US Dept. of Justice objects to Reagor-Dykes request to hire Chief Restructuring Officer

DOJ objects to Reagor-Dykes request

LUBBOCK, TX (KCBD) - In documents filed Monday, August 13, a United States Department of Justice Trustee has objected to Reagor-Dykes Auto Group's request to hire a Chief Restructuring Officer (CRO) to investigate the actions of the former Chief Financial Officer and anyone who may have been working with that person.

On Thursday, Reagor-Dykes Auto Group filed a motion to allow them to hire the CRO.

The documents say because of the departure of the former CFO and the current state of RDAG, the company and owners have determined it necessary to bring on the Chief Restructuring Officer firm. This person will also take on the duties of a Chief Financial Officer.

The documents Reagor-Dykes filed on Thursday say the CRO will investigate the former CFO, anyone who may have been working with that person, the owners of Reagor-Dykes and anyone related to ownership.

The US Trustee says in the documents filed today the CRO would have expanded powers which would permit him to independently investigate Reagor-Dykes' prior financial transactions and their owners and officers. The documents say these duties belong to a chapter 11 trustee or an examiner, not a CRO. They are asking the court to deny Reagor-Dykes Auto Group's application to employ a CRO.

The US Trustee states in the court filing Reagor-Dykes' motion to hire the CRO did not say who that person would report to, the CRO's fiduciary duties, or, if need be, the process by which the CRO would be removed. The motion also does not mention where the CRO's authority fits into the hierarchy of Reagor-Dykes' current management.

Below are excerpts from the filing today.

17. The problem with appointing a responsible person versus a chapter 11 trustee is that the Bankruptcy Code does not provide any independent powers to a responsible person.  The only types of fiduciaries provided for under the Code are trustees and examiners.  See 11 U.S.C. § 1104.  See also In re Adelphia Comm. Corp., 336 B.R. 610, 664 (Bankr. S.D.N.Y. 2006)(holding that court could not appoint independent fiduciary because no basis in Bankruptcy Code for their appointment).  Permitting Mr. Schleizer to serve as a de facto responsible person puts the estate at risk for actions taken under his authority.  For example, the Code does not define whether such a person is able to hire professionals, pursue chapter 5 causes or action, or carry out the functions normally reserved to debtors-in-possession or chapter 11 trustees.  The Court – or an appeals court – may reverse any actions taken under Mr. Schleizer's authority.  In contrast, a chapter 11 trustee has clearly defined powers under the Bankruptcy Code to hire professionals and pursue such causes of action.

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