E-mails focus of resort's bankruptcy hearing

More accusations and denials about improper actions involving computer records punctuated a hearing in Bankruptcy Court this week about the Crowne Plaza San Marcos Golf Resort in Chandler.

Attorneys for the resort's owner, San Marcos Capital Partners, complained that information-technology experts from Teris, an IT company, appeared at the resort a second time, on June 1, to download information from resort computers and servers.

Teris first showed up at the resort on May 19, the result of a subpoena from Colorado-based Guaranty Bank and Trust Co., the resort's lender. Teris began copying data from computers.

On May 23, the resort got an order from bankruptcy Judge George Nielsen to temporarily suspend compliance with the subpoena.

However, Teris employees arrived at the resort June 1 after-hours and "demanded access" to all of the resort's computers and servers, according to court papers filed by attorneys of the debtor, San Marcos Capital Partners.

Teris workers said they were there on the authority of the court-appointed receiver, Kirby Payne of Rhode Island-based Smiling Hospitality, to fulfill the bank's subpoena.

The resort's general manager, Frank Heavlin, was not at the hotel. Payne called him and told him to send the key to the server room to the hotel with a cab driver, the resort's owners attorneys say.

Heavlin refused to turn over the key.

Later that night, the receiver's attorney, L.J. Rotman of Minneapolis, sent an e-mail to a debtor's attorney, Steve Mulligan in Denver, saying the IT people had acted to prevent destruction of evidence.

The implication miffed the debtor's attorneys.

"The debtor is fully aware of its obligations to maintain documents at the resort and has not deleted (nor) downloaded . . . any evidence," the debtor's attorneys wrote in court papers.

On June 2, Payne wrote an e-mail to Heavlin listing several concerns. The e-mail was filed in court. Payne said Heavlin was continuing to receive funds that were to be deposited in accounts controlled by the receiver, but that Heavlin was failing to do that.

Heavlin was deleting e-mails and also advising vendors that the receivership was about to end, a premature assumption, Payne said.

Furthermore, Payne said to Heavlin, "The lender, as evidenced by their motion accusing you of fraud, reveals you have failed to deliver $400,000 to the receiver, or even report its existence, (and) deposited $8,000 in funds received from an insurance company into accounts other than the receiver's accounts."

Heavlin replied by e-mail, saying he was not deleting any e-mails other than personal ones and sales request(s) from vendors. He said he had very little server space.

Heavlin said the $400,000 was handled before the receiver was appointed.

On June 3, Payne arrived at the resort and fired Heavlin, "claiming that Mr. Heavlin has a conflict of interest," say court papers written by the debtor's attorneys. Payne also fired the resort's chief information-technology employee.

Payne declined to comment to The Republic.

Teris employees have since had access to the computers.

In court Monday, John Fries, an attorney for the bank, said that Heavlin had deleted 4,450 e-mails and that they were set to be purged from the system.

"It's outrageous that Mr. Heavlin deleted . . . e-mails that could be pertinent to fraudulent activity," Fries said.

Rotman, a receiver's lawyer, attended the hearing via speaker phone and hinted at possible problems with even more than 4,450 e-mails.

Julie Trent in Denver, a debtor's attorney, also attended Monday's hearing by speaker phone, saying, "Mr. Heavlin will testify he has not deleted or purged evidence. He told Mr. Payne he deleted personal e-mail."

Heavlin, in a phone interview with The Republic, said he had deleted mainly spam, and there was such a voluminous amount, he couldn't allow it to stay in the system.

"I have nothing to hide in that computer," Heavlin said in the interview. "They are going through it with a fine-tooth comb. I did nothing wrong."

The debtor has accused the receiver and the bank of being too cozy, to the debtor's detriment, but the receiver and bank deny the accusation.

Rotman, the receiver's attorney, said the computer data are being handled properly.

"We will protect the sanctity of those documents," he told the judge.

"We will not deliver them to the bank until the court says so."

The judge set more hearings for June 23 and Aug. 1.

by Luci Scott The Arizona Republic Jun. 11, 2011 12:00 AM



E-mails focus of resort's bankruptcy hearing