Judge says Mastro guardian can't be paid from funds for creditors
Judge Marc Barreca turned down a bid by the guardian for the now-incapacitated Michael R. Mastro to pay her, and her lawyer, from funds administered by Mastro's chief adversary, court-appointed trustee James Rigby.
Seattle Times business reporter
A federal bankruptcy judge closed a short, strange chapter Tuesday in the long-running bankruptcy saga of former Seattle real-estate magnate Michael R. Mastro.
Judge Marc Barreca turned down a bid by the guardian for the now-incapacitated Mastro to pay her, and her lawyer, from funds administered by Mastro's chief adversary, court-appointed trustee James Rigby.
That's the same pot of money from which Mastro's many creditors might one day recover a fraction of their losses. The bankruptcy is Washington's largest ever, with Mastro reporting debts of $570 million.
Mastro's guardian, former state Supreme Court Justice Faith Ireland, asked last week for compensation from Rigby's funds because she said Mastro couldn't pay her. She also said she needed her own lawyer because Mastro's longtime attorney had a conflict of interest:
As guardian, she argued, she's required to act in Mastro's best interests. However, she added, Mastro's lawyer is obligated to follow Mastro's instructions from before he was incapacitated — even if they aren't in his best interests.
Ireland's lawyer, Mark Walters, acknowledged in court that the proposal and circumstances were "incredibly unusual — I almost can't believe it."
Mastro suffered a serious head injury in a fall at his Palm Springs home two months ago. Ireland was appointed last month to represent his interests in a lawsuit, scheduled for trial April 18, in which Rigby seeks to recover millions from Mastro and others.
An attorney for Mastro's wife, Linda, said Mastro recently has experienced "significant improvement."
Rigby argued that his office shouldn't pay Ireland's expenses because it's not legal or appropriate, and because there's no evidence Mastro is broke.
The Mastros are living in a $2.7 million home in Palm Springs and driving a Bentley, Rigby attorney Spencer Hall said in a filing earlier this week.
Rigby has long maintained that Mastro hid assets to keep them from creditors.
Ireland said last week that she'd be forced to quit if her bid for compensation from Rigby's funds was rejected. She declined comment after Barreca's ruling Tuesday.
In another development, Rigby filed 22 "clawback" lawsuits Monday seeking to recover more than $1.6 million from individuals and companies who got money from Mastro in the 90 days before he was pushed into bankruptcy in July 2009.
Bankruptcy law assumes a debtor is insolvent three months before entering bankruptcy, and that many payments to creditors during that window can be voided later because they favored some creditors over others.
Rigby wants the largest sums from two construction companies that did work for Mastro. Other lawsuits seek money from individual "Friends & Family" investors who say they have lost hundreds of thousands in Mastro's bankruptcy.
Eric Pryne: 206-464-2231 or email@example.com