June 14, 1999
The US Bankruptcy Court in Washington, DC, received a motion on June 11 from the US Trustee Dennis Early, echoing a similar motion from the attorney representing Legion for the Survival of Freedom (parent corporation to the Institute for Historical Review), asking that the Court appoint a special trustee to operate Liberty Lobby. The legal grounds upon which the motions are made include “fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management.” The Court has scheduled a hearing for July 1.
If granted by the Court, the special trustee would take over the day-to-day operation of Liberty Lobby, and investigate numerous suspicious transfers amounting to millions of dollars among entities controlled by Willis Carto, including Liberty Lobby.
The motions come after months of obfuscation by Liberty Lobby about its true financial situation in documents filed with the Court under penalty of perjury. Liberty Lobby’s first two “disclosure statements,” which are meant to reflect all the debtor’s income, assets and liabilities, were rejected by the Court as incomplete and flawed. In each case, creditor LSF was able to show the Court that Liberty Lobby was hiding substantial assets, egregiously misstating its financial condition, or transferring funds without obtaining the Court’s approval.
As a result, Liberty Lobby was forced to submit a third disclosure statement. However, it too was so flawed that the US Trustee informed Liberty Lobby that if it had not reached a negotiated settlement with LSF by May 26, 1999, he would file a motion to appoint a special trustee. (See related item below.) As Early’s motion notes, “The conduct of the debtor as set forth above raises serious questions concerning the veracity of the information contained in the schedules and statements as well as the monthly operating reports that have been filed to date.”
At the conclusion of his investigation, the special trustee will then make a recommendation to the US Bankruptcy Court as to whether Liberty Lobby should be allowed to continue operation, or if it should be liquidated to pay creditors.
[The full text of Early’s motion is available on this Web site.]