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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO In re: CORDILLERA GOLF CLUB, LLC, Debtor. ) ) ) ) )

Case No. 12-24882-ABC Chapter 11

OBJECTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO ENTRY OF PROPOSED ORDER REQUESTED IN SUPPLEMENTAL DECLARATION OF CHRISTOPHER CELENTINO IN SUPPORT OF APPLICATION OF DEBTOR AND DEBTOR IN POSSESSION FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF FOLEY & LARDNER LLP AS GENERAL BANKRUPTCY COUNSEL TO THE DEBTOR, NUNC PRO TUNC TO THE PETITION DATE The Official Committee of Unsecured Creditors ("Committee") appointed in the above captioned, Chapter 11 bankruptcy case of Cordillera Golf Club, LLC ("Debtor"), by and through its undersigned counsel, respectfully files this Objection (this "Objection") to the Entry of the Proposed Order Requested in the Supplemental Declaration of Christopher Celentino ("Supplemental Declaration") in Support of Application of the Debtor and Debtor in Possession for an Order Authorizing the Retention and Employment of Foley & Lardner LLP ("Foley") as General Bankruptcy Counsel to the Debtor, Nunc Pro Tunc to the Petition Date ("Application"), and in support, would respectfully show the Court as follows: I. BACKGROUND 1. On June 26, 2012 ("Petition Date"), the Debtor filed with the United States

Bankruptcy Court for the District of Delaware its voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code), thereby initiating its bankruptcy case (assigned Case No. 12-11893), with the Delaware

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Bankruptcy Court (the Bankruptcy Case). The Debtor remains in control of its business and affairs as a debtor-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. On July 6, 2012, the United States Trustee filed its Notice of Appointment of

Committee of Unsecured Creditors [Docket No. 86], thereby forming the Committee. A. The Application 3. Prior to the transfer of this case to this Court, on July 10, 2012, the Debtor filed its

Application [Docket No. 115], seeking to retain Foley as its general bankruptcy counsel pursuant to Section 327 of the Bankruptcy Code. 4. In connection with the Application, despite the Debtor's contention that Foley was

disinterested within the meaning of section 101(14) of the Bankruptcy Code, the Debtor further disclosed that Foley "has in the past, and is currently representing the Debtor, David Wilhelm, WFP Investments, LLC, and certain of their respective affiliates and/or related entities in matters related to the golf course and other properties, and has also represented one or more of these entities in completely unrelated matters." Application, at 14 (emphasis supplied). 5. The Application specifically disclosed an extremely longstanding and broadly

based relationship among Foley, certain of its principal partners (Mr. Tengberg), Mr. Wilhelm and numerous entities affiliated with Mr. Wilhelm (including multiple parties having prior or current dealings with the Debtor). See Application, at Exh. B (Declaration of Christopher Celentino in Support of Application ("First Celentino Declaration"), at 9-33, 71, 72). Surprisingly, despite these multiple representations, the Application went on to request this Court's approval of Foley as the Debtor's lead counsel, while Foley continued to represent Wilhelm and related entities, including in matters relating to the Debtor. Application, at 14.

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6.

The Committee objected to the Application on multiple grounds [Docket No. 223]

("Original Objection"), generally explaining, inter alia, that: a. Foley is actually conflicted for having previously represented parties having interests and claims adverse to the Debtor and its estate in the specific transactions giving rise to their claims and interests against the estate; Foley's continuing representation of Wilhelm and related entities, including in other matters involving the Debtor, as well as the sheer depth of Foley's relationship with Wilhelm and the Wilhelm Affiliated Entities (of which the Debtor is merely a small part)1, gave rise to serious potential conflicts, the risk of bias and a substantial appearance of impropriety that disqualify Foley as counsel to the estate; and the actual and potential conflicts afflicting Foley's proposed representation of the Debtor and the extent of Foley's relationship to Wilhelm and the Wilhelm Affiliated Entities were so material, substantial and central to critical Bankruptcy Case issues and matters that conflicts counsel proposed by the Debtor could not possibly resolve the concerns.

b.

c.

See Original Objection, at 31-44. See also United States Trustees Objection to Application to Employ Foley & Lardner LLP as Attorneys for the Debtor [Docket No. 22], at 5-7; Class Representatives' Joinder to Committee's Original Objection [Docket No. 232], at 5-6. 7. Following these Objections, on July 27, 2012, Foley filed its Supplement to the

Application and Response to Objections Filed [Docket No. 273] ("First Supplement"), in which Foley, inter alia: (i) acknowledged and disclosed for the first time that, in 2012 and prior to the Petition Date, Foley billed approximately $325,000 in fees for services to the Debtor (not including amounts incurred in the Class Action but satisfied through insurance policy proceeds), and received payment thereon from the Debtor in the amount of $100,000 on April 17, 2012; and (ii) disclosed (again for the first time) that, as of the Petition Date, Foley held a $650,000

Capitalized terms used and not otherwise defined herein have those same definitions as ascribed to them in the Committee's Original Objection.

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receivable for pre-petition legal fees against the Debtor, Mr. Wilhelm and certain Wilhelm Affiliated Entities, for work relating to the Debtor. Foley agreed to "not seek payment" of (but has not waived) this claim against the Debtor, but would retain rights to seek the payment of such fees from Mr. Wilhelm and/or the Wilhelm Affiliated Entities. First Supplement, at pp. 5-9. Recognizing its serious conflicts, in the First Supplement Foley proposed to reduce its role to some so-called "support counsel" position, and proposed to have Sender & Wasserman, P.C. act as general bankruptcy counsel. 8. Following a hearing conducted by this Court on July 30, 2012 to consider the

Application, as supplemented ("Hearing"), and the various objections thereto, this Court issued its ruling, under which the Court determined that Foley was disqualified from representing the Debtor as general bankruptcy counsel. See Transcript of Hearing, at pp. 5 [line 2] 6 [line 18]. A copy of the transcript is attached hereto as Exhibit A. The Court based its ruling on the fact that Foley represented interests adverse to the estate by virtue of its continuing representation of Wilhelm and the Wilhelm Affiliated Entities, which hold multiple secured and unsecured claims against the estate (as well as equity interests), including in matters relating to the Debtor. See, e.g., Transcript of Hearing, at pp. 4 [line 19] 5 [line 22]; Minutes of Proceedings on Application [Docket No. 307] ("Minutes"). As observed by the Court, in addition to the

requirement that proposed counsel must be disinterested, section 327(a) of the Bankruptcy Code grants little discretion and expressly prohibits such simultaneous representation of interests adverse to the estate. 11 U.S.C. 327(a); Transcript of Hearing, at pp. 3 [lines 6-8], 4 [lines 523]. The Court further ruled that Foley could respond in one of three ways. Foley could: a. withdraw from its proposed representation of the Debtor in this Bankruptcy Case and file a claim for its prior representation of the Debtor;

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b.

withdraw any proposal to serve as general bankruptcy counsel for the Debtor, and limit its role in the Bankruptcy Case to the role of special counsel in specific matters, subject to the requirements of section 327(e) of the Bankruptcy Code; or withdraw from its representation of Wilhelm and all Wilhelm Affiliated Entities, and provide a supplemental declaration and proposed order to counsel present at the Hearing, confirming such withdrawal and its proposal to remain as general bankruptcy counsel for the Debtor, before submitting same to the Court.

c.

Transcript of Hearing, at pp. 6 [line 18] 7 [line 15]. See also Supplemental Declaration, at 5. 9. On August 7, 2012, Foley filed with the Court its Supplemental Declaration,

including a proposed order granting Foley's engagement as general bankruptcy counsel for the Debtor [Docket No. 340]. In the Supplemental Declaration, Foley represents that it has now withdrawn from all representation of Wilhelm and Wilhelm Affiliated Entities "as long as the Case is pending and the Debtor is a debtor-in-possession." Supplemental Declaration, at 5 (emphasis supplied). 10. Contrary to the Court's ruling as expressly set forth in the Hearing Minutes, Foley

and the Debtor provided counsel to the Committee only nine (9) minutes of advance notice on the Supplemental Declaration (including the proposed order), and despite prior inquiries by the Committee's counsel requesting disclosure of Foley's and the Debtor's intentions. It further appears that no other party was provided any opportunity by the Debtor or Foley to review and comment on the form of the proposed order, despite having objected to the Application, and further that other counsel present at the Hearing were not served at all with the Supplemental Declaration in advance of its submission to the Court.

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II. OBJECTIONS A. Foley's Supplemental Declaration is Inadequate to Resolve Foley's Disqualifying Conflicts 11. As an initial matter, Foley's Supplemental Declaration is inadequate to resolve its First, Foley has not disclosed or discussed whether it

disqualifying conflicts of interest.

continues to hold its $650,000 claim against the Debtor or intends to seek payment from Wilhelm or the Wilhelm Affiliated Entities (the "Receivable"). If Foley has not waived and released this Receivable, its continuing interest in the Receivable constitutes an interest held by Foley that may be adverse to the bankruptcy estate. The significant amount of the Receivable creates an adverse interest against the estate because Foley's recovery of the Receivable may be expressly or effectively contingent on the ability of Wilhelm and the Wilhelm Affiliated Entities to recover their claims against the estate. The ability of Foley to recover the Receivable may be seriously damaged in the event that these affiliated claims against the estate are reduced, subordinated or disallowed. Of course, as bankruptcy counsel and a fiduciary to the estate, this is exactly the duty that Foley would be charged to evaluate and perform. 12. In light of the extent of Foley's pre-existing relationships with Wilhelm and the

Wilhelm Affiliated Entities, and the critical significance to this Bankruptcy Case of Mr. Wilhelm's disputes with the Debtor's members, the foregoing dynamic casts a serious cloud on Foley's willingness to zealously dispute these entities' claims against the estate. The concerns are exacerbated by Foley's "artful" choice of words in the Supplemental Declaration, in which it indicates that Foley intends to resume its relationships with Wilhelm and the Wilhelm Affiliated

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Entities as soon as it is able to do so (i.e., once the Debtor ceases being a debtor-in-possession).2 There remains no doubt where Foley's true loyalties lie. 13. Therefore, Foley should be required to fully disclose whether it continues to assert

this Receivable against Mr. Wilhelm or any Wilhelm Affiliated Entities. 14. Similarly, Foley has failed or refused to disclose in its Supplemental Declaration

the circumstances relating to Foley's receipt of $100,000 from the estate prior to the petition date, on account of antecedent services. As this Court expressed in its Order on Application of the Debtor for an Order Authorizing the Retention and Employment of Young Conaway Stargatt & Taylor ("Young Conaway") as Delaware Bankruptcy and Conflicts Counsel for the Debtor Nunc Pro Tunc to the Petition Date [Docket No. 321] ("YCST Order"): The Court has reviewed the Application and finds that further information is needed before the Application may be granted. Specifically, paragraph 10 of the Application states that $73,226.08 was paid to Young immediately prior to the filing of Debtors petition, for outstanding balances. The Court is unable to discern whether this payment is a potentially avoidable transfer. Accordingly, it is ORDERED that, within 14 days from the date of this Order, Young or the Debtor shall supplement the Application with information disclosing the dates services were rendered by Young for which the payment of $73,226.08 was applied, failing which, the Application may be denied. YCST Order, at p. 1. 15. The same concern relates to the extent of Foley's lack of disclosure, which details

only that Foley was owed hundreds of thousands of dollars prior to 2012, and "In calendar year 2012, and prior to the filing of the petition, the firm incurred fees in the amount of approximately $325,000for the services set forth above. The firm received payment of $100,000 from the Debtor to be applied towards its services on or about April 17, 2012." First Supplement, at p. 9.

As this Court is aware, there is a pending motion to appoint a chapter 11 trustee in this case.

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16.

As with Young Conaway, the fact that Foley was paid prior to the Petition Date

on what appears to have been pre-existing obligations for legal services rendered, and as a recipient of payments purportedly made in violation of the temporary restraining order entered in the Class Action litigation initiated by the Class Representatives, gives rise to potential exposure to avoidance claims held by the estate. As a defendant in litigation asserting such claims, Foley would obviously be disqualified from serving as bankruptcy counsel. See also In re Interwest Business Equipment, Inc., 23 F.3d 311, 316 (10th Cir. 1994) (explaining that it is the duty of bankruptcy counsel to scour for preferential transfers and cannot be expected to do so where it is conflicted). In re Republic Financial Corp., 128 B.R. 793, 803 (Bankr. N.D. Okla. 1991) (a law firm that received a pre-petition transfer that might be preferential could not be disinterested for purposes of estate representation). 17. In light of the foregoing, Foley cannot be approved as counsel for the Debtor, if at

all, unless and until it fully discloses the circumstances of these payments, including the specific nature of any obligations that were owed at the time and the underlying services giving rise to same, and the nature and timing of the services that this payment was credited. B. Foley's Supplemental Declaration Does Not Justify Nunc Pro Tunc Relief Approving the Application Retroactive to the Petition Date 18. As the Tenth Circuit Court of Appeals held in In re Land, 943 F.2d 1265 (10th Cir.

1991), it is questionable whether nunc pro tunc approval for general bankruptcy counsel is ever appropriate, and even if so, "nunc pro tunc approval is only appropriate in the most extraordinary circumstances." 943 F.2d at 1267-68. 19. The circumstances here do not appear to permit nunc pro tunc relief, to say This Court ruled, as of July 30, 2012, that Foley was

nothing of actually justifying it.

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disqualified from representing the Debtor due to its then-existing representation of numerous creditors and stakeholders holding substantial claims and interests adverse to the estate, including in matters relating to the Debtor. As a result, during the entire period from (and even prior to) the Petition Date, through the date of the Court's ruling (and in fact, until all such conflicting representations were terminated), Foley was conflicted from representing the Debtor. 20. Foley's actions taken subsequent to the Court's July 30, 2012 ruling do nothing to

negate the fact that Foley represented these disqualifying interests prior to such time. As a result, Foley's request to be approved as counsel for the Debtor retroactive to the Petition Date, covering a period when it was hopelessly conflicted and disqualified, cannot be approved. See also 11 U.S.C. 328(c).3 In fact, Foley recognized this in its First Supplement, in which Foley agreed to withdraw as lead bankruptcy counsel. 21. This Court ruled on July 30, 2012 that Foley was disqualified and could not act as

Debtor's counsel, unless it fulfilled the Court's requirements to resolve those conflicting interests. Foley chose to request employment knowing full well that these conflicting interests were present. So intertwined were these conflicting relationships that it took Foley a full eight (8) days to file its Supplemental Declaration. As a result, this Court could not approve Foley as general bankruptcy counsel until Foley had advised the Court and the objecting parties that Foley had withdrawn from its conflicting interests. The Supplemental Declaration and actions can only be directed to resolving these disqualifying interests going forward they cannot magically, retroactively negate their prior existence.

Counsel for the Committee regrets the need to file this Objection, but in light of the potentially harsh consequences of section 328(c) (essentially providing for retroactive denial of all compensation to counsel during periods when it is conflicted), it is most appropriate to raise these issues at this time.

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DATED: August 9, 2012. HOLLAND & HART LLP Respectfully submitted, s/Risa Lynn Wolf-Smith Risa Lynn Wolf-Smith, #15835 Clarissa M. Raney, #40374 HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Denver, Colorado 80202 Telephone: 303-295-8000 Facsimile: 303-295-8261 rwolf@hollandhart.com cmraney@hollandhart.com -andMUNSCH HARDT KOPF & HARR, P.C. Russell L. Munsch (admitted PHV) Texas Bar No. 14671500 Joseph J. Wielebinski (admitted PHV) Texas Bar No. 21432400 Jay H. Ong (admitted PHV) Texas Bar No. 24028756 Zachery Z. Annable (admitted PHV) Texas Bar No. 24053075 3800 Lincoln Plaza 500 N. Akard Street Dallas, Texas 75201-6659 Telephone (214) 855-7500 Facsimile (214) 978-4335 ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS

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CERTIFICATE OF SERVICE I certify that, on August 9, 2012, in addition to service via the Court's CM/ECF system, I personally caused to be served a true and correct copy of this filed document, to be served, via First Class U.S. Mail, postage prepaid and properly addressed, on the parties shown on the attached service list. U.S. Mail, postage prepaid Hand Delivery Fax
Arthur J. Abramowitz, Esq. Cozen O'Connor, PC LibertyView, Suite 300 457 Haddonfield Road Cherry Hill, NJ 08002 Zachery Z. Annable, Esq. Munsch Hardt Kopf & Harr, P.C. 3800 Lincoln Plaza 500 N. Akard Street Dallas, Texas 75201-6659 Joseph M. Barry, Esq. Young Conaway Stargatt & Taylor LLP Rodney Square 1000 North King Street Wilmington, DE 19801 William P. Bowden, Esq. Ashby & Geddes, P .A. 500 Delaware avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Brad W. Breslau, Esq. Cozen O'Connor, PC 707 17th Street, Suite 3100 Denver, CO 80202 Megan M. Adeyemo, Esq. Gordon & Rees LLP 555 17th St., Ste. 3400 Denver, CO 80202

Garry R. Appel, Esq. Appel & Lucas, P.C. 1660 17th Street, Suite 200 Denver, CO 80202

Mikel Bistrow, Esq. Foley Lardner LLP 402 W. Broadway, Suite 2100 San Diego, CA 92101 Donald J. Bowman, Esq. Young Conaway Stargatt & Taylor LLP Rodney Square 1000 North King Street Wilmington, DE 19801 Travis G. Buchanan, Esq. Young Conaway Stargatt & Taylor, LLP 1000 N. King St. Wilmington, DE 19801

Peter A. Cal, Esq. Sherman & Howard L.L.C. 633 17th Street, Suite 3000 Denver, CO 80202

Kathryn M.S. Catherwood, Esq. Foley & Lardner LLP 402 W. Broadway, Ste. 2100 San Diego, CA 92101-3542

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Christopher Celentino, Esq. Foley Lardner LLP 402 W. Broadway, Suite 2100 San Diego, CA 92101

Shaun A. Christensen, Esq. Appel & Lucas, P.C. 1660 17th Street, Suite 200 Denver, CO 80202

Tobey M. Daluz, Esq. Ballard Spahr LLP 919 N. Market Street, 11th Floor Wilmington, DE 19801

Carl A. Eklund, Esq. Ballard Spahr LLP 1225 17th Street, Suite 2300 Denver, CO 80202

Mark L. Fulford, Esq. Sherman & Howard L.L.C. 633 17th Street, Suite 3000 Denver, CO 80202

Tamara A. Hoffbuhr, Esq. Gordon & Rees LLP 555 Seventeenth St., Ste. 3400 Denver, CO 80202

James J. Holman, Esq. Duane Morris LLP 30 South 17th Street Philadelphia, PA 19103

Ericka F. Johnson, Esq. Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 Benjamin W. Keenan, Esq. Ashby & Geddes, P.A. 500 Delaware Avenue P.O. Box 1150 Wilmington DE 19899 David L. Lenyo, Esq. Garfield & Hecht, P.C. 601 E. Hyman Ave. Aspen, CO 81611

Kristi A. Katsma, Esq. Dickinson Wright PLLC 500 Woodward Avenue, Suite 4000 Detroit, MI 48226

Michael S. Kogan, Esq. Kogan Law Firm, APC 1901 Avenue of the Stars, Suite 1050 Los Angeles, CA 90067 James T. Markus, Esq. Markus Williams Young & Zimmermann LLC 1700 Lincoln St., Ste. 4000 Denver, CO 80203 Melissa Maxman, Esq. Cozen O'Connor, PC 1627 I Street, NW, Suite 1100 Washington, DC 20006

Vincent J. Marriott, III, Esq. Ballard Spahr LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103

Dawn Messick, Esq. Foley & Lardner LLP 402 W. Broadway, Suite 2100 San Diego, CA 92101

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Mark Minuti, Esq. Saul Ewing LLP 222 Delaware Ave., Ste. 1200 Wilmington, DE 19899

Erika L. Morabito, Esq. Foley Lardner LLP 3000 K Street, N.W., Suite 600 Washington, DC 20007

Benjamin Morris, Esq. Foley & Lardner LLP 402 West Broadway, Ste. 2100 San Diego, CA 92101 Russell L. Munsch, Esq. Munsch Hardt Kopf & Harr, P.C. 3800 Lincoln Plaza 500 N. Akard Street Dallas, Texas 75201-6659 Jay H. Ong, Esq. Munsch Hardt Kopf & Harr, P.C. Frost Bank Tower, 401 Congress Avenue Suite 3050 Austin, Texas 78701-4071 Jon T. Pearson, Esq. Ballard Spahr LLP 100 North City Parkway, Suite 1750 Las Vegas, NV 89106-4617

Paul Moss, Esq. Office of U.S. Trustee 999-18th Street, Ste. 1551 Denver, CO 80202

Brittany J. Nelson, Esq. Foley Lardner LLP 3000 K Street, N.W., Suite 600 Washington, DC 20007 Ricardo Palacio, Esq. Ashby & Geddes, P .A. 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Richard W. Riley, Esq. Duane Morris LLP 222 Delaware Avenue, Suite 1600 Wilmington, DE 19801-1659

Matthew J. Riopelle Foley & Lardner LLP 402 W. Broadway, Ste. 2100 San Diego, CA 92101-3542

Harlan W. Robins, Esq. Dickinson Wright PLLC 15 N. 4th Street Columbus, OH 43215

Sara Schindler-Williams, Esq. Ballard Spahr LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103 Zachary I. Shapiro, Esq. Richards, Layton & Finger, P.A. One Rodney Square 920 N. King Street Wilmington, DE 19801

Harvey Sender, Esq. Sender & Wasserman, P.C. 1660 Lincoln St., Ste. 2200 Denver, CO 80264

Evan Stone, Esq. 12348 High Bluff Dr., Ste. 100 San Diego, CA 92130

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Darnien Tancredi, Esq. Cozen O'Connor, PC 1201 N. Market Street, Suite 1400 Wilmington, DE 19801

Ann Marie Uetz, Esq. Foley & Lardner LLP One Detroit Center 500 Woodward Avenue, Suite 2700 Detroit, Michigan 48226-3489 Matthew P. Ward, Esq. Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801

David V. Wadsworth, Esq. Sender & Wasserman, P.C. 1660 Lincoln Street, Suite 2200 Denver, CO 80264 Gregory W. Werkheiser, Esq. Morris, Nichols, Arsht & Tunnell LLP 1201 N. Market St., 18th Floor P.O. Box 1347 Wilmington, DE 19899-1347 Joseph J. Wielebinski, Esq. Munsch Hardt Kopf & Harr, P.C. 3800 Lincoln Plaza 500 N. Akard Street Dallas, Texas 75201-6659 Joshua E. Zugerman, Esq. Ballard Spahr LLP 919 N. Market Street, 11th Floor Wilmington, DE 19801

Ronald Wick, Esq. Cozen O'Connor, PC 1627 I Street, NW, Suite 1100 Washington, DC 20006 John F. Young, Esq. Markus Williams Young & Zimmermann 1700 Lincoln St., Ste. 4000 Denver, CO 80203 Dan White Cordillera Golf Club, LLC 97 Main Street, Suite E202 Edwards, CO 81632

Centralized Insolvency Section 2970 Market Street Philadelphia, PA 19104

Colorado Department of Revenue Attn: Bankruptcy Unit 1375 Sherman Street, Room 1375 Denver, CO 80261

Internal Revenue Service Centralized Insolvency Section P.O. Box 7346 Philadelphia, PA 19101-7346 George S. Canellos, Regional Director Securities & Exchange Commission New York Office 3 World Financial Center, Suite 400 New York, NY 10281-1022

Internal Revenue Service Department of Treasury Ogden, UT 84201-0030 Internal Revenue Service Securities & Exchange Commission Central Regional Office Attn: Office of General Counsel (Bankruptcy) 1801 California Street, Suite 1500 Denver, CO 80202

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Secretary of State Division of Corporations Franchise Tax John G. Townsend Building 401 Federal Street- Suite 4 P.O. Box 898 Dover, DE 19903

Secretary of Treasury 820 Silver Lake Boulevard, Suite 100 P.O. Box 7040 Dover, DE 19903

August 9, 2012 s/Lela Lopez Velasquez Lela Lopez Velasquez

5716000_1.DOCX

-15MHDocs 3895424_2 13152.1 3936422_3

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EXHIBIT A

EXHIBIT A

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ : In Re: : : CORDILLERA GOLF CLUB, LLC : : Debtor's Application to Employ : Foley & Lardner LLP (Docket#115); : Objection Filed by the Unsecured : Creditors' Committee; and Joinder : in Objection by Member : Representatives, Objection by the : United States Trustee : _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _:

12-24882 ABC Chapter 11

721 19th Street Denver, Colorado 80202 July 30, 2012 BEFORE THE HONORABLE A. BRUCE CAMPBELL, Judge APPEARANCES: For the U.S. Trustee: For the Debtor: Paul Moss, Esq. Christopher Celentino, Esq. Mikel R. Bistrow, Esq. Harvey Sender, Esq. Vincent J. Marriott, Esq. Carl Eklund, Esq.

For Alpine Bank:

Proceedings electronically recorded and produced by Federal Reporting Service, Inc. Requested by Holland & Hart Delivered: August 9, 2012 Time: Daily $5.00 per page; $65.00

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2 For Cordillera Metropolitan District & Cordillera Property Owners Association; Cordillera Transition Corporation: Peter A. Cal, Esq.

Damien Tancredi, Esq.

For Unsecured Creditors' Risa Wolf-Smith, Esq. Committee: Joseph J. Wielebinski, Esq. For Cordillera Metropolitan Valley Club District & Cordillera Valley Club Owners Association: For Member Representatives: James T. Markus, Esq.

Zachary I. Shapiro, Esq. Shaun A. Christiansen, Esq.

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3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 P R O C E E D I N G S (Whereupon, this is a transcript of the ruling on Foley's application to employ, as requested.) THE COURT: application. This is an area, 327(a) and employment of debtor's counsel, that doesn't afford the Court a great deal of discretion. There's, I think, a long history that goes into Thank you. I am prepared to rule on the

327(a) and concepts of this interestedness way back beyond any of our practice years prior to the Code and long before that that couches 327(a) in a fashion that actually disqualifies, as was suggested by Mr. Wielebinski, that perfectly able counsel sometime are not able to act because of the--the provisions of 327(a) perform a prophylactic function of securing the integrity of the system not because there's an actual problem, but because there is potential conflicts that undermine in the view of the public the bankruptcy process. Having said that, I should also preface my comments by saying the Court is extremely appreciative of the professional manner both Foley and the Objectors have treated this difficult subject with. The Court is of a mind that, as

things now stand, Foley & Lardner does not qualify under Section 327(a). While Mr. Wilhelm (phonetic) is not

disinterested, Foley & Lardner, I believe, is disinterested;

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4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 at least on the basis of what's before the Court. But, the

Section 104(14) disinterested definition does not knock out a professional who represents someone who is not disinterested. However, the disinterestedness standard is not the only standard of Section 327(a). Section 327(a) also disqualifies

a professional who "represents an interest adverse to the estate". Mr. Wilhelm and various affiliates who Foley & On

Lardner represents hold interests adverse to this estate. the basis--and that's not so terribly unusual that the principals and the owners hold interests adverse--they may owe money to them. There are any other number of

circumstances where principals may be adverse to the estate. In other contexts, that's not dispositive. factor. It may be a

I'm sure I'll hear something of that when it comes

to a trustee, but it's certainly not dispositive in that context. On the basis of Foley & Lardner's very comprehensive, admirable, and professional disclosures, it strikes the Court that this isn't a close question. Mr.

Wilhelm is a $7 million secured lender scheduled as disputed by the debtor. The question that I'm addressing is the

portion of 327(a) that says "a professional may not represent an interest adverse to the estate." It is undisputed

presently that Foley & Lardner represent--whether it relates to the estate's affairs in this bankruptcy or not, it's

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5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 undisputed that Foley & Lardner represents Mr. Wilhelm and other of his entities. So then, the only question is is Mr. If

Wilhelm and others of his entities adverse to the estate? the answer to that question is yes, the inquiry is over for 327(a) purposes apart from disinterestedness. As I say, Mr. Wilhelm is a $7 million secured creditor of the estate. Mr. Wilhelm has been accused of

mismanagement and I emphasize only accused of mismanagement of the debtor, a vigorously disputed contention, a resolution of which dispute all seem to agree may be central to the debtor's prospects of reorganization. Mr. Wilhelm and his

affiliates have asserted indemnity claims against the debtor in the State Court litigation. I don't mean to suggest What I mean to suggest is

there's anything wrong with that.

it creates an adverse relationship between the estate and Mr. Wilhelm and Foley represents Mr. Wilhelm. Mr. Wilhelm could

face an effort to eliminate his ownership of the debtor as part of its reorganization pursuant to 1129(b)(2)(C) of the Code. I don't know which direction this plan will take, but At present, as I say, I

that's not an impossibility.

conclude that Foley & Lardner represents entities that hold interests adverse to this bankruptcy estate. Foley & Lardner has suggested both withdrawing from some representation of Mr. Wilhelm and his affiliates or, alternatively, being retained as secondary counsel to Sender

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6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 & Wasserman or as special Section 327(e) counsel. Section

327(e) has less stringent qualification standards then does Section 327(a) in two respects, at least. Section 327(e) has

no disinterestedness requirement; no small matter for a $650,000 prepetition creditor. And, secondly, Section

327(e), unlike Section 327(a), has an adverse interest test only with respect to the matter on which such attorney is to be employed. Unlike (a), if you represent somebody with an Under (e),

adverse interest, you are disqualified under (a).

you are not disqualified if you represent somebody with an adverse interest to the estate if you are not being brought in to serve on a matter related to that adverse interest; altogether different from (a), the prophylactic effect of (a). This leads the Court to the following conclusions. The debtor's present application to retain Foley & Lardner as Section 327(a) counsel, whether primary or secondary to the Sender & Wasserman firm, is denied. The debtor and Foley &

Lardner have three options to consider and, frankly, I don't expect a decision this afternoon on this, although that's up to you. If Foley & Lardner can withdraw from representation

from Mr. Wilhelm and his affiliates and obtain appropriate waivers of consent satisfactory to the debtor and Foley & Lardner, Foley & Lardner may be retained as Section 327(a) counsel with a primary/secondary equal, but with due regard

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7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 for duplication, whatever, the same as the other professionals we've talked about this morning. The second option, Foley & Lardner may hire on as Section 327(e) special counsel, but it may not act or be compensated for work on matters for the debtor on which Wilhelm or--Mr. Wilhelm or his affiliates that continue to be represented by Foley & Lardner hold an interest adverse to the bankruptcy estate. easy answer. That may sound at first blush like an

This could in a contentious case involve some

risk of being second-guessed after the fact. And, of course, the third option, Foley & Lardner may accept Section 327(a) disqualification, file its prepetition proof of claim, and represent anyone other than the debtor that it wishes to represent; something that would be none of the affairs of this Court. As I say, I'm--this is a difficult part of my job description and Mr. Wielebinski is so right in suggesting that this is the time to face that, not when people are second-guessing people. Certainly, I have no criticism to

offer for the short time I've seen this case for either the professionalism or the quality of the service or anything else of debtor's selected counsel, but I think, as I started to say, that 327 for reasons that have been focused on many times in this circuit and have a lot of historical background is not an area that leaves the Court a great deal of

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8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 discretion. How the debtor decides to proceed, I will leave

to you to resolve and I've told you the three options that-MR. SENDER: I think I understand. I just want to talk

about logistics in terms of--if we're going to proceed under one of the first two options which is either (a) with a withdrawal or (e) with a description of what they're going to be doing-THE COURT: well, yes, okay. MR. SENDER: Well, you don't have to start with it if-Go ahead, excuse me? Can we simply tender a proposed order

consistent with one of those options? THE COURT: MR. SENDER: You may. And, this Court--to the extent we're

talking about waivers or withdrawals, do you want those attached or-THE COURT: I do not. I mean, that--I am not worried

about Foley & Lardner's ethical sensitivities and they need to sort that out with their clients including the one they share with you. MR. SENDER: THE COURT: I understand that. I mean those waivers are probably, as a

matter of the applicable and ethical considerations, have to be taken into account and I'm aware from the disclosures that there has been a lot of cooperation between Foley and Mr. Wilhelm's companies with waivers that have been served up

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9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 along the way, but--and, as I say, I don't think those waivers are my business, but if it is going to sign on as a counsel, it cannot represent the Wilhelm interests and that poses the firm with its own challenge that it may very well meet in terms of waivers from the debtor and from Mr. Wilhelm and from Mr. Wilhelm's companies. And, if they choose to do

that and if their clients choose to allow them to do that, then they may be back as your co-counsel under 327(a), but those are the only conditions under which they can do it. a sense, it's not entirely in their control. MR. SENDER: We'll get something filed sometime this In

week, Your Honor, with one of the proposed orders or a withdrawal of the application, whichever option we take. THE COURT: MR. SENDER: THE COURT: Very good. Thank you. Thank you. As I mentioned earlier, we will

try to set down the trustee matter for a hearing the 15th. And, I hope that--well, we will accommodate whatever needs to be accommodated between now and then and we will get orders entered between now and then as need to be entered. The less

we see of you between now and then, the better, but everybody doesn't control that because I've got some personal issues, I'm sorry, that will--that doesn't mean that one of the other divisions won't handle what needs to be handled, but I'd be grateful and I know in a case like this or other cases, we

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10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 all don't control our own timing on everything, but to the extent you can accommodate that, please do. Yes, sir? MR. WIELEBINSKI: that last point? Your Honor, can I be heard on just

I want to leave here making sure I am not I would urge the Court

confused and I'm easily confused.

that if Foley is going to adopt either Option (a) or (b) or one or two of the three that you outlined, that it not be just by submitting an order to you. I think, in fairness to

the Committee and others and to Foley, they should submit an application and, Judge, we would agree to it being promptly heard before Your Honor to the extent you have the availability. And, if there's no issues, then we won't file

an objection, but I think it puts everybody in a difficult situation to simply say you don't want to see the waiver letters, but they're going to accomplish what they need to to get retained-THE COURT: Well, maybe in--you raise a fair point. I

want a representation in some sort of supplement submitted with the order and provided to the people who have appeared today, to the objectors, that Foley has withdrawn from representation of Mr. Wilhelm and his affiliate entities other than the debtor. And, I think that's fair and I would

anticipate with that and an order if that is the choice. And, as I mentioned, it's not merely a matter of choice. If

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11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that's able to be done and is the choice of the debtor, the affiliates, Mr. Wilhelm, and Foley & Lardner, I will grant the application. Now, if there's some issue as to whether or

not they have or haven't withdrawn, but that representation will need to go and if that's not satisfactory, file something. MR. WIELEBINSKI: Okay. Thank you, Your Honor. I just

thought it was fair to flesh this out. THE COURT: happened. It ought to be in the record that that's

I'm not going to get in the middle because it's

privileged to start with between those discussions of whether they get waivers. And, you're not going to be in the middle

of those discussions either because it will be privileged. MR. WIELEBINSKI: THE COURT: MR. SENDER: 15th or-THE COURT: Well, it's just going to be on a (inaudible) Agreed. Thank you very much.

Anything else, Mr. Sender? Does the Court have a proposed time for the

motion calendar and-MR. SENDER: believe. THE COURT: It will be in the morning and we will--you Which is normally in the morning, I

know, I'll set aside a half an hour or 45 minutes so that we can discuss a discovery schedule to the extent it's needed, etcetera. It won't just be strung with six or seven other

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12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 small things. MR. SENDER: And, I'm assuming out-of-state counsel, if

they wish, can appear telephonically at that time. THE COURT: Anybody can appear telephonically. You can

appear telephonically if you don't want to walk across the street. MR. SENDER: do that. THE COURT: We're not taking evidence. I'll welcome you It's so far to walk. I don't know if I can

telephonically and I'll also welcome you here. If there is nothing else, I thank you all. regret having used as much of the afternoon as we have because I understand you're going to talk to each other. good luck and we'll be recess. (Whereupon, proceedings concluded.) So, I

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13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 s/Doneita Gitzen Doneita Gitzen Federal Reporting Service, Inc. 17454 East Asbury Place Aurora, Colorado (303) 751-2777 80013 2012. TRANSCRIBER'S CERTIFICATE I hereby certify that the foregoing has been transcribed to the best of my ability and constitutes a true and accurate transcript of the mechanically recorded proceedings in the above matter. Dated at Aurora, Colorado, this 8th day of August,