MERIDEN — The city is asking a bankruptcy court to allow it to probe the 11th hour formation of a limited liabilty partnership that halted a planned foreclosure auction of two Colony Street buildings.
A bankruptcy attorney hired by the city called the move a deliberate attempt to “derail” the auction and asked a New York federal bankrupty court to allow it to conduct a Rule 2004 examination, probing several claims made by CBD & Sons LTD and CBD Colony Street LLC.
City officials have stated their goal is to move forward with the auction to get 9-11 Colony St. and 13-17 Colony St. into the hands of a viable owner. The properties were the subject of an 18-month foreclosure action in New Haven Superior Court and the sale was ordered for May 22. But a bankruptcy filing made by CBD Colony Street LLC the day before stopped the auction.
If the city’s request is granted, attorneys would be allowed to depose a trustee for CBD & Sons LTD and examine documents surrounding the formation of CBD Colony Street LLC. The probe seeks to investigate among other things, the trustee’s claims that the foreclosure sale would violate bankruptcy court proceedings.
Irve J. Goldman of Pullman & Comley LLC in Bridgeport questioned that claim and others after it was revealed the new entity had not been formed when the deeds were transferred to CBD Colony Street LLC on May 21.
“In a discredited and abusive maneuver that has been described as the ‘new debtor syndrome’... this Debtor was newly formed on May 24, 2021 and purportedly acquired the Colony Street Properties based on a Quit Claim Deed from CBD that is dated May 21, 2021, three days before the Debtor’s formation,” Goldman argued in court filings. “Although the Debtor filed its Petition on the same date as the date of the Quit Claim Deed, the Debtor was not in legal existence at that time and it is not known how or when, if at all, the Quit Claim Deed was delivered to the Debtor.”
Goldman argued the two entities share the same ownership and control person Aaron Twersky, a trustee for both entities. Twersky executed the quit claim for CBD as its vice president, and the pettion for the debtor as power of attorney for managing member Chana Daskal.
Daskal is a Brooklyn, New York native who received a $20 million net settlement following injuries she suffered in a 2001 helicopter crash. Twersky is the power of attorney for a trust fund established for her and her two sons in 2007. A former trustee paid a $750,000 loan from the trust to mortgage the two Meriden buildings, and Twersky later secured the deeds when the former owner defaulted on the loan, according to multiple lawsuits filed in three states.
Goldman argued the city’s application for a Rule 2004 is warranted because CBD hadn’t yet formed the single-asset entity but pressured the city to stop the auction, according to legal filings.
Goldman stated: “In furtherance of this scheme, counsel for the Debtor sent a threatening letter to the City’s foreclosure counsel on May 21, 2021, which claimed that the ‘Debtor is the deeded owner of” the Colony Street Properties’ and sought to invoke the automatic stay to derail their scheduled foreclosure sale on May 22, 2021 under threat of sanctions.”
The letter from Twersky to the city representatives stated: “’Demand is hereby made for compliance with §362 of the Bankruptcy Code and to cancel the foreclosure auction sale of the Property. Any action taken in violation of §362 of the Bankruptcy Code is sanctionable and will be brought to the Court’s attention,’” according to legal filings.
Neither Twersky nor Goldman could be reached for comment.
Out of an abundance of caution, and not having had the time to look into the validity and legitimacy of the debtor’s actions and claims, the city cancelled the foreclosure sale, Goldman stated.
“There is certainly good cause for the requested examinations and document production requested here,” Goldman argued. “The circumstances surrounding the Debtor’s formation and the purported conveyance of the Colony Street Properties by CBD, which has common ownership with the Debtor, as well as the same control person, Aaron Twersky, for the apparent purpose of derailing the long-scheduled foreclosure sale of the Colony Street Properties, is certainly deserving of investigation by the secured creditor whose rights were adversely affected.”
The auction delay frustrated city officials who view the buildings as vital pieces in the downtown’s economic recovery and want the properties in the hands of an owner who will revitalize them. CBD had accrued nearly $100,000 in blight and property maintenance liens prior to the court-ordered foreclosure auction. The state Department of Economic and Community Development is also listed as a creditor for a mortgage it extended to the prior owner.
“It’s way past time to cut the cord here and go to a sale,” said City Councilor Michael Rohde. “They had plenty of time to square away the finances on the whole thing.”
A telephone conference between creditors and the court is scheduled for Thursday.