Friday, Sept. 14, 2001 | 9:56 a.m.
The largest creditor of Las Vegas' bankrupt Vacation Village asked a court Thursday to stop the hotel-casino from making what it called "unauthorized" payments to its owners and managing partners, the Heers family.
Foothill Capital Corp., in Bankruptcy Court papers filed July 20, said it discovered Vacation Village had allegedly without explanation or court approval been making such payments to several professionals -- many of whom are Vacation Village insiders and relatives of insiders.
Foothill said Vacation Village consistently failed to timely file operating reports, but finally did so on June 8 only after it was threatened with a motion by the U.S. bankruptcy trustee to convert Vacation Village's Chapter 11 reorganization filing to a Chapter 7 liquidation.
Gerald Gordon, attorney for Foothill Capital Corp., said during a hearing Thursday that Vacation Village has failed to comply with the court's order to sign an auction agreement for its sale on Nov. 20, advance $50,000 for advertising costs to court-appointed auctioneer Eric Nelson Auctioneering Inc. and fully cooperate with the auctioneer's requests.
But Bill McGimsey, attorney for Vacation Village, said it "doesn't have the money" and that the Chapter 11 reorganization plan provides that "Foothill will extend the money if Vacation Village doesn't have it."
Gordon, however, questioned Vacation Village's alleged inability to pay, saying: "The principals of Vacation Village are drawing out about $10,000 a week as executive compensation and about $30,000 in professional payments. Some $70,000-$80,000 a month is going out to these executives and principals. If the property is so out of cash, then why do its operating statements for July show a net profit of about $1.26 million?"
"We want an order to stop the (weekly) payments of about $2,000 each to Cathleen Heers Norcott, Cheryl Nolte, Gary Heers, Terri Heers Thompson and Tim Heers (Vacation Village's president), and ... to ask Tim Heers to explain why he won't sign the agreement," Gordon said.
U.S. Bankruptcy Judge Robert Jones didn't immediately rule on Foothill's request. But he reiterated that there are federal court orders that require Vacation Village to sign the auction agreement, advance $50,000 in marketing costs and fully cooperate with the auctioneer.
Phillip Abramowitz, another Vacation Village attorney, said: "All salaries paid to the Heers family are pursuant to an agreement with Foothill. The agreement is that the Heers family are entitled to salaries because they're running the casino. The $50,000 is going to be advanced and they are going to sign the auction agreement."
Gordon also noted that while Vacation Village has cooperated to an extent with Eric Nelson Auctioneering, this was at best "sporadic, spotty and somewhat tentative."
"Aleda Nelson (the auctioneer's president) was promised certain documents and given access to rooms by Vacation Village's general manager, Jeffrey Stephens and hotel manager, Nancy Schoolfield. But when Nelson followed up on this recently, they were no longer at the property," Gordon said. "We don't know if they were terminated or not."
Separately, Vacation Village has withdrawn its claims that Eric Nelson threatened to destroy Vacation Village's business and its owners when he was told by the hotel-casino that it was trying to get a court ruling to remove the auctioneer.