Laventhol & Horwath Bankruptcy Proceedings Held Up by PTL Creditors
NEW YORK (AP) _ A bankruptcy judge on Thursday refused to allow PTL ministry creditors to proceed with a suit against Laventhol & Horwath, a Philadelphia accounting firm.
Investors of PTL, once headed by imprisoned evangelist Jim Bakker, sued Laventhol for fraud as PTL’s accountants.
At a hearing in U.S. Bankruptcy Court, attorneys for PTL creditors asked Judge Cornelius Blackshear to lift a stay of their suit against Laventhol, which is pending in federal court in Charlotte, N.C.. If the PTL class action proceeds, it could further prolong the bankruptcy proceedings.
Joseph Moldovan, an attorney for Laventhol, said it would be too costly and time-consuming for Laventhol to defend the matter in Charlotte. He said the PTL suit should be folded into the bankruptcy proceedings in New York.
The PTL creditors are seeking $129 million in damages from Laventhol, which they charge with participating in a scam to defraud investors who paid $1,000 each to invest in a PTL-run hotel.
The court in North Carolina issued a stay of the PTL creditors’ action against Laventhol after the accounting firm filed for bankruptcy in November 1990.
Creditors initially made claims against Laventhol totaling $10.7 billion, but Blackshear whittled down that amount to just under $2 billion. The firm is proposing to settle the claims by paying $47.5 million to more than 7,000 creditors.
Under questioning by Moldovan, Jacob Brandzel, a former Laventhol partner overseeing the firm’s liquidation, gave testimony about the deterioration of its finances.
Brandzel painted a picture of rapid growth during the 1980s. By 1990 Laventhol was the seventh-largest U.S. accounting firm, with 322 partners and 52 senior principals.
But the firm was overstaffed when the recession began in 1989. Further, it was hit by mounting lawsuits. At the time of the bankruptcy filing, the firm was defending 150 legal claims totaling more than $2 billion, Brandzel testified.
Now, Laventhol’s 629 partners are being asked to contribute their own money to settle the claims. Any partner who worked at the firm since January 1984 - even people who had since left the firm - are liable.
Several partners, who saw their pay or pensions cut significantly, are balking at the settlement.
Arthur Olick, a partner at the firm of Anderson Kill Olick & Oshinsky who represents some of the dissident partners, said his clients want assurances that if they agree to contribute to the settlement, they will not be held liable in suits by PTL creditors or any other creditors.
″Without protection, they won’t contribute,″ Olick told Judge Blackshear.