IndyMac property trustee objects to permanent Chapter 7 trustee appointment following disputed election

By Caroline Salls

Pittsburgh, Oct. 17 - IndyMac Bancorp Inc. property/institutional trustee Wilmington Trust Co. asked the U.S. Bankruptcy Court for the Central District of California to appoint Jeffrey H. Beck as the permanent Chapter 7 trustee for the company's bankruptcy case.

According to its objection to a motion for appointment of interim Chapter 7 trustee Alfred H. Seigel as the permanent trustee, Wilmington Trust requested the election of a new Chapter 7 trustee on Sept. 10 and nominated Beck for the post.

Wilmington Trust said it was the only creditor to vote in the trustee election, and Beck was elected as Chapter 7 trustee.

However, on Sept. 16, Siegel's counsel disputed Beck's election.

Wilmington said Section 702 of the Bankruptcy Code provides a mechanism for creditors to elect a permanent trustee of their choosing to replace the interim trustee initially appointed at the beginning of a Chapter 7 proceeding, as long as the election is requested by creditors holding at least 20% of the claims entitled to vote for the election.

Wilmington Trust said it filed proofs of claim before the selection meeting that show it has undisputed, fixed, liquidated unsecured claims totaling roughly one-third of IndyMac's total liquidated unsecured claims.

The property/institutional trustee said Beck was unanimously elected by the required creditor vote at the meeting and would have been confirmed as permanent Chapter 7 trustee if not for the challenges raised by the interim trustee and his counsel.

Wilmington said no creditor, equity holder or party in interest other than the interim trustee has objected to Beck's election as permanent Chapter 7 trustee.

"Ignoring the wishes of a large estate creditor, the interim trustee and his counsel have raised numerous unsupported allegations disputing the trustee election and would have this court ignore the clear provisions of the Bankruptcy Code," Wilmington said in the objection.

"Many of the issues raised by the interim trustee in his papers submitted to the U.S. Trustee and this court are nothing more than a red herring and an effort to turn the straightforward election of a permanent trustee into a disputed matter."

A hearing on appointment of a permanent Chapter 7 trustee is scheduled for Oct. 30.

IndyMac filed for bankruptcy on July 31. Its Chapter 7 case number is 08-21752.

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