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BELFOR USA Group, Inc Motion For Appointment Trustee Pursuant 11 USC 1104 (Doc 102) Case No. 21-20020 Filed 3-10-21
BELFOR USA Group, Inc Motion For Appointment Trustee Pursuant 11 USC 1104 (Doc 102) Case No. 21-20020 Filed 3-10-21
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Debtor.
Document No. ___
BELFOR USA GROUP, INC.,
Respondent.
BELFOR USA Group, Inc. (“BELFOR”), by its undersigned counsel, hereby moves for
the entry of an order (the “Motion”) under 11 U.S.C. § 1104 appointing a Chapter 11 trustee in
the above-captioned Chapter 11 bankruptcy case (the “Chapter 11 Case”) of Salem Consumer
*** NEED FOR EXPEDITED RELIEF PURSUANT TO LOCAL RULE 9013-2 ***
Bankruptcy Code § 1104 to address and remedy incurable conflicts of interest that prevent the
current Debtor-in-Possession from faithfully discharging its fiduciary duties on behalf of the
estate and all creditors. Just cause exists to request consideration of the relief sought herein on
an expedited basis, and a trustee is in the best interests of creditors, and equity security holders,
and other interests of the estate. Among other things, this conflicted Debtor-in-Possession
recently filed a plan of reorganization, but given the myriad conflicts at issue, cannot
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independently pursue confirmation of the plan (or any of its core duties in the Chapter 11 Case),
defend the Motion to Dismiss, or possibly even continue with its current counsel in this Chapter
11 Case.1 BELFOR and the few other creditors are significantly and irreparably prejudiced
The need for a hearing on an expedited basis is not a result of any lack of due diligence
on the part of BELFOR. Rather, BELFOR has recently discovered significant information,
including through the privilege log recently produced and the Debtor’s recent filings on March
5th, which demonstrate the need for the relief requested. Accordingly, BELFOR respectfully
requests a hearing on the Motion at the Court’s earliest convenience, on or before March 16,
2021 (the next scheduled hearing date). A proposed order granting the Debtor’s request for an
PRELIMINARY STATEMENT
Dismissing the Debtor's Case or, in the Alternative, Converting the Case to Chapter 7 [Dkt. 33]
(the “Motion to Dismiss”) is pending before this Court. Since the Motion to Dismiss was filed,
BELFOR has discovered significant additional information which demonstrates that BELFOR’s
Motion to Dismiss should be swiftly granted by this Court. Based on this, BELFOR also seeks
immediate consideration of its Motion to Dismiss, and renews its request for dismissal of this
1
Recent information suggests that Bernstein-Burkley, counsel for the Debtor in this Chapter 11 Case, is not
disinterested due to an asserted attorney-client relationship between it and Moonbeam Capital and its affiliates.
Moonbeam Capital has expressly asserted an attorney-client relationship with Bernstein-Burkley based on its work
for other debtors in cases before this Court. See Century III Mall PA LLC, Case No. 18-23499; Shoppingtown Mall
NY LLC, Case No. 19-23178. BELFOR is further investigating this issue.
2
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2. In addition, and although BELFOR submits that the facts and the law strongly
support the prompt dismissal of this Chapter 11 Case, as an alternative to dismissal, BELFOR
seeks the immediate appointment of a Chapter 11 trustee pursuant to Bankruptcy Code § 1104.
3. As brief background, BELFOR is by far the secured creditor with the largest
claim in this single-asset real estate case, owed more than $4.2 million2 (the “BELFOR Claim”)
for work it performed (the “Work”) in the aftermath of a devastating tornado at the Debtor’s
property, a retail shopping mall in Dayton, Ohio (the “Property”). The Debtor signed a Direct
Pay Authorization for the Work, which authorized Debtor’s insurer, Travelers Insurance
(“Travelers”), to pay BELFOR directly for the Work from proceeds claimed by the Debtor.
Following a thorough review and audit of BELFOR’s billings by Travelers and its consultant
(which included certain agreed-to reductions by the Debtor and BELFOR), it was agreed by the
parties that BELFOR would be paid the amount of $2.8 million for the Work.
4. Notwithstanding that agreement, BELFOR has not received a penny for its Work,
which was completed in July, 2019. Travelers issued two checks summing the exact audited
amount of $2.8 million (see ¶ 39, infra), but those checks were payable to the Debtor and
Moonbeam Capital Investments, LLC (“Moonbeam Capital”) – the owner of the Debtor until a
purported transfer of its interests in September, 2019, as described below. Moonbeam Capital
deposited the proceeds into its own bank account with no proceeds going to BELFOR or the
Debtor.
Mechanic’s Lien filed in the office of the Montgomery County Recorder, File# 2019-00047429,
2
The value of the Property has not yet been established; this amount due BELFOR includes interest, which continues
to accrue and will be part of BELFOR’s claim in this Chapter 11 Case to the extent it is oversecured.
3
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on September 3, 2019, pursuant to Section 1311.01 et seq. of the Ohio Revised Code.3 On
February 26, 2020, BELFOR sued the Debtor4 and its then-presumed parent, Moonbeam Capital,
in the Court of Common Pleas in Montgomery County, Ohio (Case No. 2020 CV 01027) for a
host of claims, including fraud and conversion (the “State Court Action”). Neither the Debtor
nor Moonbeam filed any counterclaim against BELFOR in the year-old case, and both have
6. The Debtor’s sole asset is a retail shopping mall that was devastated by a tornado
in May, 2019. To this day, much of the Property remains in utter disrepair and sits vacant; there
are only 7 current tenants (with over 40 units once available), and the last “big box” tenant
recently ended its lease. The Debtor has only one paid employee, further evidencing the
extremely minor operations. As further described herein (see ¶ 31, infra), Moonbeam Capital
(again evidencing its control of the Debtor) estimated for tax assessment purposes that total costs
to rebuild would be between $35-$45 million and that such a rebuild may not be warranted (or
desired). Clearly, there is no real, reasonable likelihood of rehabilitation for this single-asset
Debtor. Rather, the central issue in this Chapter 11 Case is BELFOR’s litigation claim and
related insurance claim which, as detailed herein, must be addressed by an independent fiduciary.
discovered facts and the Debtor’s most recent filings in this Court, cause exists to appoint an
independent trustee because the Debtor is inextricably linked to Moonbeam Capital – the entity
that absconded with the insurance proceeds, which is the subject of the ongoing State Court
3
The BELFOR lien that was recorded on September 3, 2019 was for the amount of $3,969,438.04. On January 29,
2020, BELFOR recorded a partial lien release of $1,169,438.04, bringing the new lien total to $2,800,000.00 plus
interest, fees and costs.
4
BELFOR has respected and observed the automatic stay imposed by Bankruptcy Code § 362 as to its claims
against the Debtor, since the Petition Date.
4
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Action with BELFOR – and its principal, Steven Maksin (“Maksin”). Moreover, a trustee is in
the best interests of the creditors, whose interests are best served by installing a fiduciary who
can look at the claims in this Chapter 11 Case free from conflicts. This Debtor-in-Possession
presents conflicts of interest that make it impossible for the Debtor to faithfully discharge its
• The Debtor’s chief operating officer and the Debtor’s representative at the recent
341 meeting of creditors (the “341 Meeting”) is an employee of Moonbeam
Capital and related Moonbeam entities who pay his salary, and is not employed or
paid by the Debtor;
• The Debtor and Moonbeam Capital are represented by the same counsel in the
State Court Action where they have presented a joint defense adverse to
BELFOR;
5
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2021 [Dkt. 94] (the “Plan”) is itself evidence of the ongoing and irreconcilable conflicts of
purportedly asserted by the Debtor against Moonbeam Capital to “recover” the exact amount
paid by Travelers for BELFOR’s Work, and which allows Moonbeam Capital to keep more than
$5 million in insurance proceeds which had been paid for needed repairs to the Property and
provides a broad release and channeling injunction – without any independent investigation of
such claims. And then the Debtor proposes to use that $2.8 million to fund its Plan instead of
paying BELFOR. And this is all done so that Moonbeam Capital can rely on the release and
channeling injunction to avoid liability in the State Court Action! Given the overlap and
interrelated nature of the Debtor, Moonbeam Capital and their insiders, and the joint misconduct
exhibited by such parties over time, it is simply not possible for the Debtor to independently
9. Now that the relationships between these players have been exposed by the
privilege log described in detail below, it is even clearer that the Debtor and its former owner and
insider Moonbeam Capital and its principal, Maksin, with the help of Beacon and Sklyaroff, are
attempting to use this Honorable Bankruptcy Court not to reorganize and maximize assets for the
benefit of the estate and all creditors, but rather, to gain an unfair tactical advantage over
BELFOR in order to avoid paying BELFOR amounts for which the Debtor and its former owner
10. This Court should immediately appoint a trustee both because “cause” exists
and/or because doing so would be in the “interests of creditors, and equity security holders, and
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independent trustee who can.” In re Vascular Access Centers, L.P., 611 B.R. 742, 764 (Bankr.
11. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and
1334. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This is a core proceeding pursuant
to 28 U.S.C. § 157(b). The statutory basis for the relief requested herein is Bankruptcy Code §
1104.
STATEMENT OF FACTS
12. The following facts recently discovered by BELFOR5 confirm that this Debtor-in-
Possession is absolutely and irreconcilably incapable of executing its fiduciary duties as required
A. The Debtor’s Designated Representative for the 341 Meeting is Employed and Paid
by Several Moonbeam Entities, Including Moonbeam Capital
13. Shawl Pryor is the Debtor’s “Chief Operating Officer” and its designated
representative at the 341 Meeting. Mr. Pryor testified at the 341 Meeting that he is employed
and paid by several Moonbeam entities including Moonbeam Capital and Moonbeam Leasing &
5
Although some of these individual facts may have been known to BELFOR’s counsel in the State Court Action, as
the undersigned counsel undertook discovery and fact investigation, it became clear that these facts further support
BELFOR’s position in this Chapter 11 Case. And, some of these facts were only recently disclosed, such as the
privilege log reflecting an alleged attorney-client privilege between Moonbeam Capital’s in-house counsel and its
principal (Maksin), and the principal of Beacon (Sklyaroff) and counsel for the Debtor (attorneys at Bernstein-
Burkley).
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14. Mr. Pryor also testified, and the Debtor confirmed as part of the cash management
and DIP motions, that he is not employed or paid by the Debtor. Mr. Pryor further testified that
his work for the Debtor is provided for under the Debtor’s Management Agreement with
Moonbeam Leasing. Both Moonbeam Leasing and Moonbeam Capital were formed, and are
ultimately owned (in large part), by their principal and managing member, Maksin. Indeed,
public records show that Maksin is designated as the individual with authority to act for
Moonbeam Leasing and that Beacon/Sklyaroff, the current owner of the Debtor, shares an
15. Accordingly, Mr. Pryor has conflicting interests between the Debtor and the
Moonbeam entities who pay his salary, including Moonbeam Capital. This cannot be explained
away by pointing to Moonbeam Leasing’s role with the Debtor, given the control by Moonbeam
Capital over that entity, and given Mr. Pryor’s work for and allegiance to his employer,
Moonbeam Capital.
B. The Privilege Log in the State Court Action Reveals an Alleged Attorney-Client
Privilege as to the Communications Between and Among Representatives and
Attorneys of Both the Debtor and Moonbeam Capital, Including on Issues
Concerning BELFOR’s Claim and Moonbeam Capital’s Theft of the Insurance
Proceeds
16. On February 19, 2021, Moonbeam Capital produced a privilege log in response to
BELFOR’s discovery requests in the State Court Action (the “Privilege Log,” Exhibit B). The
individuals affiliated with and employed by Moonbeam Capital, including its principal
Maksin, its in-house counsel Jackie Ackerman, and its employee Shawl Pryor (the
Debtor’s Chief Operating Officer and its designated 341 representative), among others,
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AND individuals affiliated with and employed by the Debtor, including the principal of
Beacon (Sklyaroff), and Shawl Pryor (again, the Debtor’s COO and designated 341
representative). Frederick Elias, who represents both Moonbeam Capital (and Maksin)
AND the Debtor in the State Court Action, is part of these communications. The
“Description” for the allegedly privileged documents asserts that these individuals had
insurance proceeds. For example, there are numerous documents marked “Salem adv
Belfor,” multiple documents marked “Salem Consumer Square OH – Fee Budget Draft”
(just six weeks before this Chapter 11 Case, suggesting that Moonbeam Capital/Maksin
were part of discussions or worse, behind the budget that drove this Chapter 11 filing) and
individuals affiliated with and employed by Moonbeam Capital, including its principal
Maksin and/or its in-house counsel Jackie Ackerman, AND counsel for the Debtor in this
Chapter 11 Case, Kirk Burkley, Mark Lindsay, Sarah Wenrich and Arthur Zamosky. In
several entries, only in-house counsel Jackie Ackerman and one of the Bernstein-Burkley
attorneys appear. See, e.g., Ex. B. In another entry, Moonbeam Capital admits to an
attorney-client relationship between Maksin and David Ross, counsel in this Chapter 11
Case for Beacon, the principal owner of the Debtor. Id. Significantly, the “Description”
for the privileged documents reveals that the work performed by Mr. Burkley, Mr.
Lindsay, Ms. Wenrich and Mr. Zamosky on behalf of other debtors owned by
Beacon/Sklyaroff in other Chapter 11 cases before this Court was also purportedly
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privileged as to Moonbeam Capital, its in-house counsel Jackie Ackerman and its
Moonbeam Capital’s in-house counsel and principal (and so far it has not, despite the
Privilege Log being produced last month by Debtor’s counsel in the State Court Action),
the fact that Moonbeam Capital feels close enough to these same players to assert the
privilege reveals the extent of its influence on this Debtor-in-Possession. And, the
construct of this Chapter 11 Case is the same as the two prior chapter 11 cases about
which Moonbeam Capital claims an attorney-client privilege. All of this confirms the
d. BELFOR has highlighted the Privilege Log to denote the following: yellow for
Mr. Pryor (the COO and designated representative of the Debtor) and/or Mr. Sklyaroff
(the principal/owner of the Debtor); red for claimed privilege between Moonbeam’s in-
house counsel, its principal and counsel for the Debtor in this Chapter 11 Case, and one
green entry where even attorney David Ross appears. Indeed, the only party outside of
e. In short, Moonbeam Capital asserts and therefore believes that it has an attorney-
client relationship by and between these various individuals and attorneys affiliated with
and representing Moonbeam Capital, the Debtor and its current owner Beacon – including
consideration of Moonbeam Capital and the subject insurance proceeds. Even if there is
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confirms the close, secret and aligned relationship between this Debtor-in-Possession and
Moonbeam Capital.
17. Counsel for Moonbeam Capital not only withheld the referenced documents from
BELFOR, it also demanded the return of certain documents which had purportedly been
18. The fact that (i) the Debtor and Moonbeam Capital filed joint pleadings in the
State Court Action, at all times adverse to BELFOR (see below), and (ii) the communications
among and between the Debtor, Moonbeam Capital, Beacon, their principals, employees and
their common attorneys – including Debtor’s counsel Bernstein-Burkley, P.C. – are asserted to
be privileged, proves that this Debtor-in-Possession cannot execute its duties as a fiduciary for
C. The Debtor Has Now Filed a Chapter 11 Plan Premised Entirely On a Purported
Settlement Between Conflicted Affiliates Moonbeam Capital, Beacon and the
Debtor Further Highlighting the Need for a Chapter 11 Trustee
19. On March 5, 2021, the Debtor filed its proposed Plan.6 The Debtor also
blindsided BELFOR on that same date when it filed a Notice of Removal, again seeking to avoid
further discovery and BELFOR’s claims by removing the State Court Action to the United States
Capital and the Debtor (by its President and the owner of Beacon, Sklyaroff) [Dkt. 94-1] (the
“Settlement Agreement”). The Settlement Agreement purportedly settles a claim by the Debtor
6
Despite previous assurances that it would share its proposed Plan with counsel for BELFOR in advance of its filing
(see Exhibit W), the Debtor reneged on that and filed the Plan without advance notice on March 5, 2021.
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against Moonbeam Capital for the $2.8 million of insurance proceeds that were intended to cover
BELFOR’s Work but that were stolen by Moonbeam Capital. This does absolutely nothing to
assuage BELFOR’s concerns here, but rather, further underscores the need for appointment of an
independent trustee.
agreement between the Debtor and its former owner and continued insider Moonbeam
Capital. As an initial matter, the Settlement Agreement is not the result of an independent
evaluate potential claims against Moonbeam Capital related to the stolen insurance proceeds.
As such, by the Debtor’s own admission, without such an investigation, which the Debtor has
inexplicably abandoned, this so-called Settlement Agreement is not the result of an arm’s-length
22. Indeed, the Plan does not come close to explaining how this Settlement
Agreement is in the best interest of the estate and creditors. It is not. Through the Settlement
Agreement, the Debtor will recover $2.8 million that was specifically intended for BELFOR (2
years ago) and use that amount to not just satisfy BELFOR’s Claim, but to fund the entire
Plan.7 The Plan states that the Debtor used its business judgment in entering the Settlement
Agreement based on the fact that it “provides for a full recovery of the Proceeds.” Plan § 8.1.1.
But this is not true. As detailed below (¶ 39, infra), the $2.8 million of proceeds intended for
BELFOR is only a fraction of the total proceeds (over $9 million) received by Moonbeam
7
It also defies logic that the proposed settlement would recover $2.8 million from Moonbeam Capital, which is the
precise amount paid by Travelers on the claim by the Debtor for BELFOR’s Work, and yet the Debtor now contests
that BELFOR is owed that amount – unless of course, the true purpose of the Debtor-Moonbeam Capital
“settlement” is considered, which is to protect Moonbeam Capital from BELFOR’s claim.
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Capital from Travelers for repairs to the Property, and will not be sufficient to fund the entire
Plan.
23. The Plan further states that the Settlement Agreement “shall substantially fund the
Plan and payments due.” Plan § 8.1.1. But as detailed herein, BELFOR is owed over $4.2
million. In the Plan, the Debtor admits that BELFOR’s Claim relates to its rights to the proceeds
but the proceeds will now be spread out across the estate (at a total amount less than BELFOR’s
Claim). In addition, in the correspondence described below related to a valuation of the Property
for tax purposes, it was described that the cost to rebuild the Property as an operating retail
center would cost between $35 and $45 million – a fraction of the insurance proceeds received
from Travelers (and that Moonbeam Capital pocketed for itself). Ex. I, infra. As such, the
proposed “settlement” is not only deficient to satisfy BELFOR’s Claim, it will not come close to
24. Significantly, the Plan does not explain why it is only settling a claim with respect
to the $2.8 million and not the total amount received by Moonbeam Capital related to the
Property in excess of $9 million. See ¶ 39, infra. Relatedly, why didn’t Moonbeam Capital offer
to settle the State Court Action two years ago for the $2.8 million rather than baselessly waste
everyone’s time and money fighting that – with no settlement offer whatsoever? Instead,
Moonbeam Capital purports to now rescue the Debtor – with the very money it stole in the first
place. Clearly, this is to ensure that Moonbeam Capital is shielded from any further claims – the
true purpose of filing all along – not to reorganize and protect the best interests of creditors and
the estate.
25. Given the interrelated nature of the Debtor, Moonbeam, Beacon and their insiders,
and the joint misconduct exhibited by such parties over time, it is simply not possible for the
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Debtor to independently pursue confirmation of the Plan where the same people are on both
sides of the Settlement Agreement, which on its face, benefits Moonbeam Capital and Beacon at
the expense of the estate and its creditors. The Debtor cannot remain in possession and a trustee
must be appointed.
26. Effective September 27, 2019 (the “Effective Date”),8 Moonbeam Capital and
Beacon entered into that certain Agreement for Purchase and Sale of Membership Interest
through which Moonbeam Capital purportedly transferred its interests in the Debtor to Beacon
(the “Transfer Agreement,” Exhibit D).9 This Transfer Agreement was only recently disclosed
by the Debtor on the day of the 341 Meeting (and has been withheld from production for the past
year in the State Court Action). The Transfer Agreement specifically provides that Beacon, as
the new owner of the Debtor, waives its right to any insurance proceeds related to the Property
For the avoidance of doubt, Seller [Moonbeam Capital] shall not sell, transfer,
convey or assign, Buyer [Beacon] shall not purchase, and the Subject Interests do
not include, any right, title or interest in or to any income and/or insurance
proceeds paid or distributed to Seller [Moonbeam Capital] or received by Seller
[Moonbeam Capital] prior to the Effective Date with respect to the Subject
Interests, the Company and/or the Property.
8
The Closing Date was to be December 27, 2019.
9
On that same date, Moonbeam Capital entered into an identical agreement with Bizmax Investments Limited
(“Bizmax”) through which it purportedly transferred a small percentage of its interests in the Debtor to Bizmax (the
“Bizmax Transfer Agreement,” Exhibit E).
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the table below (see ¶ 39, infra), the evidence confirms that Moonbeam Capital received over $9
million dollars of insurance proceeds from Travelers as a result of tornado damage to the
Property in 2019 (far more than the $2.8 million the Debtor purportedly agreed to recover from
Moonbeam Capital as part of the sham Plan just filed by the Debtor). Pursuant to the terms of
the Transfer Agreement, Beacon and Moonbeam Capital schemed and agreed that Moonbeam
Capital would supposedly be insulated from any claim that insurance proceeds prior to the
Effective Date of the Transfer Agreement – proceeds paid by Travelers to repair the tornado-
28. After the Effective Date of the Transfer Agreement, Travelers issued $2.8 million
of proceeds specifically earmarked to cover the Work done by BELFOR. Notwithstanding that
such proceeds were received after the Effective Date and therefore not subject to the waiver in
the Transfer Agreement, Beacon also allowed those proceeds to be paid directly to Moonbeam
Capital without any objection that they belonged to the Debtor/Beacon or BELFOR, as agreed.
29. This confirms that the Transfer Agreement between Beacon and Moonbeam
Capital was hardly arm’s-length, but rather, part of the ongoing and coordinated effort between
Moonbeam Capital and Beacon (who is now the owner of the Debtor-in-Possession) to protect
the interests of Moonbeam Capital over the interests of the estate, its Property and creditors. 10
10
Indeed, it appears that Maksin never relinquished control of the Debtor. Records from Ohio indicate that Maksin
organized the Debtor and signed the Debtor’s certificate of incorporation as a member, manager or other
representative. See Exhibit F. In addition, the address for the Debtor provided on both the vesting deed and tax
record for the Property is a condominium in Las Vegas that appears to be owned by a company (NV Realty Auction
LLC) whose manager is Maksin. See Exhibit G (Deed) and Exhibit H (NV Realty);
https://www.mcohio.org/government/elected_officials/treasurer/mctreas/master.cfm?parid=H33%2001622%200001
&taxyr=2020&own1=SALEM%20CONSUMER%20SQUARE%20OH%20LLC.
Further, the Debtor’s address in Las Vegas is nearly identical (part of the same luxury housing complex) to the
address of Maksin and various Maksin-owned entities.
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E. Moonbeam Capital Continues to Control the Debtor Following the “Sale” of its
Interest to Beacon, as Evidenced by its In-House Attorney and Maksin Negotiating
the Debtor’s Montgomery County Tax Assessment
30. In July, 2020, nine months after the Effective Date of the purported transfer of
interests in the Debtor from Moonbeam Capital to Beacon, correspondence recently produced in
the State Court Action evidences that Maksin and Moonbeam’s in-house legal team and
employees took control of negotiating the value of the Property as it relates to potential tax
breaks by the Montgomery County, Ohio auditor. Specifically, Maksin unilaterally made the
decision to file a tax protest instead of accepting an offer from Montgomery County that would
have reduced the Property valuation for tax purposes by over $100,000. See, generally, Exhibit
I.
31. In addition, this issue reveals that the Plan (discussed above), which contemplates
repair of the Property, is woefully undercapitalized/funded and that the prospects for
rehabilitation are not feasible. The Debtor’s Chief Operating Officer, Shawl Prior, was part of
communications with Moonbeam Capital (again illustrating the inherent conflict and inability for
this Debtor-in-Possession to act independent of Moonbeam Capital) regarding the estimated cost
to repair the Property. In July 2020, Jackie Ackerman wrote Steven Maksin and others
• On July 23, 2020, Steven Maksin wrote that “[o]ur proposed value is $500,000.”
• Later that day, responding to Jackie Ackerman’s request for a description of the
damage to and value of the Property, Leon Williams wrote to Jackie Ackerman
and Shawl Pryor, “As we all know this property was hit with a Major Tornado on
May 27, 2019. The damage to this property was very catastrophic. Just
assuming we were not dealing with the brick and mortar retail fallout of
COVID-19, the cost to rebuild this retail center pre-COVID-19 industry
standards would cost between $35M - $45M. We received a fraction of that
from our insurance claim. The geographical location and demographics may not
even warrant building a retail center of that magnitude. Post Tornado and current
COVID-19 restrictions, the brick and mortar retail industry is at nearly a stand
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still. Real estate and retail experts are uncertain where the industry is headed. On
line sales have skyrocketed and those individuals that did not use on line shopping
have been forced to. Therefore, this will become the norm; brick and mortar retail
may no longer be advancing, at least for the next several years. This property in
its current state would be lucky to bring $500K.”
32. Clearly, Moonbeam Capital and Maksin maintained control nearly nine months
after the Effective Date when Moonbeam Capital allegedly transferred all of its interests in the
Debtor to Beacon. This was not work by Moonbeam Leasing to lease the Property and so cannot
be explained away as such. Upon receipt of correspondence from the Montgomery County tax
authority that was apparently directed to Moonbeam Capital, Maksin directed an employee to fill
out the form for his review. Id. And eventually, this work was directed to Moonbeam Capital’s
in-house counsel. Id. Notably, Maksin copied Sklyaroff on that directive indicating that Beacon
and the Debtor were aware of the issue, but allowed Maksin and Moonbeam Capital to handle it
on the Debtor’s behalf. Id. Shawl Pryor, the Debtor’s COO, was involved as well, but for the
reasons described above, it is unclear in what capacity he was acting, whether as an employee of
Moonbeam Capital or the Debtor. Id. In any case, the correspondence makes absolutely clear
that Maksin was the ultimate decision-maker with respect to this tax issue directly affecting both
33. Relatedly, the below table shows all outstanding and overdue taxes for the
Property:
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5/10% Payments
Tax Amount
Real/Project Charge Adjustments Payments
Year Due
Sub-Total $0.00 $0.00 $0.00 $0.00
Grand Totals
Amount
Charge Adjustments Payments
Due
Grand Totals $193,854.89 $9,694.21 $0.00 $203,549.10
34. Documents recently produced in this Chapter 11 Case by the Debtor also reveal
that the Debtor (through its state-court counsel) and Moonbeam Capital (also through the same
state-court counsel) provided discovery responses in the State Court Action that are
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35. Prior to the Petition Date, as part of discovery in the State Court Action, BELFOR
requested organizational and corporate documents from the Debtor and Moonbeam Capital.
From the Debtor, BELFOR requested “All notices, correspondence, statements, emails, letter,
and other communications in any way relating to the PROJECT, BELFOR, insurance proceeds,
and/or this lawsuit between or among any of the following: (i) Salem (including any of its
affiliates); (ii) Moonbeam Capital (including any of its affiliates)…”, and further requested “All
36. On November 10, 2020, the Debtor signed and filed in the State Court Action
“Salem Consumer Square OH, LLC’s First Amended Objections and Responses to BELFOR
USA Group, Inc.’s First Requests for Production” (“Salem’s Discovery Responses”). Ex. J. In
response to Request No. 15, the Debtor produced “documents marked as Salem 608-913.” Id. In
response to Request No. 16, the Debtor produced “documents marked as Salem 2420244, 914.”
Id.
37. Notably, no documents were produced which showed any ownership interest by
Beacon and/or Sklyaroff, nor were any documents produced which showed the Transfer
Agreement which had been executed between Moonbeam Capital and Beacon for the transfer of
Moonbeam Capital’s interest to Beacon and their agreement regarding the insurance proceeds.
The Debtor thus did not honestly respond to the discovery requests in the State Court Action.
38. After multiple repeated requests for the Debtor to produce the documents
evidencing the transfer of ownership of Moonbeam Capital’s ownership interest in the Debtor to
Beacon, the documents were finally produced in the Chapter 11 Case. Now, solely because of
documents recently produced by Mr. Burkley on behalf of the Debtor in this Chapter 11 Case,
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we know that the responses provided by the Debtor in the State Court Action concealed the facts
and documents regarding ownership of the Debtor and the insurance proceeds.11
39. The following chart outlines the payments by Travelers, which constitute the
insurance proceeds (the two checks which were delivered pursuant to BELFOR’s Work on the
11
Note that the BELFOR proceeds were all sent after the date of the Transfer Agreement so technically, could have
been claimed by the Debtor. It is significant that notwithstanding, the Debtor (under Beacon’s control) never
objected to Moonbeam Capital absconding with such proceeds. This is described above and in the argument below.
12
See Exhibit K.
13
See Exhibit L.
14
See Exhibit M.
15
See Exhibit N.
16
See Exhibit O.
17
See Exhibit P.
18
See Exhibit Q.
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showing the ownership structure of all entities (i) owned by … Moonbeam Capital… Salem…If
there has been a change in ownership at any time from May 1, 2019 to present, organizational
charts should be provided reflecting such changes.” See Exhibit R (Moonbeam Capital
Discovery Responses), No. 17. Moonbeam Capital responded that there are no responsive
documents. See Id. And, BELFOR requested that Moonbeam Capital produce “All
documentation of transfers of insurance proceeds…” Id., No. 23. Again, Moonbeam Capital
refused to produce any responsive documents, electing instead to continue to conceal the transfer
of its right, title and interest in and to the insurance proceeds. Id.
G. The Debtor and Moonbeam Capital, through Maksin, Align Together Against
BELFOR
41. The Debtor and Moonbeam Capital presented a united front by engaging the same
attorneys to represent them in the State Court Action. It defies logic to suggest that this Debtor-
in-Possession, having been so aligned with Moonbeam Capital on all things concerning
42. On April 24, 2020, the Debtor and Moonbeam Capital filed in the State Court
Action a JOINT “Answer of Defendants Salem Consumer Square OH LLC and Moonbeam
Capital Investments LLC to Plaintiff’s Complaint with Jury Demand” (the “Joint Answer,”
Exhibit S). In the Joint Answer, the Debtor and Moonbeam Capital answered all of the
43. On June 19, 2020, the Debtor and Moonbeam Capital filed in the State Court
Action a JOINT “Answer of Defendants Salem Consumer Square OH LLC and Moonbeam
Capital Investments LLC to Plaintiff’s First Amended Complaint with Jury Demand” (the “Joint
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Amended Answer,” Exhibit T). In the Joint Amended Answer, again, the Debtor and
44. Even as recently as November 25, 2020, the Debtor and Moonbeam Capital filed
in the State Court Action a JOINT “Amended Answer of Defendants Salem Consumer Square
OH LLC and Moonbeam Capital Investments LLC to Plaintiff’s First Amended Complaint with
Jury Demand” (the “Joint First Amended Answer,” Exhibit U). In the Joint First Amended
Answer, the Debtor and Moonbeam Capital answered all of the allegations jointly, including, for
example:
Id. at ¶ 14.
45. It is worth noting that neither the Debtor nor Moonbeam Capital ever filed any
counterclaim against BELFOR in the State Court Action, and the deadline for asserting a
counterclaim has long passed. And yet now in this Chapter 11 Case, the Debtor suddenly seeks
to claim an offset and damages regarding BELFOR’s work – where BELFOR is the only creditor
of import in this Chapter 11 Case. Neither the Debtor nor Moonbeam Capital pursued this claim
in the State Court Action for one simple reason: it has no merit.
46. From the outset of the State Court Action, the Debtor and Moonbeam Capital
acted in tandem in attempting to impede and delay BELFOR’s collection efforts. Represented
by the same counsel, both the Debtor and Moonbeam Capital repeatedly ignored, missed or made
excuses about discovery deadlines, among other things, and the Debtor filed the Petition on the
same day documents were due to be produced. Moonbeam Capital’s counsel (the same counsel
as the Debtor in the State Court Action) then indicated Moonbeam Capital would not be
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producing any documents and has indicated, without any basis, that Moonbeam Capital and its
agents refused to produce documents claiming the protection of the automatic stay, even though
none are debtors in the Chapter 11 Case. The relevant emails from Moonbeam Capital’s (and the
47. While entirely improper, this underscores the real reason the Chapter 11 Case was
filed – to forum shop out of the venue and jurisdiction where Debtor is located (Ohio), to this
Court that the Debtor and its affiliates deem more favorable, in order to frustrate the State Court
48. The 341 Meeting revealed that the Debtor omitted important information about
the Debtor’s organizational structure (which overlaps with persons who do business with and are
employed by Moonbeam Capital) from the Debtor’s Statement of Financial Affairs [Dkt. 1] (the
“SOFA”). Question 28 in the SOFA requests that the Debtor list all of its officers, directors,
controlling shareholders, etc. The Debtor listed only one, Beacon, as the 100% equity
holder. Dkt. 1 at 41. However, the Debtor failed to list its president, Edward Sklyaroff, or its
49. This does not appear to be a mere oversight, where in a similar filing in a previous
case by related debtor Shoppingtown Mall NY LLC that is also owned by Beacon and Sklyaroff,
the debtor disclosed Sklyaroff as president and Pryor as COO. See Case No. 19-23178-CMB,
Dkt. 21 at 48. As described herein, Mr. Pryor testified that he is paid by multiple Moonbeam
Capital entities and was also the Debtor’s designated representative at the 341 Meeting. At the
341 Meeting, the UST raised this omission and requested that the SOFA be amended
accordingly.
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50. Further, in question 28, the Debtor also failed to disclose the membership interest
in the Debtor owned by Bizmax that was transferred by Moonbeam Capital pursuant to the
Bizmax Transfer Agreement. While the Debtor’s counsel explained this omission at the 341
Meeting by stating that Bizmax’s membership interest is in profits and losses and not equity, in a
similar filing in another previous case by related debtor Century III Mall PA LLC that is also
owned by Beacon and Sklyaroff, the debtor disclosed a minority membership interest by
Bizmax. See Case No. 18-23499, Dkt. 30 at 28. On information and belief, Bizmax is an entity
51. Accordingly, the Debtor’s SOFA in this Chapter 11 Case is inaccurate and fails to
make certain required and relevant disclosures, which, notably, were made in similar filings in
previous cases by related debtors. Not only material, these omissions further call into question
I. Additional Evidence of Moonbeam Capital’s Connections to, and Control Over, the
Debtor
52. Further evidence of Moonbeam Capital’s continuing connection to, and control
over, this Debtor-in-Possession, is the fact that the Property is STILL listed on the Moonbeam
Capital website as a property that can be leased.19 This cannot be explained away due to
Moonbeam Leasing managing the Property. Rather, this shows the Property as owned by
Moonbeam Capital.
53. Beacon has Sklyaroff listed as the President with Moonbeam Leasing as the
19
https://www.moonbeamproperty.com/Property/Details/shopping-center/salem-consumer-square-shopping-center.
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54. Moonbeam Capital Partners, LP has Sklyaroff as the registered agent and
55. Bizmax, a Nevada company, and the transferee under the Bizmax Transfer
Agreement, has Sklyaroff listed as the director and Moonbeam Leasing as the agent.20
entity.21
57. The Debtor’s counsel indicated to this Court his intent to hire a “special manager”
of his choosing to investigate possible claims against Moonbeam Capital. When counsel for
BELFOR tried to negotiate an agreement whereby counsel for the Debtor would refer ALL
possible claims involving both Moonbeam Capital AND BELFOR to a neutral third-party
attorney, in order to have a level playing field, counsel for the Debtor refused. Counsel for the
Debtor made clear on the record before this Court that he would not give up his ability to object
ARGUMENT
58. The Court should appoint a Chapter 11 trustee under Bankruptcy Code § 1104(a)
because either (i) “cause” exists or (ii) doing so would be in the “interests of creditors, and equity
59. Section 1104(a)(1) provides that the Court “shall order the appointment of a
trustee for cause, including fraud, dishonesty, incompetence or gross mismanagement of the
affairs of the debtor by current management, either before or after the commencement of the
20
https://opencorporates.com/companies/us_nv/E0074562011-1.
21
http://www.moonbeamtrading.com/OfficialSite/Contact_US.html.
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case.” 11 U.S.C. § 1104(a)(1) (emphasis added). The enumerated list of wrongs constituting
“cause” that warrants the appointment of a trustee is not exhaustive. See, e.g., In re Sharon Steel
Corp., 86 B.R. 455, 458 (Bankr. W.D. Pa. 1988), aff’d, 871 F.2d 1217 (3d Cir. 1989) (“Under §
1104(a)(1), the words ‘or similar cause’ and § 102(3) indicates that the grounds for appointing a
trustee are not limited to those specifically enumerated.”). “Accordingly, courts have found
misuse of assets and funds; inadequate recordkeeping and reporting; failure to file required
documents; lack of adequate disclosure; lack of appropriate cost controls; transgressions related
to taxes; failure to make required payments; lack of credibility and creditor confidence; and
breaches of fiduciary duties.” In re Vascular Access Centers, L.P., 611 B.R. at 764. A court
may consider both the pre- and post-petition misconduct of the current management when
making the determination that “cause” exists for the appointment of a trustee. Id. at 767
(appointing trustee where both debtor’s principal’s “prepetition and postpetition misconduct
mandatory upon a determination of cause.” In re Marvel Entm’t Grp., Inc., 140 F.3d 463, 472
60. Moreover, even “if there is insufficient cause to appoint a trustee under §
1104(a)(1), or if the cause cannot be proven, a trustee may still be appointed [under section
1104(a)(2)].” In re Sharon Steel Corp., 86 B.R. at 458. Section 1104(a)(2) “creates a flexible
standard, instructing the court to appoint a trustee when doing so addresses ‘the interests of the
creditors, equity security holders, and other interests of the estate.’” In re Sharon Steel Corp.,
871 F.2d 1217, 1226 (3d Cir. 1989) (quoting 11 U.S.C. § 1104(a)(2)).
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61. “[T]he willingness of courts to leave debtors in possession ‘is premised upon an
assurance that the officers and managing employees can be depended upon to carry out the
fiduciary responsibilities of a trustee.’” In re Circulatory Centers of Am., LLC, 579 B.R. 752,
764 (Bankr. W.D. Pa. 2017) (quoting In re BG Petroleum, LLC, 525 B.R. 260, 282 (Bankr. W.D.
Pa. 2015)). And “[a] debtor-in-possession’s inability or unwillingness to discharge its fiduciary
62. Here, cause exists to appoint an independent trustee because the Debtor is
inextricably linked to Moonbeam Capital – the entity that absconded with the insurance
proceeds, which is the subject of the ongoing State Court Action with BELFOR – creating
conflicts of interest that make it impossible for the Debtor to faithfully discharge its fiduciary
duties to the estate and creditors by, among other things, pursuing claims against Moonbeam
Capital for the lost insurance proceeds. See, e.g., id. at 767 (Holding that debtor’s general
partner had numerous conflicts of interest with the Debtor that made it impossible “to faithfully
discharge his fiduciary duties to [the debtor] to preserve and maximize assets of the estate by,
63. Shawl Pryor, the Debtor’s Chief Operating Officer, and its designated
representative at the recent 341 Meeting, testified at the 341 Meeting that he is employed and
paid by several Moonbeam Capital entities including Moonbeam Capital and Moonbeam
Leasing. Mr. Pryor further testified that his work for the Debtor is provided for under the
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Both Moonbeam Leasing and Moonbeam Capital were formed, and ultimately owned, by their
principal and managing member, Maksin. Indeed, public records show that Maksin is designated
as the individual with authority to act for Moonbeam Leasing and that Beacon, the current owner
of the Debtor, shares an address with Moonbeam Leasing in Las Vegas, Nevada.
64. Accordingly, the Debtor’s operations are inextricably linked to, and no doubt
controlled by, Moonbeam Capital entities and their principal, Maksin, creating myriad conflicts
of interest. The Debtor’s chief operating officer, Mr. Pryor, receives his salary from Moonbeam
Capital entities, which placed him in charge of the Debtor’s operations. Meanwhile, the
Debtor’s president and only other officer, Sklyaroff, owns Beacon, which is the current owner of
the Debtor and clearly connected to Moonbeam Leasing (and likely other Moonbeam Capital
entities) in some capacity as it shares an address with Moonbeam Leasing in Las Vegas. In
addition, Sklyaroff organized Moonbeam Capital Investments, LLC, per the articles of
organization. Moreover, the Debtor has stated that Sklyaroff is an investor in various Moonbeam
Capital entities. Under these circumstances, where the Debtor’s only two officers each have
conflicting interests between the Debtor and the non-debtor Moonbeam Capital entities, it is
impossible for the Debtor to fulfill its duties as an independent fiduciary. See In re Clinton
Centrifuge, Inc., 85 B.R. 980, 985 (Bankr. E.D. Pa. 1988) (“Among the sensible rationales
offered for concluding that cause exists under § 1104(a)(1), is that the debtor entity is not being
operated in a fiduciary capacity, by current management, for the benefit of all creditors … [t]hat
same concern is occasionally expressed by a court’s concluding that existing management has
conflicting interests involving both the debtor and non-debtor entities.” (citations omitted)).
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Statement [Dkt. 95] as Exhibit 1, contains a full and broad release of Moonbeam Capital, as
follows
5. Release of Moonbeam. Upon the later of the receipt of the Settlement Payment
and the entry of the Order approving this Agreement (the “Release Effective Date”),
the Debtor, the Debtor’s estate, and their successors and assigns (the “Estate
Parties”), hereby irrevocably release and discharge Moonbeam, and its officers,
directors, managers, members, employees, agents, representatives, affiliates,
predecessors, successors, assigns and/or counsel, and each of them (collectively,
the “Moonbeam Releasees”), from any and all claims and causes of action arising
from, based on and/or related to the Proceeds (the “Released Claims”).
66. Worse, the Plan proposed by the Debtor includes a channeling injunction which
Moonbeam Capital will no doubt claim as protection from BELFOR’s claims in the State Court
Action:
14.3 Injunction
67. This is key to the need for a trustee in this Chapter 11 Case. The entire Plan is
premised on settling a claim against Moonbeam Capital – all at once an affiliate, insider, and
employer of the Debtor’s COO – however framed, Moonbeam Capital has influence over this
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b. The Debtor Has Acted in Lockstep with Moonbeam Capital in the State
Court Action
68. As described above, BELFOR initiated the State Court Action against both
Moonbeam Capital and the Debtor in order to recover amounts due for the Work provided,
including the stolen insurance proceeds. Moonbeam Capital and the Debtor have mounted a
joint defense in the State Court Action against BELFOR, confirming their close relationship and
the Debtor’s inherent conflicts of interest. The Debtor and Moonbeam Capital are represented
by the same counsel and filed a joint answer to BELFOR’s complaint. And recently, Moonbeam
Capital apparently asserted a joint privilege with the Debtor, asserting that communications with
its counsel and the Debtor and its counsel are allegedly protected attorney-client
communications. Of course, this could only be the case if there is a joint defense agreement in
the State Court Action. In addition, when the Debtor filed this Chapter 11 Case, both Moonbeam
Capital and its principal, Steven Maksin, asserted that they are also protected by the automatic
69. Importantly, while the Debtor and Moonbeam Capital are operating as one in the
State Court Action, at the same time, the Debtor has acknowledged in this Chapter 11 Case that
it may likely have a claim against Moonbeam Capital for the lost insurance proceeds (and has
purportedly resolved that claim through the proposed Settlement Agreement). Yet, the Debtor
took no action to assert such a claim in the State Court Action, by filing a cross-claim, or
otherwise even after the Debtor was transferred to Beacon on September, 2019. To the contrary,
the Debtor has acted in complete unison with Moonbeam Capital, confirming the Debtor’s utter
inability and/or unwillingness to act as an independent fiduciary for the estate and creditors.
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70. It has also recently come to light that Moonbeam Capital and Beacon were
involved in a highly suspect transaction just over a year before the Chapter 11 Case was filed,
intended, in part, to ensure the insurance proceeds remained out of reach of the Debtor and
BELFOR. Specifically, Moonbeam Capital purportedly sold its membership interests in the
Debtor to Beacon through the Transfer Agreement for the sum of $4 million, which includes the
For the avoidance of doubt, Seller [Moonbeam Capital] shall not sell,
transfer, convey or assign, Buyer [Beacon] shall not purchase, and the
Subject Interests do not include, any right, title or interest in or to any
income and/or insurance proceeds paid or distributed to Seller
[Moonbeam Capital] or received by Seller [Moonbeam Capital] prior to
the Effective Date with respect to the Subject Interests, the Company
and/or the Property.
used the Transfer Agreement to ensure it kept the insurance proceeds intended for the Debtor and
its Property.
71. This transaction was of enormous financial consequence for the Debtor and likely
caused any purported need to file the Chapter 11 Case. On August 5, 2019, Travelers issued a
check to Moonbeam Capital and the Debtor in the amount of $4,007,079.24 for “Building
Repairs” that was deposited into a Moonbeam Capital account. See ¶ 39, supra. Travelers
issued two other checks to Moonbeam Capital and the Debtor in June, 2019 totaling $1 million
for “Salem Consumer Square-Advance Building Payment.” Id. Based on the current condition
of the Property, none of these proceeds totaling over $5 million were used for repairs, but rather,
went straight to Moonbeam Capital’s pocket. So, under the Debtor’s scheme, Moonbeam Capital
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keeps that $5 million plus the $4 million paid by Beacon to acquire the Debtor – and BELFOR
still has not been paid one cent for its work.
72. To be clear, Beacon, the entity purchasing ownership of the Debtor and its
Property (and now acting on behalf of the Debtor-in-Possession), agreed to purchase an asset
that was in complete disrepair following the tornado four months earlier without the benefit of
millions of dollars of insurance proceeds issued to cover repairs on the Property, and further
agreed that those proceeds would remain with Moonbeam Capital, the former owner. This can
only be viewed as an insider deal structured by Moonbeam Capital and Beacon to insulate
Moonbeam Capital from a later claim by the Debtor or BELFOR for recovery of the insurance
proceeds. In any case, this is a highly questionable transaction evidencing the need for an
independent trustee. In re Clinton Centrifuge, Inc., 85 B.R. at 985 (“There are a plethora of
questionable business dealings between a debtor corporation and a related, nondebtor entity.”
(collecting cases)).
73. Further, the two checks from Travelers that should have been paid directly to
BELFOR totaling $2.8 million, were issued after the Effective Date of the Transfer Agreement.
See ¶ 39, supra. By the terms of the Transfer Agreement stated above, Moonbeam Capital only
retained “insurance proceeds paid or distributed to Seller or received by Seller prior to the
Effective Date.” However, these proceeds received after the Effective Date, and specifically
earmarked for BELFOR, were still paid to Moonbeam Capital without any objection by Beacon,
further confirming that Moonbeam Capital controls the Debtor even after the purported transfer
of its interest to Beacon and Beacon is merely a puppet of Moonbeam Capital and its principal
Maksin. In other words, Beacon’s agreement that Moonbeam Capital would retain the insurance
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proceeds under the Transfer Agreement, and its silence as further proceeds were diverted by
Moonbeam Capital after the transfer, confirms that the Debtor always was, and still is, under the
control of Moonbeam Capital, acting solely in the interests of Moonbeam Capital and its
principals rather than the estate and its creditors, requiring an appointment of an independent
trustee in this Chapter 11 Case. See In re Circulatory Centers of Am., LLC, 579 B.R. at 764
(appointing trustee where court found “the Debtors’ principals are advancing their own personal
interests at the expense of creditors in the bankruptcy estate in derogation of their fiduciary
duties”).
74. While all of the above provides ample evidence of the Debtor’s conflicts that
preclude it from acting as an independent fiduciary for the estate and creditors, the Debtor has
already conceded it cannot independently fulfill its duties. Through its motion seeking post-
petition financing [Dkt. 70] (the “DIP Financing Motion”), the Debtor revealed that a “special
manager has been appointed by the Debtor’s management for the purposes of investigating the
facts and circumstances surrounding the procurement and payment of prepetition insurance
proceeds.” Dkt. 70, ¶ 10. a. “Special manager” in this case effectively means conflicts counsel
and is tantamount to an admission by the Debtor that it cannot independently oversee the claim
that is at the core of this Chapter 11 filing – i.e., whether Moonbeam Capital improperly diverted
the insurance proceeds intended for BELFOR as compensation for the Work it provided away
from the Debtor and into its own pocket leaving BELFOR (and potentially the Debtor) with a
claim for the amount stolen (now in excess of $4.2 million). This admission by the Debtor that it
cannot address the pivotal issue in this Chapter 11 Case, underscores the need to appoint an
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independent fiduciary under § 1104(a)(1).22 See, e.g., In re Sharon Steel Corp., 86 B.R. at 465
(“The failure of [debtor’s] management to pursue recovery of insider preferences and fraudulent
its fiduciary duty, amounts to gross mismanagement and warrants the appointment of a trustee
75. For all of the reasons described above, cause exists to appoint a trustee based on
the Debtor’s utter inability to act as an independent fiduciary for the estate and its creditors.
76. There is also “cause” to appoint a trustee based on the Debtor’s history of
77. As an initial matter, as described above, the Debtor has not been forthcoming and
honest with respect to its discovery responses in the State Court Action (see ¶¶ 34-40, supra) and
the SOFA filed in this Chapter 11 Case (see ¶¶ 48-51, supra). Specifically, the Debtor
misleadingly produced corporate formation documents for the Debtor and failed to disclose the
Transfer Agreement or the insurance proceeds from Travelers through discovery in the State
Court Action, despite requests for same. The Debtor also failed to disclose its officers and
directors or minority interest holder in the SOFA. These facts are material and relevant,
particularly to the conflicts and issues that are the subject of this Motion, and the Debtor’s failure
22
This is particularly true where the Debtor has now, through the proposed Settlement Agreement, abandoned any
independent investigation of these claims against Moonbeam Capital despite previously acknowledging that such an
investigation is necessary.
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78. Further, and as described above and in the Motion to Dismiss, the Debtor, under
the control of Moonbeam Capital and its affiliates and principals, and Beacon, allowed millions
of dollars of insurance proceeds intended for use by the Debtor in repairing the storm-damaged
Property to go directly to Moonbeam Capital for its own benefit, to the detriment of the estate
and its creditors. In particular, Moonbeam Capital took the $2.8 million that was to be paid
directly to BELFOR for its Work on the Property in an outright theft, contrary to the parties’
agreements and the interests of the Debtor. “Recovering” only that amount now, through the
guise of a settlement and the Plan, does not negate what Beacon actively allowed in the first
place, nor does it recover from Moonbeam Capital all that is due this estate.
79. It is noteworthy in that it appears the Debtor perpetrated a similar scheme against
a similarly situated creditor in a prior bankruptcy proceeding before this Court, although the
creditor in that case did not press the issue as BELFOR does here. In 2018, Century III Mall PA
LLC (the “2018 Debtor”) filed Chapter 11 in this Court, scheduling Olson Restoration, LLC
D/B/A/ Servpro Extreme Response Team Olson (“Servpro”) as both a secured and unsecured
creditor. Moonbeam Capital and Maksin were affiliates of the 2018 Debtor. Servpro had
performed repair work for the 2018 Debtor and its affiliates following a sprinkler malfunction at
a few department stores on the subject property and the 2018 Debtor and its affiliates withheld
insurance proceeds from Servpro. Servpro filed a lien, and pursued the 2018 Debtor and its
affiliates via a lawsuit in the Western District of Pennsylvania, as well as Maksin in a separate
lawsuit, seeking to recover the insurance proceeds. The 2018 Debtor filed bankruptcy and stayed
the claims brought by Servpro – a scheme effectively identical to the one perpetrated here
against BELFOR, except that here, BELFOR is presenting the facts and law to this Court to
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80. The Debtor’s history of diverting substantial funds away from the estate and
creditors like BELFOR mandates appointment of a trustee in this Chapter 11 Case. See, e.g., In
re Sharon Steel Corp., 86 B.R. at 463 (holding appointment of trustee was “mandatory under
both § 1104(a)(1) or § 1104(a)(2)” where there was “conclusive evidence of self-dealing [and]
transfer of huge assets to other companies under common control with [debtor] and away from
the reach of creditors, stripping the debtor of cash [and] depleting the assets of the debtor so as to
81. As described above, this Debtor and its affiliates effectively stole millions of
dollars from BELFOR who, as a result, has received nothing for the Work performed and
completed nearly two years ago. Based on this history, BELFOR justifiably has absolutely no
confidence in the Debtor’s ability or willingness to run this Chapter 11 Case as a fiduciary for
creditors like BELFOR, and a high level of animosity as a result. The substantial acrimony and
conflict of interest between the Debtor and BELFOR – by far the largest creditor in this Chapter
11 Case – further warrants and justifies appointment of a neutral trustee. See, e.g., In re Marvel
Entm’t Grp., Inc., 140 F.3d at 473 (Finding cause under § 1104(a)(1) in light of an “unhealthy
conflict of interest [that] was manifest in the deep-seeded conflict and animosity between the []
debtor and the Lenders and in the lack of confidence all creditors had in the [debtor’s
controller’s] ability to act as fiduciaries”); In re Shubh Hotels Pittsburgh, LLC, No. 312, 2011
WL 7145601, at *4 (Bankr. W.D. Pa. Feb. 1, 2011) (Appointing trustee in light of high level of
“animosity and acrimony” between debtor and creditor because “without the interjection of a
neutral third party, it is clear to the Court that litigation costs will bury this case in the absence of
a change of direction”); In re Sharon Steel Corp., 86 B.R. at 460 (“Irrespective of ‘fault,’ if the
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conflict among the interested parties threatens the viability of the business and is detrimental to
the welfare of the estate, the appointment of an independent trustee is appropriate in order to
82. As detailed above (see ¶¶ 19-25, supra), the recently filed Plan is premised on the
proposed Settlement Agreement between Moonbeam Capital and the Debtor (by its President
and the owner of Beacon, Sklyaroff). The Settlement Agreement purportedly settles claims by
the Debtor against Moonbeam Capital for stolen insurance proceeds. However, the settlement
amount of $2.8 million is only a fraction of the over $9 million in proceeds issued by Travelers
for the tornado damage to the Property that was all pocketed by Moonbeam Capital. See ¶ 39,
supra. The Debtor settled the claims without an independent investigation which it previously
represented was necessary to investigate claims against Moonbeam Capital and sought approval
from the Court to retain a “special manager” to conduct such investigation. Accordingly, the
Settlement Agreement, which is the premise of the Debtor’s Plan, is not an arm’s-length
transaction, but rather, an insider deal between co-conspirators Moonbeam Capital and Beacon.
83. In addition, the proposed Settlement Agreement will not come close to satisfying
BELFOR’s Claim, let alone funding the entire Plan, including the over $35 million required to
rehabilitate the Property from the severe tornado damage, as conceded by Moonbeam Capital
itself. Ex. I.
84. Even if the Court finds there are no grounds for cause (and BELFOR respectfully
submits that the grounds for cause are overwhelming), the Court should appoint a trustee under
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the interest of creditors’ test of subsection (a)(2). Among the factors the court may consider in
(i) the trustworthiness of the debtor; (ii) the debtor in possession’s past and
present performance and prospects for the debtor's rehabilitation; (iii) the
confidence – or lack thereof – of the business community and of creditors in
present management; and (iv) the benefits derived by the appointment of a trustee,
balanced against the cost of the appointment.
In re Vascular Access Centers, L.P., 611 B.R. at 765. However, “subsection (a)(2) envisions a
flexible standard.” In re Sharon Steel Corp., 871 F.2d at 1226. “Frequently, findings of ‘cause’
[under 1104(a)(1)] and ‘best interests’ [under 1104(a)(2)] are ‘intertwined and dependent on the
same facts.’” In re Vascular Access Centers, L.P., 611 B.R. at 765 (quoting In re Grasson, 490
B.R. 500, 506 (Bankr. E.D. Pa. 2013). “Under this section, the court is empowered to use its
broad equity powers to engage in a cost-benefit analysis of the impact of appointing a chapter 11
85. As set forth in detail above, the factors supporting appointment under §
1104(a)(2) all weigh heavily against the Debtor remaining in possession. First, the Debtor
cannot be trusted to manage this case as a fiduciary in the best interests of creditors. Appointing
a trustee is justified to reestablish trust and confidence in the Debtor’s management. See, e.g., In
re Sharon Steel Corp., 86 B.R. at 460 (noting “enormous benefit to be achieved by the
proceeds to the detriment of the estate and creditors, alone warrants a Chapter 11 trustee.
87. Third, BELFOR, the Debtor’s largest creditor, rightfully has no confidence in
management and control of the Debtor. Indeed, as described above, there is significant acrimony
between BELFOR and the Debtor. See In re Marvel Entm't Grp., Inc., 140 F.3d at 474 (“The
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level of acrimony found to exist in this case certainly makes the appointment of a trustee in the
best interests of the parties and the estate” under section 1104(a)(2).).
88. Fourth, the benefits of appointing a trustee far outweigh the costs. Once
appointed, the trustee would assume immediate control and oversight over the Debtor’s sole
asset, the Property, which is barely operational and declining in value after years of disrepair.
The trustee would also independently evaluate claims for, among other things, lost insurance
proceeds that could exceed $9 million where the Debtor has agreed to an insider deal with
Moonbeam Capital for a fraction of that. Not only does that potential value far outweigh the
CONCLUSION
For all of the reasons stated above, BELFOR respectfully requests that this Court: (i)
appoint a Chapter 11 trustee and (ii) grant such other and further relief as the Court may deem
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