EpiCentre's unsecured creditors appeal ruling

The committee of unsecured creditors in the EpiCentre's bankruptcy case has appealed a judge's decision to disband the committee.

In January, U.S. Bankruptcy Judge George Hodges approved a motion by the EpiCentre's trustee to disband the committee. In his order filed with the court, Hodges said he approved the trustee's motion because the committee "is no longer necessary to protect the interests of its constituency; the administrative expense of the Committee is not justified; and the Committee has appeared to be counter-productive to the process of this case."

The decision came as the uptown complex's developers, lenders and bankruptcy trustee argue over whether millions of dollars in parking revenues and other money was wrongfully diverted from the project so they wouldn't have to be paid out to creditors.

The committee's attorney, Dennis O'Dea, has told the Observer such a move was unprecedented. Unsecured creditors are among the last to be repaid in a bankruptcy case, with secured creditors and administrative expense claims being paid first.

The project's bankruptcy trustee, Elaine Rudisill, managing director of The Finley Group, is investigating the EpiCentre's finances, looking for money and property that should be recovered to pay off the project's debts.

In an order explaining his decision, Hodges said the trustee "is capable of and required to adequately represent the interests of unsecured creditors in these cases."

So far, more than $220,500 has been paid in legal fees and expenses for the committee, court filings say. This money comes from cash generated by the EpiCentre.

"In these cases the secured creditor has a lien on the cash generated by the debtors' operations. Consequently, the Committee's fees are paid out of cash collateral of that creditor," the order says. "This continued free ride for one group of creditors at the expense of another is an administrative burden that is no longer merited.

At stake in the bankruptcy case is the future of the prominent, 302,000-square-foot retail and entertainment complex, which has been mired in court battles since holding companies Pacific Avenue and Pacific Avenue II filed for Chapter 11 bankruptcy protection in 2010.

The EpiCentre's owners filed for bankruptcy protection after Regions Bank started to foreclose after a $93.9 million loan came due.

Regions later sold the construction note to Blue Air 2010, a limited liability company. Since then, a new company has been hired to manage and operate the complex at Trade and College.

Rudisill has sued EpiCentre developers Afshin Ghazi and George Cornelson III contending that the men "fraudulently, intentionally and knowingly caused the Debtors to transfer millions of dollars in parking revenues to affiliated entities for the benefit of Ghazi and Cornelson personally." The court filings allege the men used shell companies to hide the revenues, and that they did not disclose the companies or the transfer to the bankruptcy court.

Home to restaurants, bars, an art gallery, movie theater and offices, the complex at Trade and College streets sits across from Time Warner Cable Arena, site of the upcoming Democratic National Convention, which will attract tens of thousands of visitors.