Free Appendix - District Court of Delaware - Delaware

Case 1:04-cv-01565-SLR

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I II ,I

Victor - Cross/Tomashefsky 1 offices that the company iS in trouble bocause Mr.

i!168

Crowley's

~-10

2 longer there. That's my greatest concern.
I

3 Q All right, you mGnti oned at the begi nning of your
4 testimony you've had two concerns _ Okay, one Was that refe rr i S Sources might be doterr.ed and the other was that key employee

6 might leave.

7 A Correct.
8 Q Do you think it's possible to bring in a crisis man~ger n
9 a way that would assure the referral sources that there would

10 be no problem?

Jl A

With n good communiciJtion plan, probably yos.

~

12

Q All right, and in fact you've had lots of experi ences in
your business with crisis managers being brought in and

13

14 communications plans being developed to assure important
15 constituencies that the company is not going to be liquidated.

16 A
17 Q

I have.

All right. In your main experience with crisis managers

18 where you have serious prahl ems involve bus inesses where ther
19 WGre only a small number of cusLomers who accounted for u

20 significant part of the company's business; is that fair?
?1 P.

Where corrnunications plans have not been successÍ\J'i,
Gut that's not the case with Coram, is it?

22 that's correct.

.

23 Q

24 A
25 Q

No.
Okay, Coram has hundreds, if not thousands, of referral

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Victor - Cross/Tomashefsky
1 sources.

169

.' A That's correct.

3 Q So getting back, though, you do have a fear that if Mr.
4 Crowley were to leave and a crisis manager were brought in,
5 some 01 Coram's managers might leave.

6 A Around the country, yes.
7 Q But you'vo seen strategies implemented at other. companies
8 to address that concern when crisis managers ar.e brought in,

9 haven't you?

10 A

To try to allay those fea rs, I have.

.

1J Q

And those strategies are principally good communication

12 and a key employee retention program.

13 A
14 Q

A very far and wide key employee retention program,

yes.

And in your opinion it's possiblú that an effective

15 communication strategy and a good key employee retention
16 program would be Ii kely to succeed in persuading top managers

17 to stay at Coram if a crisis manager were brought in.

18 A

In this particular Case I don't know if it's like~y, but

19 it certainly could be put in place, but I believe that the ke~
20 employee r.etention really would have to go to many, many, many

21 people, not j list in the Denver corporate office, but I think . n
22 the offices around the country that actually see the patients.

.

:n Q

Um-hum. Well, you said you didn' t know whether it was
It is possible.

2~ likely. You do think it' 5 very possible.

25 A

.

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1 Q

It's very possible, isn't it?

2 A Is it very possible not to lose key employees? I'll sayl!

3 :i.t's clearly possible" 4 Q Well, in your deposition, at Page 73, you were asked the
5 question, "Do you have an opinion as to whether with an
6 effective communication strategy and a good key --" KERP or k "Y
7 employee -- that's key employee L.¡~tention plan -- "top manage s

8 could be persuaded to stay at Coram if a crisis manager was

9 brought in?"

.

10 Mr. Barkasy objected. "Could be, as is it possible that 11 could happen?" r suppose he meant or is it possible.
17.

The witness, that's you, "It would help."

13

And the question was asked, "Do you have an opinion one

14 way or the other as to whether an approach would be likely to

15 succeed?

16 And your answer was, "It's very possible. n You did say 17 that.
18 A
I'm -- if I said that in the transcript after seven hour ,

19 I said it on the transcript.

20 Q

And it would bo correct to say, Mr. Victor, that no top

71 manager of the company has told you directly or indirectly th t

22 he or she would 1eavè the company if Mr. Crowley no longer wa

.

23 the CEO.

24 A

Tha t' s correct.

25 Q

And as of a few days ago, as of the date of your

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V lctor - Cross/Tomashe£s ky
1

171

deposi tion at least, you could not j dentify a single competitor

2 of Coram that was hiring Coram's managers; isn't that right?

3 A

That is right.

i I

4 Q

It's fair to say, Mr. Victor, that you do not believe thbt

5 Nr. Cro"iley' s serving as CEO is critical to the decisions of

6 Co.ram's top managers to stay with the company; isn't .it.?
7 n i don't think 1 can say that. I think that many of the 0
8 managers are there and look to the reorganization of this

9 company because Mr.Crow1ey is there today.

10 Q

But you wouldn't say he was critical. Let me rephrase

.

11 that.

12 You wouldn' t say it was critical that Mr.
13 to get them to stay, would you?

Crowley be Lhe-e

14 A

It depends on whether this KERP plan and a crisis manage

is and if a good cornmunications scheme could be put in place.

16 Q

But you don't know whether it' 5 critical at the moment;

17 your best characterization is lL's a fear. Is that right?

18 A
19
~1r .

It is a fear that T have had for quite some time that if

Crowley

left

we

would lose a

lot of the
Croviley' 5

key people a round

20
.?1.

the country, yes.
Q

And

as far as you know, Mr.

made no commi tment

22

.

23

to stay with Coram past the end of June. A That's my understanding, yes.
And as far as you knQ\.¡ Mr. Cro"il ey' s made no commi.tment 0

24 Q

25 Sbiy \.¡i th the company past a plan of reorganization's

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1 confirmation; isn't that right?
? A That is my understanding.
:3 Q 1'd like to ask you a. fe\.¡ qur.:stions about NL Cro¡Üey's
4 work at Cora.m.

5 In the COurse of forming your views of Coram' s operation~,
6 you've spoken to several potential purchasers or their

7 investment bankers to gather information; isn't that correct?

8 A I have.
9 Q You spoke, in fact, with three investment bankers?
10 A
11 Q

Approximately, yes.
And one of those was all investment banker from the Raymo d

..

12 James firm?

13 A 14 Q

Yes.
And that person told you, among other things, that Mr.

15 Crowley is not a well-loved person.

16 A

Thoso were his words.

17 Q And what he -- what he meant by that when you followed u
18 was th~t Mr. Crowley -- that employees, managers and other
!

19 people in the industry considor him arrogant; is that i"ight?
20 A
21 Q
Those were the words of this particular investment banke-.

And apart from speaking to this investment banker, you

?2 formed an impression in the course of your work interviewing

.

23 several people at Coram that they fear Mr. Crowley; isn't tha'

24 right?
2S A
Some I -- my own impression was that Some of his employe s

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Victor - Cross/Tomashefsky i73
i

1 did fear him, because he w~s a tough manager. He has brought
2 great discipline to this company from what we'v8 seen.

3 Q But the impression of fear actually runs from the very t p
4 managers down to the branch managers; isn't that right?

5 A IVly irnpres s í on, some, yes.

6 Q Now, you, yourself, have met Mr. Crowley in the course 6
7 performing your work, haven't you?
8
" n

Befor.e today we actually meL once in a face-ta-face

9 meeting Ü¡ Denver, that's correct.
10 Q
And when you met him at that face-to-face meeting you

11 actually questioned him about the conflict of interest iSsue

~

12 that was dl.scussed jn Judge Walrath's opinion in denying

13 confirmation.
14 A
1,1 Q

1 did.
And during that discussion Mr. Crowley blamed it all on

16 his counsel, didn't he?

17 A 18 Q

He did. He felt it was an oversight of debtor's counsel
Indoed, your impression of that conversation is tha t he

19 felt it was much ado about nothing.

20 A

He felt that he was being unfairly crucified throughout

21 this proceeding because of that, yes.

22 Q

But he -- the impression you got was that it was much to

.

23 do OVer nothing *
::4 A

Yes.
Now,

25 Q

there's been some testimony today, in fact Some

froi
i

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Victor - Cross/Tomashefsky 174
1 you, about My. Crowley's performance as Coram's CEO. And a lot
2 of that testimony is to the effect that Coram's doing better
3 now than it was beforo he became the CEO; ian't that right?

4 A from what

5 Q Well, you haven't heard a lot of that testimony.

6 A I haven' t heard any of it. We ware sequestered, but I d
"l beJi.eve the company is peL"forming very well today, yes.

8 Q But you \vould agree that campa ring tho company's
9 performance today, òt least judged by its EBITDA, e-b-i.-t-d-a,
10 in 1999 compared to its EBITDA today is not really an apple:: ,0
11 apple:3 comparison, is it?

-

12 A No, only in that the company was ver.y difíerent j.n the
13 late nineties than it is today. It was in the midst of
14 essentially a roll-up, so when I look at the company's
15 performance in the late nineties to normalized operatj ons

16 today, it is different.
17 Q
The company was rolling up all of the elements t.hat form

18 Coram toda~y', right?

J 9 li
2() yes.

It was, and Lhat had been completed certain.1y by '98, '9 1

21 0

Okay. And also there was some unusual cir -- or

;::2 extraord.inary circumstances affecti.nÇJ the: company's rJerforman e

.

23 in 1999 when iLs EBITDA was zero or ne9~ltive; is thùt right?

24 A
25 Q

Yes, there was that Arnst proceeding.

Now, EßITDA's a fairly important measure of a company's

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Victor - Cross/Tonèâshefsky

ils

1 performance in your view; is that a fair statement?

~ A It is one of a -- one of a few very important measuring
3
4

sLicks, yes.

Q And it would be correct to say that over the past three
years Coram's EBITDA has not been consistent, and it's gcme u.

5

6 and down and up; ian't that right?
-7 A It has spi. ked. It was -- it was up in 2 000, down i. n ? 00

8 and the up again in 2002.

9 Q Um-hum. Another measure of a company's performance woul
10 be its accounts receivable collection, wouldn't it?

.

11 A Yes.

12 Q Okay, and in your view the company's accounts recei vable
13 collections have not been improved in the way they should be 14 improved; is that fair?

1S A

I think they can do better, and I think they have been

16 trying to do betLer.

17 Q But it's not been improved the way it should have been

18 improved in your view.
19 A It has not been improved drastically in the number of da s
20 that the medical receivables are outstanding.

21 0

In fact, that's your greatest criticism of current

22 management, is that they have not managed to decrease the

-

23 number of days that accounts receivable remain outs

Landing .

24 A

That is correct.

~5 Q

All right, I'd 1 ike to ask just a few questions about wh t

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Victor - Cross/Tomashefsky i 6
i the future holds, since that seems to be, in part, what we'rG
r, L

here about todav. L
I

3 Until last. week when you learned about some docu!Ien I:S th t

4 Mr. Crowley had produced in cHscovery, you had no idea that ¡v.I_.
5 Crowley had c~ntinued to do any work for Cerberus during 2002'

6 isn't that right?

7 A That is correct.
8 Q And at your deposition, shortly after you learned about
9 those documents, my partner, Mr. Bradford, asked you whether

10 you thought i i:. was imprudent for Mr. Crowley to contj,nue to d

.

1 i work for Cerberus, to do work for Cerberus while he was

12 employed as Coram's CEO; do you recall that?

13 MR. KIPNES: Objection. No foundation and ~n

14 incomplete hypothetical.
15
i 6

MR. TOMASHEFSKY: Just asking him if he recalls

beT
I

asked a question.
THE COURT:
MR.

17
18

Yeah, what -I apologize.

KI PNES :

19

THE COURT:
THE WITNESS;

Overruled.
I recall a question that I was -- thaF

20

7.1 I was asked about whaL my impression was when I hea4d that he

22 was still looking at transactions for Cerberus, something lik

.

23 that, yes.

24 BY MR. TOMASHEFSKY:

25 Q

The question was, if you recall -- maybe this'll

refreShl
!

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Victor - Cross/Tomashefsky
1 your recollection -- do you think it' 5 imprudent for Mr.

i 7

2 Crowley to be continuing to do work for Cerberus while he's

3 employed as the CEO of Coram? That was the question. You we-e
4 asked that?

5 A Yes, you just -- I t.hink so. You just read that.
6 Q Right, and at your deposition the Trustee's counsel
7 instructed you not to answer that question; is that correct?

8 A I honestly don't recall, but ( take your word for it.
9 Q But you do have COnCorns, Mr. Victor, about keeping
10 Crowley on because in your own words, he taints the process,

.

11 doesrl the?
12 A
1 think the two issues that Mr. Crowley has had before

13 this court, one in the first plan confirmation where he had a
14 failure to disclose that relationship, and the one in the
is second plan confi rmation dcni¿:l where he was still get ling

16 compensation ~rom Cerberus and a conflict of interest was

i 7 there. I think that's why we're all here today_ If that
18 didn't happen, none of uS would be here today.

19 Q

And that taints the process.

20 A

I think it has tainted the process, which is why we're

21 here today, but I believe that process has been cured, becaus
72 that's why a Chapter 11 trustee was appointed 1 ast March.

.

23 Q

You say that as i: -- as a legal opinion or as' a business

24 opinion?

25 A

Both.

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Victor - CrosS/Tomashefsky 1'8
I

1 Q

You've not been retained by this cst~te to render legal

2 opinions.
:- Pi.

No, I hi:ve not.

I i ve hung up my legal hat several years

4 ago.

5 Q Okay.
6

MR. KIPNES: Your Honor, he's asking the witness' 5

7 opinion. He doesn't like the answor, and now he's trying to
" v

THE COURT: Overruled if that's an objection.

9 tlY MR. TOMASHEFSKY:

10 Q

Would it be correct to say though, Mr. Victor, that it's

11 your opinion that keeping -- if keeping Mr. Crowley on as the

)

12 senior executive at Coram would preclude Coram's exiti ng

13 bankruPtcy before the end of this year, that it would be a ve y
11 bad thing to keep Mr. Crowley on as a senior executive?

15 A An y
16
17
18

MR. KIPNES; Objection.
THE COURT: What's the objection?

MR_ KllNES: It's a hypothetical. He's asking for

19 his legal -- now he's asking for his legal opinion?
?0

MR. TOMP.SHEFSKY: No, I'm just asking his opinion.

21

MR. KIPNES: J s he -- are you

is part of the

22 question that by definition the company is not out of

.

23 bankruptcy this year?
24

THE COURT: He's aski ng a hypothetical. I'li

25 overrule. You can answer.

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Victor - Cross/Godnick 1 9
i THE WITNESS: I think anything that precludes this
2 company from emerging from Chapter 11 by the end of the year s
3 a bad thing.
-1 BY MR. Tm1ASHEFSKY;

5 Q And if keeping Mr. Crowley as a CEO or senior executive n
6 this company would slow that process down or make it impossib e

7 to exit bankruptcy before the Gnd of the year, then in your
B opinion keeping Mr. Crowley on as a senior executive would be a
9 very bad thing.

10 A Same answer. If that or any oLher thing precludes this
11 company

from getting out of bankruptcy by 12/31/03 that's a b d

)

12 thing.
13
14
Q

Thank you, Me.
MR. MR.

Victor.
No

Tm1ASHEFSKY:
Bl-\RKASY;

fur"ther questions.
Your Honor.

15 16
17 18
BY MR.

I'm Very

sorry.

MR.

GODNICK:

briefly,

CROSS EXAMINATION

GODNICK:

19 Q

Sír'?

20 A
21 Q

Yes.
Counsel referred you back t your deposition and he asked

/.2 if you recalled being as ked a question, and this is OIl Page 9

.

23 of the transcript, not Page 73 as you indicated.

24 "Do you have an opiníon as to whether with an effective
25 communication strategy and a good KERP program top managers

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Victor - Cross/Godnick 181
1 could be persuadod to stay at Coram if a crisis manager was

i

2 brought in?"

3 He appropriately pointed out thut there was a~ objection.
4 You stated, "It would help."

5 Question, "Do you have an opinion one way or another as t
6 whether an approach would be likely to succeed?"

7 And he referred you t your answer, Answer, "It' 5 very
8 possible."

9 Do you recall that?
10 A
11 Q
On cross, yes.

Okay, do you recall what e1 se you said at your deposition

")

12

immediately following, "It's very possible"?

B A I might have said, "I just don't know."

14 Q Okay, does it refresh your recollection if 1 say -- I tel. 15 you, you said, quote, "I can't say whether it' 3 likely or
16 unlikely or more likely than not, but it is the way you deal
17 with a situation like this, yes."

18 And then there was a question, "What specifically about
19 Coram would cause you to believe that such an approach would b
20 less likely to succeed than it ordinarily would?"

21 And your answer was, "Because there are 50 many offices i
~2 so many different locations that the key people are the branch

.

23 managers, the people viho are managing the specific ther¿ipies a'

24 each place. Those arc the ones that will likely be cherry
25 picked. I think for a KERP plan to be truly effective in a

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Victor - Redirect
1

caSe like Coram, you really need to have that KERP plan go
and wide which they usually don't."
Do you recall giving that answer?

fJ
i I ! I

2
3

4 A I do.
5 Q And, in fe:ict, is that your view today?

6 A Absolutoly.
7 Q Thank you.

8 REDIRECT 8XAMl NATION
9 BY HR. KrPNES:

10 Q

What's the derivation, if you know, of tho term "crisis

11 mana.ger"?

)

12 A 13
Q

There's

a
a

crisis.
cris.1s at Coram in your
manage.i" come
v iriw?

Is there
No.

14 A
15
Q

Could a
Yes.

crisis

in and absolutely

bomb?

16 A

17 Q

And that would not be a good thIng for the company. woul

18 it?
19 A

No. the company is performing i"lel1..
Do you have any estimate Lhat you can give us of the cos

20 Q

21 of the kind of KERP program you thj nk would be nccess~ry in

22 order -- that you would like Lo see put in place if Mr.

.

23 Crowley's to be replaced?

24 A
25 Q

Cost or number of poople?

Either way. Start with the number of people.

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Victor - Redirect

d2
I

1 A

Number of people,

1 think you would need 160 to 200

peop~e
!

2 to be included in the KERP plan to really keep the managers
3 nationwide from being cherry picked.

4 Q Do yoLl have any idea of what the minimum number, dollar
5 number, you would have to give one of these managers in order
6 to be sure that they would stay in the face of Mr. Crowley 7 leaving anò a crisis manager being brought in?

8 A
9 Q
10 A 11 Q

Per inòi vidual?
Yes.
I would say probably minimum $50,000.

You were a very experienced bankruptcy lawyer in your

)

12 former life, correct?

13 A 14 Q

I would like to think so.

I just said experienced. I didn't go any farther.

15 How could Mr. Crowley qive the T.nistee a com.rnitmcnt that

i 6 he would stay beyond a plan of reorganization?
17 A
)p -'
Q

I don't think ho can.

Would you think that a person, not necessarily Judge

19 Adams, but any person looking at this situation who decided
20 that it would be in the best interest of Coram to keep Mr.
21 Crov/ley in place for another four months would have no ration 1

22 basis for reaching that conclusion? That was a horrible

-

7.3 question.
24 A
?5Q
Wow, that was a tough question. Could you ask that agai ?
Do you w~nt me to ask -- do you want me to ask that one

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Victor - Redirect

il3
i

1 again?

2 A Yes, please.
3 Q Is it unreasonable to conclude that Coram is better off
Lj

with Mr. Crowley in place through a reorganization process thin
replacing Mr. Crowley with a crisis manager?

5

6 A Yes.

7 Q Would that be unreasonable'?
8 A No, it is very reasonable to keep him under these
9 circumstances, and that's been my opinion personally.

)0Q

You were shown these obj actions for which 1 personally

11 apologize. Were you ever made aware that these objections we e

~

12 corrected?
13 l\
14

No, I never saw these before.

Q Are you aware whether any of the current folks at Coram I
Some.
So, they moved with Mr. Crowley at least once as far as

i ", came with Mr. Crowley?
16 A 17 Q

18 YOll know.

19 A

Some.
I think you said that anything that "lQuId stand .in t.he w y

20 Q

21 of this company coming out of reorganizat.ion this year would e

22 a bad thing.

.

23 A 24 Q
25

I did say that several Limes.
Thank Y011.

MR. KIPNES: I have no further questions. I think

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Mr.. Bressler - Arçrument

1

1 have no furt-her questions.
2

THE COURT; Well, I have a question.

Is the Trust.e

3 currently -- or have you had any discussions with the Trustee
4 currently about ~ny extension of the current KERP?
5 6
7 8

THE WITNESS: No, I have not.

THE COURT; All right, thank you. You may step dow .

THE WITNESS: Thank you.
MR. BRESSLER: The Trustee rests, Your Honor.

9

THE COURT: Any

no witnesses by the Committee?

10

All right, 1'11 hear brief argument.
Let's take a ten-minute recess.

,

11
12

Yes, I have to be out of here by 4: 30.
(Rece.5s)
MR. BRESSLER; Your Honor, you read the papers,

13
14

15 you've hear a lot of testimony. 1 think I'll starL out by
16 saying thank you for your attention and direct you merely to
17 the response of the Chapter 11 Trustee in opposition to the
18 Equity Commit.tee's motion.

19 We believe that that sets forth the accurate standa d
~o to be applied heL'e, i.¡hich is the Tr.ustee' s business judgment:.
21 He has properly exercised his discretion and his belief, and n
22 an informed way in good faith, continuously keeping in mind, s

.

23 he said, Your Honor's prior rulings.
24

Equity has generated lots of documents, and those

25 produced actually supporL whQt Mr. Crowley's been telling the

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Mr. Bressler - Argument
., .L

1jS

Chapter 11 Trustee and don't vary from it, and do not show

that
!

2 he's taken any money in 2002 from any other parLy, LhaL he's
3 done -- tried to collect any money fU.:lH\ any other party for

4 work done for Coram in 2002, or tha L in any way his efforts f r 5 anyone else, fortuitous or otherwise, have detract.ed from his

6 performance at Coram.

1 Performance shows s Lability, profitability and a
8 situation that should remain as the status quo until the plan

9 can be confirmed. There hasn' t really been any showing as to
10 why Equity has waited for I guess two and a half years or

11 certainly more than a year since your last opinion to fi Ie th' s

.,

12 motion.

13 The agreement that's been entered into with the
14 Trustee by Mr. Crowley now specifically states, and Equity ha

15 16
1.7

said where is there i: dOClUn8nt? Here is a documen I.: that l3ays, YOL! shall not do any more work of any ldnd for the next si.x months or any of t.he noteholders or any of the preferred
And we now lwve the documonts tha.t shovi that

18 stockholders.

19 l"lr. Crowley has completely terminated in every which \vay othe
20 than possibly having a monetary claim ensuing any relationshi

21 he has with Coram -- with Cerberus, and that presumabl y i s th

22 only reason that we're here today..

.

23
2'1
-, i: LJ

these circumstances, Çjiven the latene.'s of th day, reminding the Court that Equity h;:sn't shown j n ;:ny way that the Trustee's business judgment is not informed and is n
Under

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186

1 basod on his thorough ohsei:vation of the coinpany, its
2 employees, consulting with his advisors, doesn't seem to be a
3 reason to not grant the motion, and certainly specula

lIon abo

4 ,ihat somebody cO\.ld spend five or Len million dollars on for

~ some sort of a crisis manager for the next four mQnths would
6 something that Lhe Trustee -7

THE COURT: Where do you get five or ten million

8 dollars for a crisis manager? I've heard Mr. Victor say 80,0 0
9 a month. 10

MR. BRESSLER: No, I understand the 80,000, but

11 $~O, 000 per person for a KERP plan for 125 people to go with

.l

12 that.
10) oJ

THE COURT: Well, do you intend to. file any extensi n

14 of the existing KERP ëlfter ¡vjar.ch 6'?

15

MR. BRESSLER: The answer is yes, Your Honor, we

16 consider.ed that, and we arc working on numbers.

You may

17 recall that when we filed last time both the KERP and the MIP,
18 the Management Incentive Plan, the Trustee -- and his dir.ecti n

19 I'm sure will be the same -- squashed the numbers down from t e
20 two larger niimbers that bad originally bGen recommended by
21 management into a smaller amount and aJ so, as you heard, tied

22 it to company employee agreed

employee agreements to

.

23 continue on for six months in order to earn the money, and we
24 are in the process of considering that now.

25

We have recommendations from management. It is the

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11 'I i

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Mr. Levy - Argument 1 J,
i opinion of the Trustee's odvisors that the numbers recommende1
2 by management. are numb(~i:s that he would not: be agreeable to. I
3 And we r J. i be filing an extension, but it wiii be in -_
4

THE COURT: Remind me what -~
MR. BRESSLER: -- significantly smaller amounts.
THE COURT: Remind me what the last KERP entailed.

5
6 7 8

MR. BRESSLER: The last KERP was -THE COU RT :

In dollars.

9

MR. BRESSLER: The last KERl was approximately a

10 million-two, I believe. And there was also, in addition to
11 that, a branch incentive plan, and I do not recall the exact

)

12 number of that for the next layer of employees down, but for

13 the top 40 emplo::ices it ,,¡as roughly a million-two.
14
Jl.nd that was a combination of both the management

IJ incentive plan and the key employee retention plan.
i6

THE COURT: And you're seeking a million-two to get

i 7 Mr. Cr.owley to stay 'til June 30.

18

MR. BRESSLER: We arc seeking $800, 000 plus off the

19 $200,000 reimbursement of his legal fees, after a rathGr

70 protracted negotjation to get to that point.
21

THE COURT: All right, thank you.

22

MR. LEVY; Your Honor, we are not questioning Judge

.

23 Adams 1
24

businoss judgment.
So

f\1r. CI'ovlley may

be thù

best manager
a

25

far as I know there is no competency exception to the rul e that says thaL a corporate officer,

in the world.

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Mr. Levy - Argument i 8 8
1 CEO, cannot have a conflict with a maj or creditor. We have n t
7 contested how well the company is doing.
It gives \15 some

3 heart that when we come to confirm our plan perhaps somebody
1 will take -- believe what we've said, that it's valuable.

S That's not the issue here.

6 The issue here, Your Honor, is that no plan can ever
7 be confirmed if you have a conflicted CEO, and make no mistake,

8 Mr. Crowley is the CEO. Why e1 se is he getting -- or are the

9 trying to give him a million dollars? There are -- as Your
J.O Honor said in a number of prior opinions -- hundrecb of

11 decisions what he does is pervades everything that goes on wit 1

)

12 the company.

13 Now, Your Honor, we don't have a problem with Judge
14 Adams' decision that he chose not to investigate the conflict.

15 Judge Adams is one of the most experienced jurists in this
16 country, and if that's what he decided to do, that's fine.

17 Judge Adams conceded on tho witness stand that the issue of a

18 conflict is not a business judgment issue. It' 5 an issue to
19 decided by this Court.

20 I don't think you need to determine today
~1 definitively that a conflict exists. I Lhink what you need to 22 do is look forward. Are we going to confirm the plan in four

.

23 months? Two years ago, as we all know, we couldn't confi r.m a
24 plan. A year ago we couldn't confirm a plan, both because of

25 Mr. Crowley. And this yoar we won' t be able to confirm a plan

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Mr. Levy - Argument

1819

1 if Mr. Crowley is there.
2

Now, why is there still a conflicL? Well, first of

3 all, Mr. Crowley says, "I'm working pro bono." That's an
4 insult to the

word "pro bono". He's not working for free.

5 He' s worr~ing fot' favors. He said it himself. lie's working

6 because he wants Cerberus, who he wants, what is it, five, ten,

7 fifteen million dollars for, to be nice to him, to pay him tha

8 money. That's a conflict:. lIe's the CEO. Cerberus is the
9 major creditor. And there's no pro bono here. He may not be
10 getting paid 80, 000 a month, but he sure is trying to get

11 something back.

)

12

Second reason there's a conflict.

Your Honor, T
And he may try an"

13 think we've really seen who Mr. Crowloy is.

14 say, "Well, I didn't mean it. It was attorney-client
15 privilege, N but he wrote a memo. He wrote a memo, and he says
i

16 he's angry. Ho Is angry at Mr. Feinberg because he got -- he I

17 got stiffed. Now, what is he write in the memo? He says,
18 not really angry at you." Instead he says,

"1./ r"

"I didn't have

to

19 recite what Friedman told me. I didn'L have to write that EC20 .320 memo."
2 1

What was he doing? I think he was planning -- I
I'm not suggesting that Feinberg got it.

22 don' t know whether

.

23 I don't knO\". Maybe in the fullness of time wc'll find out.

21 But what was his .'3tate of mind? Be was going to spill the

25 beans on Feinberg. Be was going to say, "Yeah, I perj urad

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Mr. Levy - rgumen _ ~v
I

A t l,,__h,

I

i rnysel f. I recited what they said. Yeah, 1 wrote that memo arili
') "-

lied about i.t." And yes, he thought bett.er. He never sent iJ1,

3 But that's not important. What's important is that there were
4 bills to -- there were beans to spill.
5

And that mGffO, the one that Mr. Schreiber wrote,

6 $11,200/000/ that's the same amount, approximately, that Judge

7 Adams remembered as the amount he claimed. Now, if in fact --

8 the most important question I asked is if Schreiber didn't, get
9 these ideas, these three commitments, pay him the di. fference,
10 pay him $5 million and reinstate him, pay his leqal fees, if h 11 didn't get them from Mr. Crowley, where could he have gotten

)

12 them from?

13 There may be an answer. Mr. Schreiber's sitting
14 right there. He could have gotten on the witness stand and

15 told us. He didn't.
16
Now, Your Honor, as far as this sky is falling

17 argument, you know, I saw three professionals. They're going

18 to stick with it. They have pride in this company. I think i19 they'ro fairly compensated, why should they go to someplace

20 else? I don't think the sky is falling. I think we all are
21 desperatê to get a plan confirmed, our plan, their plan, if

22 it's fair to us. We stiii haven't seen their plan for a reaso

.

23 we'll never, never understand. But these people are going to
24 soldier on, Your Honor. I bel ieve that. I think we ough t to 25 get rid of Mr. Crowley, we ought to clean up this company _ An

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Mr. Schreiber - Argument
1

finally, the notion to pay him a million dollars so that he'll

J

2 stay for six months, first of all, it really puts the lies to
3 all this pious testimony about how much he cares about the

4 company. Why couldn't he wait SiX months if he cares about th
5 company': ~Tudge Adams doesn't li.ke it.

It's unfair. He

6 blackmailed us once, six months or four months. He'll
7 blackmail us again.

8 Thank you very much.
9

MR. SCHREIBER: Your Honor, I was hoping to have an

10 opportunity to speak before Mr. Levy, but he certai~~,~cl. put me I

11 to the challenge. .I: think there's .ceally only two i;:.L,ues here,

~

12 and the first one is a slam dunk winner. First one is whether
13 the Trustee has reasoned business judgment to make his

14 decision. And I think we all concede that the Trustee's

15 intogrity is something we'd all like to aspire to. No one
16 questions his integrity at' his reason business judgment.

1'1 The second is obviously the conflict, tho conflict
18 that has pre-dated my existence in this case, and it' 5
19 something that I want to address in just a minute.

20 But first I want to talk a little bit about the thre
21 rules that the Trustee gave my client, Mr. Crowley f when they

22 met in early t1arch. They were very simple rules.

first, no

.

23 Cerberus money. He accepted that. The $80,000 a month, Mr.
24 Crowley had not received that for t.hree months. .He ha~:m' t

2S received it since December of '01,

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Mr. Schreiber - Argument
1

19l

Second, he can look at other businesses for cerberusf

2

but not businesses that conflict with Coram. And he did that.

3 My clienti 1've discovered over the past fourteon months as
4 I've represented him for the firs t time ever, has two great

5 habits. One is he loves to look at businesses, challenges,

6 deals. ßnd the second is he likes to write things. We'll get
7 to that in a second.
8

The third rulü is that none of these investigations

9 of Cerberus matt'ers should be on Coram time. And no one has
10 said that any of these investigations were done on Coram time.

11 So, I guess what I'm saying in a nutshell, Judge, is that Judg

l

12 Adams laid out three ground rules, and Mr. Crowley lived by

13 those ground rules.
14

Judge Adams approved the ongoing discussions wi th
Cerberus and ~eCOgniZed that Cerberus owed. my client a lot of I,

15

16 money. Now, 1n the perfect world I'll toll you, Judge, I woul~
17 18

have wished -- and I negotiated hard for that payment to be ¡
made and this portion of the relationship över.

i

But that I

19

didn't happen. Cerberus didn't want to pay for reasons which .

20 don't understand at this point, but that's irrelevant.

21 The reality is, is that my cl tent got very
22 frustrated. And he has a tendency to write, as well as doi as

.

23 Your Honor is doing. We like to write things.

I i ve done it

24 myself in writing. As he said, a lot of times he writes
25 things, he puts lhe on the side of his desk, and they sit ther.

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Mr. Schreiber - Argument
1

19r

for awhile. Sometimes he re-writes them. Sometimes he sends.
them to me, and I keep them and I make marks. I throw them inl
I

2

3 my file.
4

But we write our ideas down so we don't do other

5 things, so we don't act on them sometimes. We write our
6 thoughts down 'cause we're frustrated. And when we're owed a
7 lot of money from somebody and someone invites you to New York
8 because they want to meet you face to face to make an offer to
9 settle it, and you don' t get that offer, you get nothing,
10 tha L' s a pretty frustrated experience I imagine.

11 And I certainly don't criticize my client for writin

)

12
~, 1-:

down some words

that miqht or might not have been accurate at the time, might have been how he was feeling, might have
ma ybe

14

might hùve been

too at.rong.

Wha t:.;ve ¡: .

That's his

is tendency.
16

We'rc not here to confirm a plan, Judge. We're here

17 to question whether or not it' s appropriate to give Mr. Crow) e

18 essentially the same sort of KERP stay bonus that the other
.19 Coram employees got. He's noL getting a mi.llion dollai:s today

20 He's getting a million dollars -- he's getting $200,000 now.

21 And he's getting some more money in four months. It w~s
22 supposed to be six months, but it's taken us lwo months to get

.

23 here.
24
2i:) .

So, clearly there's the same sort of tie-down that
every other employee of Coram has had.

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Mr. Bressler - Rebutt.al Argument i9~
1

Finally, ,Tudçre, we did hedr a par.ade of horribles.

2 We did hear, as Mr. Levy says, thø sky if fallinq. I hate to
3 use this analogy r but I will.
I mCdri someti,mes it's batter to

4 stick with what you know than what you don't know. When you
5 have a vary fragile enti.ty that's been in bankruptcy for two

6 and a half years, where we have a president who's done nothing
7 but keep this company from going to total ruin, we have a

8 Trustee who's investigated this company and feels comfortable

9 with this management. Do we really want to change horses in

10 midstream, Judge? I think not. I think $800, 000 is a lot of
11 money.

I think a million dollars is a lot of money. But I

)

12 think it' 5 fair, I think it's what the Trustee has dcterm~ned,

13 and as the guy on the other side of those negotiations wi lh th
'14 Trustee l' ii tell you. It was a hard-fought batt.le. So, I

15 respect his position, and I hope that Your Honor will as well.

16
1'1

Thank you.
MR. BRESSLER: One or two short words of rebuttal,

18 Your Honor. This is a Trustee's motion, not the motion o£ the
19 debtor in posscs5ion or of the debtors. The cases we cite mad
20 it clear that the Trustee, even if ther.e had beon d conflict

21 under certain circumstances, could retain Mr. Crowley.

22 We submit that there hasn't been any showing, and

.

23 yes, the Trustee recognizes that Mr. Crowley says he has a

24 claim against Cerberus. Your Honor heard a lot of testimony
2~ about that. The Trustee has not taken any position On that,

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~

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Decision
1

and has kept out of whatever monetary claim Mr. Crowley may

J

2 have against Cerberus.
:3

MR. LEVY: Mr. Schreiber said we ought to stick with

1 him. Merely resonance of what the director' 8 witness, Mr.
5 ~neral said, "Well, he's doing a good job, let's stick with

6 him."
7

And the cases that Mr. BressJ.er talks about do talk

8 about people who in the past have a conflict. I certainly
9 think his past conflict twice colors what happened here today,
10 but it is the ongoing relationship that troubles us so.
11

Thanks.

)

12 THE COURT: Well, l' m going to deal wi th the
13 Trustee's motion for approval of the extension. And in doing
14 so, I agree that it is the business judgment. rule that I just

15 consider.

16 'ro express my feelings I'm going to paraphrase
17 someone I think epiLomizes the business judgment rule, and tha.

18 is Warren Buffet. And he has said that the ideal employee is

19 someone who's smart, hard-working and honest. But if the
20 employee isn' t honest, you darn well better hope he's stupid

21 and lazy, because otherwise you're in trouble.

22 There is no question in this case that Mr. Crowley i'

.

23 smart, hQrd-working, a brilliant businessman. But I do not
24 believe he is honest. And his testimony today has not
25 convinced me that he has changed since the last time he

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Decision

19 )

1 testified.
2

Judge Adams has an impeccable reputation for

3 integrity. Quite frankly, I don't want his reputation or mine
4 sullied by approving continuing employment of an employee that

5 I do not believe to be an honest person. I think being asked
6 today t.o trust that Mr. Crowley is complying with the Trustee'

7 request simply because there is no proof that he has not

8 complied with the requirements imposed upon him by Lhe Trustee
9 goes too far, given the fact that he has previously failed to

10 disclose relevant information. And quite frankly, the draft
11 documents that were produced continue t.o show at least in May

)

12 of 2002, after the appointment of the Trustee, continue to sho

13 what r believe is a continuation of Mr. Crowley's continued
14 efforts to continue to get i~eimbuL.scment from Cerbe:tus for

15 efforts undertaken in this casco

16

It's a belief I have. There is no evidence that an

17 agreement was reached with Cerberus or that Cerberus

18 participated in it, but I think that the drafts show that Mr.

19 Crowley sought to have that continuati on, sought to be paid,
20 albeit after confirmation, that is after he was no longer
2 i subj ect to the jurisdiction of th j.s court, sough t to get

22 remuneration for efforts taken in this case, which quite

.

23 frankly is not permissible.

24
_ 2,;I

And given that belief, I will not approve any
extension of employment.

I've said before that fortunately 0

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J
i

unfortunately I'm in the position where principles

can Ç1uide

!

2 me, even though it may result in financial harm to others. Bu
3 even saying that, I do ta ke into consideration that my decisio

4 will have or may have some adverse effect on the business
:, operations.

6 Rut I am satisfied that the employees that were put
7 in place befo:ie and by Mr. Crowley, the systems that were put

8 in place can survive Mr. Crowley leaving. There are plenty of
9 other competent, in fact, brilliant businessmen who can step
i 0 in, whether from within this organization or from without.
11

And I think it's more important t.hat the debtor,

1

12 under ~he supervision of this Trustee, not be tainted by any
13 suggestion that the senior executive has anything other than
14 100 percent dedication to this entity and to this entity alone.

15 So, I will deny the motion.
16
17 18

I'll look for a form of order, Mr. Levy?
Need we go any further?

UNI DENTIFIEn ATTORN8Y: I think Mr. Levy has a

19 motion.

20

MR. LEVY: Your Honor, we have a motion, and that.

21 motion calls for the termination of Mr. Crowley and an
2? instruction to the Trustee to pursue dj sgorgement of

.

23 compensation collected.
? 4

THE COURT: I'm going to hold that under advisement.

25

MR. LEVY; Thank you.

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19~
;¡ i I i i

THE COURT: Because the ramir iea Lions of my decision i

2 may have an impact on that.
.)
.,

MR. LEVY: Thank you very much, Your Honor.
THE COURT; All Tight?
We'll stand adj ourned.

4

5 6

UNIDENTIFIED nTTORNEY: Thank you, Your Honor.

7 (Recording ends)
" .0

*

k

-k

9

CERTIFICATION
I, Betsy Wolfe, certify that the foregoing is a

10

11 correct transcript from the electronic sound recording of the

)

12 proceedings in the above-entilled matter.
13

~PJ Ul1 15 Betsy Í!)olte
14

7Y1()J.Jlí eLi ~5
Date

16 ,J&J COURT TRANSCRIBi;RS, JI\)C.
17 18

19

20
21

22

.

23
24 25

B413