Thursday, April 24, 2014
In the drama surrounding the August Wilson Center, some public officials seem to have decided who should play the role of villain: Judith Fitzgerald, the court-appointed conservator charged with figuring out how to discharge the center's $10 million debt. This week, Mayor Bill Peduto and County Executive Rich Fitzgerald called for Ms. Fitzgerald's removal, after she announced she would back a $9.5 million bid for the center. That bid involves building a hotel above the current structure, and paring down the cultural offerings in the current space; Peduto and Fitzgerald maintain that a smaller bid, made by local foundations who say they'll preserve more of the center's mission, would be better for the community. They also accuse Judith Fitzgerald of ignoring the concerns of the black community.
State Attorney General Kathleen Kane has also expressed misgivings about Fitzgerald's performance. But at least one local bankruptcy expert says Judith Fitzgerald is being miscast.
Mark D. Yochum, a Duquesne University of Law professor who teaches bankruptcy, says that while he's sympathetic to those who want to preserve the center's mission, Fitzgerald is being criticized mostly for doing precisely what the law requires.
Yochum says "he's known Judge Fitzgerald for a thousand years. Every bankruptcy person in town does, because she's nationally recognized." And he adds that, as a court-appointed conservator, Fitzgerald "has an ethic to maximize the value of the property for the creditors. That's it. You may not like that law, but it's the obligation she has."
In fact, Yochum says, Fitzgerald could quite conceivably "get in trouble" if she passed up a higher bid -- even if the lower bid was more popular with the public. Creditors, after all, could argue that the receiver ignored her legal responsibility to make them whole. (And it's worth noting that Dollar Bank, who holds the $7 million mortgage that makes up the bulk of the Center's obligations, has indicated its support of the $9.5 million bid.)
Yochum says there might be more leeway for Judge Lawrence O'Toole, who appointed Fitzgerald and who ultimately will decide the center's fate. "As far as I know," says Yochum, "there's nothing in the case law to suggest that. But the function of a judge in a receivership is odd" -- with much of the heavy lifting done by the receiver -- " and these state-law receiverships have been around for almost as long as the commonwealth itself. The laws describing them haven't been changed since 1910," which can offer a judge some latitude he might otherwise not have.
But Yochum says Fitzgerald really has no such latitude. He also scoffed at the suggestion -- which has been percolating online -- that Fitzgerald faces a potential conflict of interest because her commission is based on the amount of the winning bid. Yochum says that's "a common arrangement" and "in a way, the opposite of a conflict of interest. The idea with these commissions is that she will try to get as high a bid as possible."
And there's the rub, says Yochum. The entire legal process is set up to ensure that when a debt is defaulted on, the creditors get as much of their money back as they can. Ordinarily, nobody questions whether that's a good thing; ordinarily, though, the property in question doesn't have the kind of public significance that the Wilson Center does.
Yochum is himself an active participant in the theater community. (In fact, he'll be appearing -- as evil McCarthy-Era lawyer Roy Cohn -- in an upcoming performance of Angels in America at Throughline Theater this June. "I have a great death scene," in the two-part play's second installment, he promises.) And he says "I feel bad about this whole thing. I'm big on theater, and [the Wilson Center is] a lovely performance space … and in the theater community it's difficult to find space to perform. But it's just too bloody expensive. And I don't see there's enough charitable support to keep it running."
But what about the support the center has already gotten -- from local foundations and government subsidies? Doesn't the money they've shelled out give the public a stake too -- one the process should consider, even if it wasn't in the form of a loan?
"Nice speech," says Yochum, not unkindly. "I respect all that. But by the same token, I would say, 'You could have gotten a mortgage'" -- which would give foundations a seat at the table. And while the city's Urban Redevelopment Authority is holding about a half-million in Wilson Center debt, it's Dollar Bank who holds the mortgage and is the Wilson Center's largest creditor. That puts the bank in the catbird seat, and "There's a lot of incentive on Dollar's part to go with what the receiver comes up with."