

much as in hindsight, I should have. One of the judges there, Bob Warden, and I were on a lot of panels together, so I would see him a lot at PLI programs, and there were always the phones we could use. Uh, other places, for reasons I

01:08:37.299 - 01:08:57.089

said earlier, I had to spend more time than I would have thought appropriate. Uh, but it was a mission to convert people and as I said earlier, the OMB and the congressman early were two of our very important ones because we had budget. Issues along the

01:08:57.089 - 01:09:13.789

way, some of which I shared. With the US trustees at the time, I, I, we were an open office, but I didn't wanna demoralize anyone. We had to do a lot of fighting and we actually, and this is a tribute to the US trustees, we had

01:09:13.789 - 01:09:31.450

to get. We had to be able. Even though it was in front of Congress, there was a way to get an exemption somehow, and I forget the details by having another supplemental budget put in separately by the government and as I said earlier, you'd be surprised

01:09:31.450 - 01:09:48.629

at the things that require the president's personal signature and the attorney general allowed only us and the FBI's appeal to go through. It went to OMB where it was then headed to the president's desk. One of the attachments I had made the US trustees, and it's

01:09:48.629 - 01:10:02.750

the one time I will admit being sadistic. I left the law firm and this was the best job of my life because I didn't have to do time reports anymore, but they did so the US trustees did have to do rough time reports. It wasn't to

01:10:02.750 - 01:10:21.399

the 10th necessarily but by category as I recall it. It may have been by briefs or, uh, you know, motions on fees or whatever it is. I had those, and in making my report to OMB, which I knew was going to the president. Uh, I had

01:10:21.399 - 01:10:36.879

all these statistics about how, how hard these people work. I got a call at 9 o'clock the night before this decision was due from my contact at OMB that the president had questioned. How did I, where I said these people work so hard and all that

01:10:36.879 - 01:10:50.189

stuff, and I, and I put in the hours and he, being a former submarine commander, was asking them, how did I know they worked these hours? Was this just anecdotal or was this just like taken out of the sky to try to impress him? I remember

01:10:50.189 - 01:11:01.839

getting, uh, inappropriately angry, one would say, and, uh, I told them what I thought of his question and that I had the backups for this and if he wanted to call them right now on his phone, he could finally probably find a couple of them at

01:11:01.839 - 01:11:18.049

work. And anyway it went through chutzpah is a great thing when you're young, uh, and anyway we got what we needed and after that was the congressional attempt and congressman nearly saved us from that so we did have some very close calls, but we did in

01:11:18.049 - 01:11:38.750

fact, uh, survive with an incredible. Ah, motivated group. Now, I did try to dictate to the US trustees. I felt that it was my job to set policy and if the different districts and Frank is the one I heard from most, you know, that kind of

01:11:38.750 - 01:11:54.810

form I wanted. Consistent forms for all statistics and Frank says, well, the judges here are not gonna like that. I remember and I said, well too bad so we're in charge of this aspect and the hell with them basically. Uh, and I think as you'll hear

01:11:54.810 - 01:12:08.540

that, that didn't always work, but it was a goal. That's why I was asking Irving earlier about this, uh, you know, if there was a sale order, I would have, if it was up to me. If it was really up to me, I might have said.

01:12:09.149 - 01:12:23.459

You know, let it be. If a sale goes through, it's the wrong amount of money, it's not in our head. Irving's argument, as you've heard, was different. Uh, Frank had a case and he can tell you his side of it. He wanted to appoint a trustee

01:12:23.459 - 01:12:38.160

in a major case. I asked him who he was going to appoint and he told me it was none of my business. On chapter 11, uh, I said, I, but I'm your boss, and, uh, he won. I backed off. On the other hand, and this is

01:12:38.160 - 01:13:00.520

something that will be, may be lost in history. And I will not mention the district. There was one district. Where the appointments as panel trustees was so political. So over the top, transparently political that I was terrified that there would be a major scandal, so on

01:13:00.520 - 01:13:20.040

the one area where I really didn't care. District by district. I said all appointments to panel trustees have to be approved by me. No one complained. They would send them in. My secretary is assignment, she had a rubber stamp, and she was told, when you get

01:13:20.040 - 01:13:32.220

them from these 9 districts, don't tell me. I don't want to see them. Stamp, OK. On the 10th district, bring them to me because I know there will be trouble and there was, and I said no to this one, no to that one, and no to

01:13:32.220 - 01:13:50.040

that one. I have no idea what's happening in the year 2012, but if the US trustee still is approving appointments to panel trustees, the history of that is to prevent inappropriate appointments in a particular district where inappropriate appointments were a problem, could have been a problem.

01:13:50.620 - 01:14:08.330

So there, the history of great sounding things can rest on. Uh, much more humble, uh, areas. Well, now I'm going to give your colleagues an opportunity to tell us, uh, their perspective on this. It is clear to me that from comments they've made earlier that there

01:14:08.330 - 01:14:23.509

was a lot of appreciation for many of the things that were done by you in your office, but I suspect that there was also not just chafing but other things that went on and, uh, among them. And I'm particularly curious and I'm trying to understand whether

01:14:23.509 - 01:14:42.830

or not you guys did things behind the executive office's back in order to uh facilitate um your relationships uh amongst each other and with your judges and, and, uh, the practicing bar. Frank, how about you start? Well, I, it's funny I can't, um, I can't remember

01:14:42.830 - 01:15:03.569

the particular instance Rick was talking about in terms of, uh, uh, a form or something like that, uh. What I remember about it is maybe forgetting the things that are unpleasant. What I remember about it is that. In fairness to Rick was that. We did a

01:15:03.569 - 01:15:19.490

lot of talking we did a lot of talking on all issues and we were constantly sending information back and forth and, and you know I'd like to say that I'm such a good advocate that I win every argument. I've probably lost some arguments, but I don't

01:15:19.490 - 01:15:33.305

remember things coming down that I didn't have a say on or that I couldn't pick up the phone and say are you out of your mind, uh, so, uh, and, and that politely and I. Do, but I, but, but, but I think, I think that was,

01:15:33.424 - 01:15:48.345

uh, the strong part of this that yes, there, there, I'm sure there were some disagreements, but I remember so many conversations that it's hard to be affected by one so the, the interplay was good, and, and that's, uh, where I'd come out, yeah, I would, I

01:15:48.345 - 01:16:10.359

would agree with that, um. The there was, uh, first of all, Rick would convene conference calls even if, uh, he wasn't, even if we weren't having a big meeting, um, sometimes among the US trustees we'd have a conference call and we'd talk about some of the

01:16:10.700 - 01:16:26.890

issues that were affecting us, um. I certainly wouldn't say that I ever did anything behind Rick's back. Um, I think that I probably had a discussion with him and he would say, I don't think you should do that and I might say yes, I'm going to

01:16:26.890 - 01:16:44.839

do it, but and I did it. Uh, sometimes I knew that in New York I probably could get away with it and so it was something to try, uh, and there were many occasions where that happened and then we won. And Rick would send it around

01:16:44.839 - 01:17:01.120

and say, see what Irving did in New York, so I took that as a pat on the back for, for doing something, uh, but I, I think that Rick said there was a lot of transparency. Uh, he wouldn't just say do X, he would tell you

01:17:01.120 - 01:17:20.770

why he thought X should be done and gave you an opportunity to discuss it with him either as a group or individually. Um, I think that was healthy, uh. I, I think that we, um. When, uh, the trustee grams that he mentioned uh were good because

01:17:20.770 - 01:17:39.830

it helped us all see what was going on in other places, what judges were saying about what somebody was doing, and you could try to figure out how to use it in your district, um. And I, I don't, I don't recall Rick ever getting involved in

01:17:40.450 - 01:17:56.959

a trustee appointment or an examiner appointment or something that that we were doing in New York, um. But I also remember on numerous occasions I talked to him about what we were doing, so he had an idea. It gave him the opportunity if he thought I

01:17:56.959 - 01:18:18.350

should be doing something else, he, he could say so, um, you know, I had one case, um, early on, uh, called OPM leasing. Oh my. Um, and yes, it did stand for other people's money, uh, and, um. I had to appoint a trustee and um I

01:18:18.350 - 01:18:37.979

decided that I was gonna look around for a trustee. I wasn't just gonna take another lawyer or or somebody um this this was a computer equipment and I decided I was gonna look for somebody who was a businessman and then he'd hire a bankruptcy lawyer. Uh

01:18:39.180 - 01:18:56.240

So I had met in my prior life at the SEC a fellow in the in the equity funding case who I called, and he was then in Hawaii finishing up an old A Chapter 10 case and I said, can you get to New York in 2

01:18:56.240 - 01:19:12.009

days? He said, No, I can't. And I said, Well then I'm not gonna consider you for this job. I called someone else, uh, whose name was given to me, and by the way, we took seriously getting. Recommendations from the creditors and and the participants, so I

01:19:12.009 - 01:19:26.439

had a list. I took the people that I thought of, but I also took a list of 5 or 6 people that others recommended, and I had a recommendation for a, a fellow who had been involved in the WT Grant, uh, bankruptcy at Chapter 10 in

01:19:26.439 - 01:19:40.700

New York, and I tracked him down. He was on the ski slopes. He was vacation with his kids, and I said, Look, if you're skiing, call me when you're done at the end of the day. And I talked to him, um, and I mean we did

01:19:40.700 - 01:19:56.470

things like that. I finally picked a fellow who had had some background in some fraud cases in a in a business context because I thought he would be the best and then as I said earlier he just went and picked a a a lawyer um I

01:19:56.470 - 01:20:13.709

had an examiner issue which was purely accounting. I appointed an accountant it just made sense and in fact we told him. He said, well, what if I need legal papers? I said, well, if they're simple, we'll help you, and if not, you'll hire a lawyer, um,

01:20:13.839 - 01:20:28.040

so you know we just, and, and Rick was very supportive when we told what at least when I told him how I was handling some of the cases and explained why, um, and he might say, did you think of this? Did you think of that, but

01:20:28.040 - 01:20:45.629

again it was always a healthy discussion. I never ever felt. That he said you got to do it this way. It was never my way or the highway. I wanna, I wanna talk more about independence and selection of trustees and, and examiners, but. As you all

01:20:45.629 - 01:21:03.790

know, I did come into the pilot program and trust me, there were certainly colleagues of yours who had very strong feelings about their independence that they worked for the attorney general, not for Mr. Levine or Mr. Shea or anyone else, and that they didn't have to

01:21:03.790 - 01:21:22.580

listen to anything that came out of the executive Office for US Trustees. Was I smoking something at the time, or um, are your colleague, are you two the most. Congenial of your colleagues and the others were all sons of guns. I just, I, I think a

01:21:22.580 - 01:21:39.470

lot of it just has to do with how people viewed their position and, and how they viewed their role and, and how they felt they had to deal with people. um, I, I always had a reputation of having an open door um. Uh, I had a,

01:21:39.589 - 01:21:55.220

a, a lawyer. I'll give you an example. I had a lawyer send me an affidavit that he was ready to file because one of the lawyers on my staff had taken a certain position in the case, and he sent it to me, and, uh, I read

01:21:55.220 - 01:22:09.970

it and I picked up the phone and I said, uh, what train are you going home on tonight? And we met and we sat together and we hashed out the problem. It was a mistake and, uh, you know, his affidavit didn't have the light have to

01:22:09.970 - 01:22:27.080

see the light of day. It certainly had the effect he wanted it to have and nobody wanted to fight, um, so I think each of us brought a different style, um, you know, my style, um. I would much prefer to negotiate a settlement than than to

01:22:27.080 - 01:22:42.950

have to litigate a long time, spend a lot of money, and at the end of the day have a pyrrhic victory, so I. I just, I followed that, um, and I, I made it my business to go around as most of my colleagues did to talk

01:22:42.950 - 01:22:57.750

to, to bar groups to just to talk to accounting groups, various organizations and try to get our message out and say, you know, we are the new guys, but we wanna be your friend and we wanna work with you and I, I think it's just a

01:22:57.750 - 01:23:14.970

lot of it I think had to go with style, you know, and, and how. Some people probably thought, uh, maybe they thought they were more important than they really were. I had, uh, These guys are collegial, but I think the group generally was a collegial group.

01:23:15.009 - 01:23:31.729

If there were people that had reservations, my guess is. That I might have picked up a hint of it or the alternative is I'm not as attuned as I thought I was. The comments that Irving and Frank made, if I could just go on a little

01:23:31.729 - 01:23:48.790

detroit for a second. There's one thing the US Trustee program at the beginning created. And I don't think I'm any longer in a position to know how this or if this works nationally. In the 1st 2 years of the program in every single jurisdiction that I

01:23:48.790 - 01:24:07.669

know of. The source of what to do and how to do it in all of the 10 regions where the uh which I think was 21 jurisdictions I forget the number, uh. Was the US Trustee's office. You wanted to know what to do as a trustee.

01:24:08.330 - 01:24:24.979

You wanted to know, should you consider this or that. It was the US trustees whom they called, and I think that was something, and I don't know if the US trustee plays that function today, even the newcomers like uh I mentioned Dolores Coopel earlier, she hired

01:24:24.979 - 01:24:38.500

a spectacular staff. She may not have known bankruptcy to start with, but everyone on her staff, including at least one or two, at least one that I know of who's either now or then became a bankruptcy judge, uh, you know, were, were spectacular, and these guys'

01:24:38.500 - 01:24:53.740

staffs were great, so. In most of the regions if there was a conference or a brown bag lunch or whatever and if it was put on by the US trustee, the attendance would be huge and then there were the calls that uh we've just heard about

01:24:53.740 - 01:25:09.290

that Irving would get a call from this one and a call from that one. Uh, and I think that was something that even, you know, everyone was in this together for this new statute, including members of the bar and professionals. My single most embarrassing moment, but

01:25:09.290 - 01:25:24.540

that illustrates that, and I admit a few embarrassing moments, is the US trustee in Colorado, Dolores said, you know, she's having a meeting of the panel trustees. And uh You know, an annual meeting really to get together and it's going to be at 6 o'clock at

01:25:24.540 - 01:25:38.140

night and would I mind if I had the time, could I be there because they'd like to meet me and. So I said, yeah, I can be there, I can. You know, visit the office and see other offices in the rough geographical area. So I agreed

01:25:38.140 - 01:25:56.479

to go and at 6 o'clock, the trustees are assembling, and you remember, I come from a state. Massachusetts Where it's never more than 2 hours to any court in any of the other New England states, it just isn't. So I show up and there are the

01:25:56.529 - 01:26:13.709

panel trustees from the District of Colorado. And we're there at 6 and some guy comes in at 6:45 looking a little bedraggled, apologizing for coming late, but there had been a snow drift at the top of the continental divide. Which he had driven over from coming

01:26:13.709 - 01:26:33.149

from Steamboat Springs on the way to this meeting in Denver. And I realized this this woman who hadn't known bankruptcy had generated. Such an enthusiasm he wanted to come meet whoever the head of the office was, see, you know, what's going on, you know, what, what

01:26:33.149 - 01:26:48.580

are the things to talk about as a panel trustees job wasn't on the line it wasn't, it wasn't that kind of meeting and uh. I realized that the US trustees had created this forum, this, uh, I don't know, forums with we call it a cloud now

01:26:48.759 - 01:27:06.459

where you could go and you would get educated and learn things, and I think that was a very, very valuable contribution and, uh, you know, you've seen two of the people here, uh, they're colleagues with different personalities and different skills generally speaking. Uh, you know, with,

01:27:06.540 - 01:27:22.339

uh, you know, maybe an exception here or there, uh, created the same milieu in their respective jurisdictions. I, I would, I would, uh, follow that up by saying I, I, I think there was always this concern in the national office as to whether you had power

01:27:22.339 - 01:27:41.160

to do something. Um, and in the end they would, they would rule on that, but, uh, and, and I suppose in a couple cases may have disagreed. I, I think though that before it ever got to the executive office there was a. There was a little

01:27:41.160 - 01:27:57.939

independence we all had this streak of independence and so and we all talked to each other before we talked to the national office so rarely would you challenge the national office unless you had 5677 people supporting you because you had the night calls and you walked

01:27:57.939 - 01:28:12.995

it through and I, I cannot tell you how much Arnie Cavasa. Came to town the other day. He says, you know, I just, uh, Northern District of Texas, and, and he was laughing about our 4 o'clock phone calls that, you know, he talked to me more

01:28:12.995 - 01:28:28.169

often than he did his wife for a while, and it, and it was true. You, you, but so you talk these things through and Um, and you didn't invite the executive office because they were the executive office. They weren't US trustees, and they didn't do it,

01:28:28.540 - 01:28:40.339

so there was that sense. And as Rick said, you know, when he called me up once and said the controversial case camera, who's your trustee? I suspect it was Auto Tram, but I don't know. Auto Train, but I said I'm not gonna tell you, but that

01:28:40.339 - 01:28:54.120

was an assertion of independence. But I don't think that should be taken as an assertion that we didn't respect Rick. I mean, Rick had his role and we had our role, and we were jealous of that, but I, but there wasn't conflict in the, in the

01:28:54.120 - 01:29:12.680

other side. I, I think one of that pointed out Frank's comment about the 4 o'clock calls, which has come up a couple of times, is it showed also the camaraderie of, of the group of, of the 10 of us, plus our assistants, um, and, um. As

01:29:12.680 - 01:29:29.200

I said, um, we, we, in some cases we tried to think out of the box and, and figure out ways of dealing with various matters that were coming up that, um, we couldn't, uh, that we felt. We should try to figure out how to deal with

01:29:29.200 - 01:29:42.930

it before we talk to the executive office, as Frank said, if you had 5 or 6 or 7 people who said yes, then you knew you could tell Rick you were going to do it because you had the support of everybody else. But, uh, I, I,

01:29:43.000 - 01:30:01.890

I think it also is just a good way of bouncing ideas off people, which is always a very valuable exercise. Well, we've already addressed the. issue as to whether or not there was any pressure brought by the executive office with regard to appointments and frankly I

01:30:01.890 - 01:30:24.310

think probably in particular in the early days the most important job that the US trustees had from a standpoint of The participants in the system was the appointment, the appointment of and selection of panel trustees, chapter 11 trustees, and examiners. Um, obviously Irving, you've already addressed

01:30:24.310 - 01:30:43.109

the question of trying to be collaborative and seeking points of view, but I'm, I'm curious to what extent were you all ever pressured by whether it was the Department of Justice, other government agencies who thought that since you were. A government agent you might be more

01:30:43.109 - 01:30:59.799

receptive to them, um, constituents within a case who didn't particularly want to share their views with other people or the court um ever interfered plus I'd just like to hear from you about the appointment process to the extent that you can tell us some of the

01:30:59.799 - 01:31:21.100

stories because I think that was such a critical role. Well, I'll, I'll start and I'll one word never. Um, either by the executive office or, or other government agencies, um. Uh, uh, uh, but I, I think that. If, if I knew that the government agency was

01:31:21.100 - 01:31:37.990

heavily involved in the case, um, I would invite them to give me a recommendation like I would any other constituency in the in the case so that I was um. You know, I was I tried to be inclusive, um, I always viewed that the buck stopped

01:31:37.990 - 01:31:56.189

with me and I would have to make the choice, um, and I would personally interview, uh, everybody on the list because I thought that was the right thing to do, um. As I, as I indicated in my earlier, uh, story, uh. Somebody couldn't make it, well,

01:31:56.350 - 01:32:18.049

that was too bad, but, uh, typically, um, The recommendations were for people local now in New York, um, over the years, um. They didn't have trustees in the under the old act. Everybody filed the chapter XI 11, uh, tried to stay out of Chapter 10 until

01:32:18.049 - 01:32:39.160

the SEC came around, uh, so, uh, New York had a. Had a sort of a history of not having trustees, so in the early period, uh, in the 2.5 years that I was trustee, um, we didn't have that many motions and, and quite frankly didn't have

01:32:39.160 - 01:32:57.200

that many cases that seemed to call for the appointment of a trustee. Now we did have a fair number of cases that we we appointed an examiner and maybe there'd been an SEC enforcement action or maybe there'd been. Some other government agency involvement that suggested to

01:32:57.200 - 01:33:10.149

us we ought to have somebody go in there and take a look maybe would come back and tell us we should have a trustee and maybe he would come back and just say here's the problem and you could figure out how to fix it, uh, but,

01:33:10.160 - 01:33:30.430

um, again, uh, we did those things as we saw appropriate, um, and, um. But as he started out, I, I, Rick never called and said, uh, here's somebody you gotta consider or you can't consider this person or that's a bad appointment or anything in my time

01:33:30.430 - 01:33:45.240

it just never happened. The only time I ever got pressure. It had to do with legislation, not on the case. Proposed statute that just, oh, I know what it was. There was gonna be a statute that would allow government entities clearly to serve on a creditors

01:33:45.240 - 01:34:03.270

committee. And the chief administrator, the Assistant Attorney general for legislation was Alan Parker, who happened to be the chief counsel of the House Judiciary Committee that passed the bankruptcy code. So of all the people in the department, he knew, he knew the legislation. And the IRS

01:34:03.270 - 01:34:18.589

wanted it, uh, excuse me, the tax division wanted it. I said it was gonna be horrible because you won't ever take votes. Somebody will say, let's vote on a plan for X, and you'll go off and take 8 years, probably a little cruel exaggeration. Uh, so

01:34:18.589 - 01:34:29.189

I opposed it and they pouted. I never saw an adult pout before or they, you know, hadn't that time. They said, Well, you're supposed to be working on the same side as us. We're all in the Department of Justice. And I said, No, no, I do

01:34:29.189 - 01:34:45.319

administration of bankruptcy cases. You do tax collection. And we won the day that statute did not pass. Then I have no idea what the statute is now, so except for that one incident which had to do with legislation. I, at least in the executive office, never

01:34:45.319 - 01:35:03.839

received any pressure at all from other branches, and, and I, I would, I would add I was talking during our break, um. Patco, the professional air traffic controllers filed in in Washington. And the president filed fired all the controllers, and Robert Poli was the head of

01:35:03.839 - 01:35:21.229

the union. And uh the case was limping along and there were also proceedings against Poli in connection with the operation of the union out in I think it was Kansas and uh there were a lot of disgruntled workers in Washington and elsewhere who come in and

01:35:21.229 - 01:35:42.000

say what can you do? I lost my job and I, I didn't call a strike and you know and and uh and there were. Newspaper articles talking about you know airline flights all over were interrupted for the loss of controllers. And so, uh. One union worker

01:35:42.000 - 01:35:58.890

brought me in a copy of the contempt cite, I think it was a contempt citation by the district judge for failing to turn over information ordered by the court. So I filed a motion without talking to anybody to appoint a trustee. For Patco. Which looked like

01:35:59.189 - 01:36:13.379

the Justice Department, I guess if I, we were the Justice Department was now gonna fire Patco after I mean fire Pole from even his union job after they had fired him from being the head of the union. And I sent out notices to the agencies on

01:36:13.379 - 01:36:29.899

the list and I noticed that the EOUSD was not on that list and so I called 3 or 4 days before the hearing and said. You know, I should tell you guys this, but I filed this motion. And the paper didn't pick it up until the

01:36:29.899 - 01:36:49.720

day of the motion and the the newspaper and so we went into Judge Whalen's court. And there were a crowd of people there and nobody from justice called back. And so there really was independence and um. Howard Moskov from Hogan and Hartson, who represented all the

01:36:49.720 - 01:37:04.569

airlines and some by virtue of some organization, came in and said. We oppose that motion. And I was just absolutely stunned and I said we could put, we could give him a new party to deal with and we could put some planes back in the air

01:37:04.870 - 01:37:21.100

and he said Judge, we oppose that motion. And Judge Whalen said, The airlines don't want it done. They're the biggest creditor in this case. I mean, they're injured by the actions of that, so I am, uh, I don't think you've got a constituency, Mr. Dial. And

01:37:21.100 - 01:37:39.459

he denied the motion and that was out, but the significance of that story was to me that. That this could have been a highly embarrassing motion, a motion that was contrary, and yet it was within the role to try to facilitate a reorganization and a restructuring

01:37:39.459 - 01:37:53.569

for all those employees, so it was a clear conflict, and they did not intervene. And I, I thought that was very significant. There's a reverse side to that where we would have liked input and never got it. I mentioned earlier, I was on the rules committee.

01:37:54.509 - 01:38:10.669

And the rules committee would sometimes ask for comments or whatever. They had no interest in this at all. There were 2 Court of Appeals judges, some district court judges. The subject of US Trustee, what they could do or not do, all the independence, the overlapping. No

01:38:10.669 - 01:38:30.270

one on that committee cared anything. I, I have no idea of an appropriate analogy, but I, I was there alone, uh, and you know they were good on other things, uh, to an extent, but on the subject of powers of a US trustee and what's administrative,

01:38:30.350 - 01:38:49.350

the things that we were. We were birthed to care about. This is administrative. This is judicial. One of the things I learned from that experience where nobody else had comments or didn't want to take the time for comments is that although that's a critical distinction and

01:38:49.350 - 01:39:04.850

Congress cared that it'd be critical once the statute passed and we and we were doing our thing and doing it effectively, we were the ones out there doing it. The judges, as I said earlier, probably 95% of them from hearing, uh, my colleagues here, maybe 98%

01:39:04.850 - 01:39:25.919

of them accepted it either overtly or covertly or both, but. There. The fact that there should be a serious discussion or worry in a particular case was this within the US trustee power or was it not, uh, has never, uh, actually until two weeks ago with

01:39:25.919 - 01:39:46.830

this new proposed, uh, there's a new fee, uh, proposal the US trustees have which has generated now 26 responses I guess, uh, until then this is the I have never seen anyone really care to take an interest. In these distinctions that were so important to us

01:39:46.890 - 01:40:02.290

and the and by the way I don't mean to minimize the importance what we wanted to do happened the judges are over here doing their thing the US trustees are over here doing their thing, but there's no one I suspect who cares to analyze the distinctions

01:40:02.290 - 01:40:20.490

in case there's a close question and on the rules committee. That I will tell you that the members of that committee had zero interest. And or patience in wanting to hear anything about that, so I, I was just, I was disappointed in that and I. Although

01:40:20.490 - 01:40:36.129

we got what we wanted because people would say, yeah, yeah, whatever, but that's how things happen there. I think we'd be remiss if we didn't talk about one other topic that uh I think we forget about because you guys created it and you did it so

01:40:36.129 - 01:40:53.609

well that we don't even think about it as an issue anymore but disclosure statements in chapter 11 cases talk about adding to the transparency and uh bankruptcy cases. I'd like to hear from you guys how you established your process and procedure and how collaborative that was.

01:40:54.729 - 01:41:20.379

Um, I'll start off, um. I guess I came to it with a perspective from the SEC, um, which, um, I, I used, um, I shared some of that with my colleagues, of course, and, um, so we were getting our feet wet in disclosure statements and, um.

01:41:21.149 - 01:41:44.220

In 1980 really and um then uh Rick hired uh a young lawyer uh. Who came to the executive office, he had a securities background, um, and he, um, helped put together some templates, if you will, uh, that we were then able to use, uh, and information

01:41:44.220 - 01:42:03.410

that we could share with practitioners so they, they would know what to expect from us, uh, and I, I think, uh, it was something that evolved, uh, over. A, a 2 or 3 year period, uh, and, uh, it, it just provided the underpinning for what goes

01:42:03.410 - 01:42:22.290

on today. I, I would add to that. To say that everybody brought a particular expertise to the program and Irving particularly. In New York had more with his SEC background and also with the cases that were filed in New York, let's say as opposed to Washington

01:42:22.290 - 01:42:37.109

and Virginia, the volume of of sophisticated elevens uh had more experience with that so I, I do remember the the templates and the the. Because that was a new concept for everybody and what should be in it, and I also remember that you had the ability,

01:42:37.810 - 01:42:52.970

and this was unique to get on the telephone and talk to somebody who'd seen 10 times the number you did and to say should they include this or shouldn't they if you really had a question and should there be this area be expanded and rarely I

01:42:52.970 - 01:43:06.470

think did we ever send them up but you had those 4 o'clock calls or 3:30 call that preceded it. That you were able to go and and it worked the other way. I mean if you had a particular expertise you went to whoever had that expertise,

01:43:06.549 - 01:43:20.629

but I remember that on a number of cases, uh, that was an auto train for one I mean you just took advantage of the expertise you had in the program and you did that and I think that's really a wonderful thing. I think 11 other point

01:43:20.629 - 01:43:39.979

I would make is that I think we also all recognize that not every company was a large company and had to have. Uh, a big disclosure statement. I think that in, in many cases, um, the, the, a 2 or 3 page description of what the plan

01:43:39.979 - 01:43:59.479

was about and maybe, uh, the last financial statement, uh, didn't have to be audited, but the company was such that that was perfectly appropriate and I think that was something that we. We, we recognized early on that we not every company was gonna be the same

01:43:59.479 - 01:44:18.470

and, and that, uh, again we were flexible enough that we were able to deal with that and I think uh that gave us credibility with the judges where they saw that we weren't. Straitjacketing everybody into one particular way of doing things. Oh, I was just gonna

01:44:18.470 - 01:44:33.450

say add one other thing to that, and that is one of the hires that we had as we went along were financial analysts, uh, and that was certainly a new concept. So on, on a lot of particularly small levels or, or things where there were accounting

01:44:33.450 - 01:44:47.520

issues if you weren't an accountant and you didn't. I mean you had some questions as to whether or not this was properly prepared or who just had expertise in looking at this. I mean this was the first time anybody associated with the court process that I'm

01:44:47.520 - 01:45:02.500

aware of had had an independent source that would look at everything like this at least once and say. They really did a terrible job of presenting this. It wasn't presented in accordance with the nationally approved accounting standards, or there's an omission here that should be in

01:45:02.500 - 01:45:21.319

there. I might not catch that, but having that local expertise too was very beneficial. To clarify, the financial analysts, one of their jobs was analyzing with respect to financial disclosure statements. But the financial analysts in the office had a broader, uh, a broader mission than that

01:45:21.319 - 01:45:38.490

because that person's job was to make sure that the weekly and daily and monthly reports all made sense as well. The Involvement in the disclosure statements is a very interesting issue. It's, I feel a little paranoid about or schizophrenic about it. On the one hand, I

01:45:38.490 - 01:45:54.810

think we did a spectacular job. I think I remember the first disclosure statement in the country. I think it was storage technologies. It was in the first circuit and. My view, as Irving said, even in the, in the small cases, and it's hard to believe nowadays,

01:45:55.209 - 01:46:10.169

I thought a 5 or 10 page disclosure statement was fine. It should be an un-p proxy statement. That's what I thought. And in the early days that was enough, uh, and there were a lot of objections and still I see some occasionally, you know, somebody files

01:46:10.169 - 01:46:24.600

an objection. And since no one cares anymore really what's in a disclosure statement and in those days you could say, OK, you can put in that the creditors committee believes X and that's what they believe, that's a fact, they believe it. Is that as useful as

01:46:24.600 - 01:46:42.040

it could be? Who knows? But I had reservations about whether the US Trustee's Office should be involved in disclosure statements at all since if there was, if there was a creditors committee. That was again the creditors committee's job. Now the US, even though we had this

01:46:42.040 - 01:46:59.069

spectacular young lawyer, uh, Mark Rosen, who had come to us from Hale and Door as it was then called, uh, and he did fantastic training. So our comments on disclosure statements, I think, were the best in the country. How much in hindsight we should have been

01:46:59.069 - 01:47:19.600

involved in disclosure statements if there was an active creditors committee. I'm not sure, uh, but the comments are really high quality and help set a very high bar, so as they say, all's well, it ends well. The uh Program got off to an interesting start, uh,

01:47:19.609 - 01:47:35.339

and I particularly wanna thank you all for, uh, getting, getting it off to the great start that it did get off to. There was a lot going on when you started this program. There was a brand new statute in place. Judges had a brand new role

01:47:35.339 - 01:47:55.299

in the process. The bankruptcy, uh, practitioners were expanding to add new people outside of the old so-called bankruptcy ring, so there was a tremendous amount, um, that I suspect operated to some extent to the program's advantage in the sense that. You being kind of a new

01:47:55.299 - 01:48:13.580

player, people kind of looked at you and and wanted advice, wanted help, wanted to help understand what was going on, and I, I, so I'm assuming that there were oftentimes you guys got involved in sort of taking the lead in um developing some of the areas

01:48:13.580 - 01:48:26.839

of law and I, I think that's an important part of the history of the program and I'd like to hear a little bit about that from you all, uh, Frank, you wanna start? Sure, um. I think there are many areas like that, but I think one

01:48:26.839 - 01:48:42.359

of them that's particularly interesting was the question of fees, and the question of fees in the sense that in a lot of the smaller cases with trustees, I will say this is more true in Virginia than it was in DC, the judges have pretty much established

01:48:42.359 - 01:48:58.080

hourly rates. And they had fixed hourly rates and the whole point of this was to have a more to widen the bankruptcy bar, to widen the bar for people that could come in, and they call me up and say, really, I can only get 1 per

01:48:58.080 - 01:49:15.580

hour here for this. This is not a simple case. It's a hard case. Every case is a hard case, but, but essentially it was there and. The judges, I think, welcomed for the most part, the ones I appeared in front of are coming in and saying.

01:49:16.390 - 01:49:33.009

When that fee application was filed, we know there used to be rates here. But Uh, that were limited at say $250 an hour at that point or whatever it is 2.25%, but $300 or $275 or $300 whatever it was in 19 in that period is, is

01:49:33.009 - 01:49:47.609

in 1970 is not excessive for this. This would be in a chapter seven case where the attorney had gone out, but he went through a lot of machinations to sell property or to get clear title or to do something else and. A lot of times lawyers

01:49:47.609 - 01:50:00.919

turned down some of that work because they said I can't, I can't get paid at my rate for that at a, at a fair rate, so we're not talking about huge amounts. So that was really an important thing and that really sold the program in a

01:50:00.919 - 01:50:17.759

certain sense to our constituency to the bar too. And, and also sometimes the judges complained about it and I can remember fee applications where I said where trustee's fee were quit where I said Judge. If you cut that fee because he said I've always had a

01:50:17.759 - 01:50:30.790

policy, one judge said I've always had a policy of never paying more than this, and I said. That's not what the code has in mind. I think this is market. I've put in some evidence that it is a market. I'll appeal your ruling. And we went

01:50:30.790 - 01:50:43.819

back into chambers and you know we came up with something a little less than I had put in but it got through and that was the end of the cap from then on it it just wasn't there so what I'm saying is it was it was

01:50:43.819 - 01:50:56.259

important because they had done it before and it was an easy way to do it. And and trustees knew and so that sold the program as well as I think complied with the statute. Not only was that, I think, a boon to the lawyers, but to

01:50:56.259 - 01:51:11.509

some extent it was a nice opportunity for the judges who had been used to the old concept of the economy of administration. It would have been a very difficult transition as they were trying to learn the new code for them to try and think about. What

01:51:12.180 - 01:51:27.660

would be a reasonable rate when many of them had now been on the bench for 1020, some 30, 40 years and away from, um, you know, charging fees and having any notion of what was useful, so I suspect it helped the judges as well and they

01:51:27.660 - 01:51:46.089

had a cadre of people. Who were willing to take the lower appointments in my home jurisdiction there were several men. There were always men who sat in the front row of the court. All of a certain age which I deny having reached. And they would be

01:51:46.089 - 01:51:58.620

there every morning and they would get the cases successively. So each one would wind up with about 5 cases. You get this one, you get this one, and it would just be like, I think in police courts in some places, and that's what they were happy

01:51:58.620 - 01:52:12.640

to get their, uh, whatever the amount was. It was enough to eke out a living. And no one was looking for any we're talking again the small cases of the chapter sevens. I, I, yeah, I think 11 other thing that I would note, um, on the

01:52:12.640 - 01:52:30.240

other side is that, uh, one of the things that the code was designed to do and has done certainly, uh, but did back then as well is it brought a lot of new people in, uh, into the practice, um, so in New York for example we

01:52:30.240 - 01:52:51.399

had. A lot of people who were filing cases, um, who quite frankly didn't really know what they were doing and they were charging people $1500 and then if they had to go to a hearing they charge them more. And um we we did we came upon

01:52:51.399 - 01:53:14.770

that uh experience uh and. We, we saw. This same lawyer having a lot of clients who were defaulting on things that really they shouldn't have been defaulting on and we um. We ended up, uh, we brought a lawsuit against the lawyer, uh, to make him pay

01:53:14.770 - 01:53:31.810

back his fees and actually got the US attorney interested in the case and the lawyer went to jail for a coup uh a couple of years, um, but I felt at the time and looking back at it I still, I felt very strongly that we had

01:53:31.810 - 01:53:47.970

to send a message you just, you couldn't file and then walk away from your client. You, you had a duty. Um, and you know if charging $800 to file, um, wasn't gonna let you do other things, well, maybe you should charge $1200 and then you could

01:53:47.970 - 01:54:03.669

do everything, um, we weren't trying to fix the price, we were just trying to make sure that people who needed the help, uh, who you started to help, you could just couldn't drop and most of these were. You know, somebody, the bank or somebody came in

01:54:03.669 - 01:54:22.729

and would lift stay motion or something like that where all of a sudden. Persons in court and telling the judge, um. I, where's your lawyer? Well, he, I, I can't afford to pay him $400 to be here. And one of the judges picked up the phone

01:54:22.729 - 01:54:37.580

and said, Would you look at the transcript of this hearing? And this is how it came to our attention. One of the things that Irving and Frank have both indirectly indicated. Was this was a level I guess directly one of the things the US trustee did

01:54:37.580 - 01:54:56.660

is made everyone feel comfortable that they would get information how to get into this area. What some of the people who were practicing since 1979 may also not remember is the degree of informality that went on in a lot of the courtrooms which the US trustees,

01:54:56.759 - 01:55:15.839

not to the US trustees alone, some rules changes in the 1980s helped too, but the presence of a third party. Made a lot of the habits go away. It was common in many courts, not just in my home court. Because of those mixtures of things, conferences

01:55:15.839 - 01:55:30.810

would take place at the judge's bench, and a case would be called, and the common scenario was, or even before the case is called, Joe Wax, who had just finished handling case one, he's up there. He says, Judge, I have this next case, and this is

01:55:30.810 - 01:55:46.080

the story, and they're, they're, they're mumbling to themselves, and, OK, I'll prove that. The lawyer leaves. The hearing is over a half hour later. And some creditor who came for the hearing says, what happened to Kasich? Oh, we took care of that. It was a very

01:55:46.080 - 01:56:06.919

bad image, those ex parte conversations I described before. A lot of them would happen because of schedules just before a scheduled hearing. So you frequently had the site, no malice intended, as you're sitting there waiting for your hearing, the judge, uh, the door from the judge's

01:56:06.919 - 01:56:22.770

office opens. And you're getting ready to stand thinking it's the judge and it's your opponent emerging from the judge's chamber, sits down, and then the judge comes out like a minute later. That wasn't helpful. So one of the things the US Trustee, and I should have

01:56:22.770 - 01:56:39.680

said this earlier, but one of the things the US Trustee did with this outreach. And the fee interests and everything else is everyone knew what the playing field looked like. And that was a big change. So no more would people be saying, what happened to my

01:56:39.680 - 01:56:57.120

case? You mean that mumbling up there was it, uh, and again, this was not common in all courts. And this was not always done, and it wasn't done maliciously. It was that administrative stuff, but the image was terrible. You just and so this went a long

01:56:57.120 - 01:57:13.299

way. It was open and I think a lot of the judges, I would say a huge majority, appreciated that because it made them look. More like judges and it made them feel more like judges and it made them act more like judges and people recognize them

01:57:13.299 - 01:57:29.790

as more like judges so that was that was one thing I'm very proud of this before we wrap up I'd like to ask each one of you to talk either about your greatest challenge or your greatest success or for that matter the greatest challenge to the

01:57:29.790 - 01:57:48.040

program or the greatest success to the program that you saw. Um, during the period, Irving, I'd like to start with you. Well, The last. 6 to 8 months that I was in the program, uh, I think the biggest challenge was going to work in the morning

01:57:48.040 - 01:58:09.450

and wondering if I'd have a job in the afternoon, uh, but, uh, what I, as I said early on, um. I, I think the The greatest challenge was to uh get the program started, get it off the ground, uh, have some fun, learned, uh, made some

01:58:09.450 - 01:58:30.100

good friends the camaraderie of the group, uh, was really exceptional, um, and, um, just. Get up every day and say I'm doing something that I can be proud of, um, get a lot of satisfaction out of, uh, things that we did as a group also that

01:58:30.100 - 01:58:49.310

I did by myself, but more as a group and that, um. I think that we put We got the program started on a good footing. Uh, and that, uh. You know, it was only, only about 6 years later that uh somebody decided that this little experiment

01:58:50.009 - 01:59:09.270

was good enough to go national, uh, with 2 exceptions, and, uh, I think that that's uh. Uh, a testament to the group, uh, that started the program and, uh, I, I think we all should pat our backs, pat ourselves on the back for that. Frank, I,

01:59:09.339 - 01:59:27.209

I think that, the, I mean it was just a wonderful opportunity to, to, to work on this because it was something new and, um, and, and a wonderful opportunity to, to work with the judges and. Even the the judges that as I said before, were reluctant

01:59:27.209 - 01:59:45.330

or or had a lot of questions in in terms of support, uh, in, in a three year period came around so that. They realized something new was going on. They were part of the process that was probably best typified, I think it was in late 1982

01:59:45.729 - 02:00:03.299

that somebody in the executive office, um. Came up with, I don't know whether it was an idea but came up with a model of, uh, keeping track of all the records and the proceedings on bankruptcy court and having her on the on on computers and being

02:00:03.299 - 02:00:18.319

able to bring it in. And the the judges in Virginia and Maryland agreed to host in one of the courtrooms, and we had the whole bar in there, uh, local bar, and they came in and they had a big screen and they did a mock electronic

02:00:18.319 - 02:00:33.740

filing and they did all the stuff which is now the wave of the future and, and everybody was in there and, and I think that that had the idea for that was presented by the executive Office of US Trustees, but the fact that you had bench

02:00:33.740 - 02:00:51.160

and bar. And government all working toward that system and saying we're going to even go a step further showed I think how far everything came in a short period of time. Uh, just the whole experience of, of learning from the change that went on and having

02:00:51.160 - 02:01:07.370

being part of it was wonderful. Excellent, Rick, and I guess the thing I'm, well, the challenges was support, financial and otherwise, but the, and, and I thought acceptance, but it turns out that was not so, uh, it turned out not to be so challenging. There was

02:01:07.370 - 02:01:34.640

more receptivity than I had at first expected. Uh, I think the greatest accomplishment was that we created a cadre. Of The employees in the first group at least, which made. Super qualified professionalism in bankruptcy be the norm. There were always the outstanding bankruptcy lawyers that you

02:01:34.640 - 02:01:49.839

could rattle off because that was Charlie Sellig and you can go wherever. Ah, and say, oh, this is a great lawyer, a great lawyer here, yeah, my city has a bankruptcy bar, but this one's good, that one's good. Uh, I think the US trustee was the

02:01:49.839 - 02:02:10.290

first, not the first people who were good. They were very good people, as I said, but the first people identified with big neon lights as being bankruptcy professionals who all truly were. Very accomplished, caring professionals with a mission. And I think therefore the acceptability of bankruptcy.

02:02:11.359 - 02:02:29.770

As a field of endeavor. Uh, equal to at least equal to other fields of endeavor, at least I'll say in law, I don't know if I'll compare it to surgery or not, um, is something that this particular group because of the way they particularly implemented the

02:02:29.770 - 02:02:46.470

program, uh, went a very long way to the professional bar we, and not even bar also other professionals as well that we have, so I think it gave it that running start that this could be done. This field that had been in some circles uh sneered

02:02:46.470 - 02:03:06.399

at uh is now a field. Honored is, you know, there are people who don't like lawyers at all, but, uh, it's a field that is highly respected. And people assume there's going to be professionalism and people who take shortcuts will be recognized as such and people

02:03:06.620 - 02:03:23.910

who do good jobs are recognized as the majority, the heavy majority of people in the field, so. This group was fantastic. This was a pilot program that worked. And as Irving said, only 2 jurisdictions that don't want it, and I don't believe those were quality-related issues.

02:03:24.270 - 02:03:47.049

And, uh, the program, whatever quibbles 1 may have with particular policies here and there, we now have perpetually. A bankruptcy practice that we can all be proud to be a part of and participants in so. I think that wraps it up pretty nicely, gentlemen. Thank you

02:03:47.049 - 02:03:52.089

for your contributions to the program and to this program. Thank you. Thank you.