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Saturday, March 20, 2010
Vaughan Attorney Wants Out
By Richard Metcalf
Journal Staff Writer
Just days before a meeting of creditors in his personal bankruptcy case involving nearly $100 million in debts, Doug Vaughan's attorney is asking to withdraw.
"There has been a breakdown of the attorney-client relationship and a breakdown in communication," attorney Shay Meagle said in a motion filed late Thursday afternoon. "Meagle feels that these problems have rendered her unable to provide effective representation of the debtor in this Chapter 11 bankruptcy case."
The bankruptcy filing, which seeks to give Vaughan time to reorganize his finances and deal with debt, lists hundreds of creditors who invested money in return for promissory notes paying exceptional interest rates and secured by Vaughan personally and deeds of trust in real estate.
The filing lists total assets of about $17 million and debts of $97.2 million, and shows many loans were secured by the same properties.
Vaughan, a 62-year-old real estate executive, filed separate but related Chapter 11 petitions for himself as an individual and for his residential real estate company on Feb. 22. Meagle was paid a retainer of $15,000 at that time to represent Vaughan in his personal petition only, court documents say.
Meagle said in her motion that she had discussed her intention to withdraw with Vaughan, who "has indicated that he does not wish for Meagle to withdraw."
Meagle did not return a Journal phone message seeking comment.
Meagle's motion to withdraw comes a week before a scheduled March 25 meeting of creditors in Vaughan's personal case in U.S. Bankruptcy Court. A new bankruptcy attorney to replace Meagle apparently hasn't been lined up.
"If there was another attorney lined up, (Meagle) would have put it in her motion to withdraw," said Bill Davis, a bankruptcy attorney in Albuquerque who represents some creditors in the case. "It's unusual to see an attorney withdraw right before the creditors meeting without another attorney lined up. I've never seen it in 25 years."
Meagle's motion to withdraw gives no timeline for her departure, which Bankruptcy Court must approve.
The U.S. Securities and Exchange Commission and the New Mexico Securities Division are both investigating how Vaughan raised money from investors and how he spent that money.
Although no charges have been filed, Vaughan is seeking Bankruptcy Court permission to pay a $200,000 retainer to hire the Saul Ewing law firm, headquartered in Philadelphia, and one of the firm's Baltimore-based partners, Charles Curlett Jr., as personal legal counsel for the SEC investigation and any criminal charges that might arise from it.
Vaughan is also seeking approval to pay the Albuquerque law firm of Gorence & Oliveras as counsel concerning the New Mexico Securities Division investigation.
Twenty objections to the hiring of those two law firms have been filed in the case. Many of the objections, written by lawyers representing creditors, are essentially legal briefs arguing case law and other legal precedents to thwart payment to the two firms.
As Vaughan's personal bankruptcy attorney, Meagle must contend with those objections, as well as continue with the processing of what has turned out to be an involved Chapter 11 case.
As a sole practitioner — she has sometimes answered her own office phone when the Journal has called — Meagle would appear to have her hands full.
"She's in the middle of a battle that she probably didn't anticipate," Davis said when asked about Meagle's apparent situation. "I would think (Vaughan's case) would take at least one full-time attorney and paralegal, plus a receptionist to handle the volume of calls coming in."
Intense interest
The related Chapter 11 petitions by Vaughan and Vaughan Company Realtors have generated intense public interest.
The Web site for the New Mexico Regulation and Licensing Department, where the state securities division has a complaint form posted, went from an average of 10 to 12 hits a day before the bankruptcy filings to more than 200 a day at the end of February, said spokeswoman Bernice Geiger.
"Was it due to the media coverage of the Vaughan case? We don't know for sure," she said. "But we can't think of any other explanation."
The volume of public inquiries to the U.S. Bankruptcy Court Clerk's Office in Albuquerque led to the posting of direct links to each of the two Vaughan cases on the court's Web site, plus instructions on how to tap into its electronic filing system.
"We got lots of calls, e-mails and even people at the front counter — hundreds and hundreds of inquiries about what's going on," said Norman H. Meyer Jr., clerk of the Bankruptcy Court, about the decision to post the link. "We realized very quickly we had great public interest and had to do something to accommodoate it."
The Furrs Supermarket bankruptcy in 2001 was the last New Mexico case to get special treatment because of public interest, he said.
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