Westech Capital filed with the U.S. Bankruptcy Court an objection to the motion of Eric Steinhofel, Robert Clement, Rick Shottenfeld and Arch Aplin to appoint a Chapter 11 trustee.
The objection asserts, “The Motion is based on misinformation and speculation, and does not state any valid basis to appoint a trustee. The Motion is premised on the mistaken belief that the Company’s duly elected directors are unable to fulfill their fiduciary duty in determining whether to pursue a derivative action filed by some of the movants, without making demand on the board, that a trustee would pursue the suit, and that pursuit of the suit is in the best interest of the estate….The appointment of a trustee pursuant to Section 1104(a)(1) is an extraordinary remedy, and there is a strong presumption that the debtor should be permitted to remain in possession absent a showing of need for the appointment of a trustee. The parties moving for the appointment of a trustee have the burden of proof, which they must meet by clear and convincing evidence.”
The objection continues, “There is insufficient evidence of fraud, dishonesty, incompetence or gross mismanagement of the affairs of the debtor by current management before the filing of the case and there is no evidence of such conduct after the filing. The Debtor is negotiating a term sheet for the infusion of over $1 million in new capital and the acquisition of an interest in a broker dealer to provide a basis for a plan of reorganization. The Debtor should be allowed to propose a plan.”
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