Emergency motion filed in cemetery case

September 17, 2009 (CHICAGO) Earlier this week, a bankruptcy judge put the scandal-plagued owner, Perpetua Holdings, in charge.

Now Illinois Attorney General Lisa Madigan is asking the court to overturn that ruling.

As many as two dozen lawyers crowded federal bankruptcy court on Thursday as the question of control over the beleaguered cemetery was hashed out. They looked around and thought they better talk among themselves before hammering away at each other in court. So the judge let them.

Lawyers for the cemetery's owners, Perpetua Holdings, as well as attorneys for the attorney general, the Cook County sheriff, the cemetery's former receiver, and groups of debtors and creditors went into conference in response to the attorney general's motion. When they returned, most weren't talking. But attorneys for victims of the grave re-selling scandal were.

"By going into bankruptcy, that has thrown a monkey wrench into it, that has the effect of making it probably the most difficult venue to try to resolve the problems," said Blake Horwitz, class action lawyer for plaintiffs.

But bankruptcy is an orderly process, according to one practitioner in the field for a quarter century, and allowing Perpetua to remain in control could make sense.

"If the company has greater value as a going concern you want to keep it going if possible and if new money can be put in to keep the company going, well that is a sensible thing to happen. And the people will put the money in if they know they have a chance of getting paid first," said David Leibowitz, bankruptcy attorney.

The attorney general's motion to strip control of Burr Oak from Perpetua was continued to next Tuesday.

In the meantime, Horwitz and other plaintiffs lawyers are concerned that money in trust at Burr Oak -- money that could be paid out to victims families -- through legal maneuvers could end up in the hands of Pacesetter SBIC, a venture capital company that lent Perpetua at least $6 million to run Burr Oak. Pacesetter is a secured creditor of Perpetua and as a lender it denies it has anything to do with the cemetery owner's operations.

"Management is entirely separate. None of Perpetua's principals have any interest in Pacesetter. Definitely no overlap on officers…I don't know if the Pacesetter director is also a Perpetua director," said Vincent Lazar, Pacesetter SBIC lawyer.

The attorney general's office may or may not be sold.

"We are keeping Perpetua on a short leash. We asked for a short date from the bankruptcy court. We are coming back here at 10:30 on Tuesday morning and we will not stop in the meantime," said Paul Gaynor, lawyer for Illinois attorney general.

Next Tuesday, the parties will come back to bankruptcy court to flesh out the relationships, if any, between Perpetua and Pacesetter. The role of former receiver for Burr Oak, Raymond Szabelski, may be a big point on which the sides can compromise. His work in starting to get the cemetery working in an orderly fashion again was well received by all sides.

Perpetua regains control of Burr Oak on Wednesday

The receiver for Burr Oak returned the keys to the property to a lawyer for Perpetua Wednesday morning. It's not how Szabelski thought his quest to clean up this place would end.

"I was surprised. I didn't expect that it was a decision by Perpetua to move that way," said Szabelski.

Szabelski was authorized to spend $50,000 in cemetery trust funds to resurrect neglected bookkeeping and maintenance programs across the sprawling operation. The Cook County Sheriff's Department says it was stunned by Perpetua's ability to get back in control.

"The frightening part is, nothing has changed in the state of Illinois since this happened to now that will prevent the same sort of thing from happening again," said Patterson.

The license revocation was put over to next week. In the face of Tuesday's report from the governor's task force on cemeteries, which recommended cemetery employees be licensed and services be paid for in forms other than cash, Perpetua faces about 50 lawsuits over the scandal, and the company's lead bankruptcy lawyer said Chapter 11 will protect his client.

"Eventually, someone will acquire that cemetery and will own it and operate it, and the bankruptcy is just the vehicle to address the financial distress that has caused by all of this trauma," said Robert Fishman, Perpetua attorney.

As far as trauma goes, it was said in Wednesday's hearing that at least $6 million is going to be fought over by the creditors of Burr Oak. That's all part of the proceedings that are going to be happening over the next few weeks.

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