The dirty laundry about the Inner City bankruptcy are detailed in an 18 page court document filed in U.S. bankruptcy court in the Southern district of new York. In the filing, the creditors lay all of the blame at the feet of Pierre Sutton. The senior lenders are claiming they are now owed approximately $250 million after ICBC defaulted 2 years ago. The lenders also claim that a restructuring deal was put together for ICBC and Sutton pulled the rug out from under the deal, at the last minute, by changing out board members, including Charles Warfield (Warfield is still employed by ICBC just no longer on the board).
"On the eve of moving forward with this orderly chapter 11 filing, the parent company of the Alleged Debtors, at the behest of the parent company?s chairman, Mr. Pierre Sutton, forced the Alleged Debtors to back out of this deal, apparently to seek a greater recovery for himself and other existing shareholders. This decision was inexplicable, given that negotiation of the restructuring proposal had been ongoing for several month. Moreover, Mr. Sutton engineered removal of incumbent boards of directors at the Alleged Debtors and put in place new ?professional? directors. And, after having gone through months of negotiations, existing restructuring advisors either were dismissed or resigned and replaced with new ?hired guns.?
The creditors claim in their filing that the restructuring proposal included a 5-year employment agreement for Sutton at a base salary of $600,000 plus $20,000 in business related travle expenses. The creditors also claim the restructuring plan was approved by the Inner City board on August 13th then claim within 48 hours Sutton "commandeered the ICBC board of directors in order to block any further progress toward a restructuring agreement."
Dispatched from the board were Charles Warfield, Lois Wright, and Edwin Shirley, each of whom supported and voted in favor of the restructuring proposal according to the filing. "Mr. Sutton apparently proceeded to disavow the restructuring proposal. Thus, after over two years without any debt service payments, over one year of maturity, and several months of protracted, good faith negotiations with the debtors, the Senior Lenders have commenced these chapter 11 cases reluctantly, as a method of last resort to preserve the value of the Collateral for all stakeholders and to drive an otherwise stagnate default situation forward to a successful resolution."
We reached out to ICBC yesterday for comment but did not hear back.
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