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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Chapter 11 In re: Case No. 11-22820 (RDD) THE CHRISTIAN BROTHERS INSTITUTE, et al., (jointly administered) Debtors.
DECLARATION OF ILAN D. SCHARF IN SUPPORT OF MOTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR ENTRY OF AN ORDER APPOINTING AN EXAMINER WITH EXPANDED POWERS TO SELL REAL PROPERTY OWNED BY THE DEBTORS Ilan D. Scharf, declares under the penalty of perjury that: 1. I am a partner in the law firm of Pachulski Stang Ziehl & Jones LLP,
counsel to the Official Committee of Unsecured Creditors (the Committee) of The Christian Brothers Institute (CBI) and Christian Brothers of Ireland, Inc. (CBOI and, collectively with CBI, the Debtors), the debtors and debtors in possession in the above-captioned cases (the Cases) under chapter 11 of Title 11 of the United States Code (the Bankruptcy Code). I maintain an office at 780 Third Avenue, 36th Floor, New York, New York 10017. I am over the age of 18 years, and am not a party to the within action. I make this declaration in support of the Motion of the Official Committee of Unsecured Creditors for Entry of an Order Appointing an Examiner With Expanded Powers to Sell Real Property Owned by the Debtors (the Motion) filed contemporaneously herewith. Capitalized terms used but not defined herein shall have the meanings and definitions ascribed to them in the Motion. Unless stated otherwise, all facts herein are upon information and belief. 2. I have reviewed the Schedules of Assets and Liabilities (Schedules) filed
by each of the Debtors in these Cases. Based on the Schedules, the Debtors non-insurance assets appear to consist primarily of their real estate holdings. CBI listed seventeen parcels of
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real property on its Schedules [Docket No. 35] with a stated aggregate value of $62,464,000. Thirteen of CBIs properties (including each of the New York City Property, the Stratton Road Property and the Rochester Property discussed below) have a stated value of more than $1 million each. CBOI listed three parcels of real property on its Schedules with a stated aggregate value of $306,000 [Docket No. 37]. Together these real property holdings account for more than 97% of the Debtors scheduled non-insurance assets. True and correct copies of CBI and CBOIs Schedules are attached hereto as Exhibits A and B. 3. On September 15, 2011, the Committee asked the Debtors to provide a
plan for the sale of the Debtors real property. See email from Ilan D. Scharf to Scott Markowitz dated September 15, 2011, a true and correct copy of which is attached hereto as Exhibit C. Since that time, the Committee has repeated its request to the Debtors to provide a real estate disposition plan. See, e.g., letter from Ilan D. Scharf to Anthony Dougherty and Scott Markowitz dated September 23, 2011, a true and correct copy of which is attached hereto as Exhibit D. The Debtors have not provided a report in response to these requests. 4. To date, the Debtors have retained a broker to sell only one property that
has a scheduled value in excess of $1 million: a building located at 74 West 124th Street in New York City (the New York City Property). The Debtors have also retained brokers to sell two single-family residences owned by CBOI and one single-family residence owned by CBI. The collective value of those three properties appears to be less than $825,000.1
See Debtors Application for Retention of RE/MAX 10 as Debtors Real Estate Broker (seeking to retain broker sell simple family residential property to be listed at approximately $300,000) [Docket No. 94] and order approving such retention [Docket No. 102]; Debtors Application for Retention of Four Seasons Real Estate Center as Debtors Real Estate Broker (seeking to retain broker to sell single family residential unit for a list price of $283,000) [Docket No. 104] and order approving such retention [Docket No. 144]; and Debtors Application for Retention of RE/MAX 10 as Debtors Real Estate Broker (seeking to retain broker to sell single family residential home at a listing price of approximately $240,000) [Docket No. 195].
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5.
To date, the Debtors have contracted to sell only two properties: the New
York City Property for $13 million; 2 and a single family residential house located in Chicago for $257,500.3 6. CBI owns two parcels of property on Stratton Road in New Rochelle, New
York (the Stratton Road Properties).4 Iona Grammar, a school founded by CBI or the Congregation, is located on the Stratton Road Properties.5 The Debtors have informed the Committee that they do not own the school, just the property on which the school is located. The Debtors are negotiating a sale of the Stratton Road Properties to Iona Preparatory School (the Prep School), which was also founded by CBI or the Congregation. See letter from John A. Verni to Anthony D. Dougherty dated September 26, 2011, a true and correct copy of which is attached hereto as Exhibit E (as redacted to delete price information).6 The Debtors have not retained a broker or any other real estate professional to advise them on the sale of the Stratton Road Properties, which together have a scheduled value of in excess of $12 million (or more than 20% of the scheduled value of the Debtors real property). See email exchange between Scott Markowitz and James I. Stang dated November 18, 2011, a true and correct copy of which is attached hereto as Exhibit F.
See Debtors Motion for Orders Pursuant to Section 105(a) and 363 of the Bankruptcy Code and Bankruptcy Rule 6004 Approving (i) Sale Procedures and Notice of the Auction Related thereto, (ii) Sale of Real Estate to Harlem Village Academies or a Party Making a Higher and Better Offer Free and Clear of Liens, Claims, Interests and Encumbrances, (iii) Approving the Stalking Horse Purchase Agreement, and (iv) Granting Related Relief (the Sale Motion) [Docket No. 154].
3 4
The Debtors have not yet filed a motion seeking approval of the sale of the Chicago property.
See Ex. A. The Stratton Road Properties comprises two properties described on CBIs Schedules: Stratton Road (vacant land) with a scheduled value of $3,350,000; and 173 Stratton Road with a scheduled value of $9,325,000. As such, the total scheduled value of the property used by Iona Grammar is $12,675,000. See, e.g., www.ionagrammar.com/services.htm#silver (last visited on January 10, 2012) (Iona Grammar is a private Catholic School of academic excellence based on the tradition of Edmund Rice Christian Brothers North America.)
6 5
See also ionaprep.org/apps/pages/?uREC_ID=63799 to type=100824 (last visited on January 10, 2012).
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7.
The Prep School has a two-tiered board consisting of a Board of Trustees
and a Board of Directors. The Prep Schools Board of Trustees is comprised entirely of three Christian Brothers, two of whom also appear to be directors of CBI. The Prep Schools Board of Directors is comprised of thirteen members, two of whom are Christian Brothers. See list of Board of Trustees and Board of Directors of Iona Prep attached hereto as Exhibit G. 8. CBI owns a property in Rochester, New York (the Rochester Property)
valued at $10 million on CBIs Schedules. The Rochester Property contains Bishop Kearney High School (BKHS), a school with which the Debtors are no longer affiliated. On November 29, 2011, BKHS made an offer to purchase the Rochester Property. See correspondence from Douglas J. Lustig to Ilan D. Scharf, a true and correct copy of which is attached hereto as Exhibit H. The Debtors deemed the offer too low and have apparently refused to counter it. The Committee has repeatedly asked the Debtors to begin a marketing process for the school.
I declare under penalty of perjury that to the best of my knowledge, the foregoing is true and correct. Dated: New York, New York January 11, 2012
/s/ Ilan D. Scharf Ilan D. Scharf
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Exhibit A
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Exhibit B
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Exhibit C
11-22820-rdd Ilan D. Scharf

From: Sent: To: Cc: Subject:
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Ilan D. Scharf Thursday, September 15, 2011 1:06 PM 'Scott Markowitz'; Anthony Dougherty; 'Eric H. Horn'; Marilyn Simon James Stang CBI\Open Issues
Scott, The Committee is concerned about the lack of progress in these cases, including document production, asset sales and disclosure of basic information for the bar date process. Discovery: The Committee sent the Debtors a detailed informal request for documents and information on July 21, 2011. At the Debtors request, the Committee also negotiated and executed a confidentiality agreement governing production of documents in these Cases. The Committee signed to confidentiality agreement on September 1, 2011. To date, the Committee has not received any documents in response to its informal request. Nor have the Debtors notified the Committee of (a) what responsive to the Committees request are in the Debtors possession, custody or control, (b) any objections the Debtors may have to production of documents requested by the Committee (other than some general comments that the request is extensive or that the Debtors do not want to disclose certain information), or (c) when the Debtors will produce responsive documents. To date, the Debtors have only committed to produce documents that were already produced in actions pending in Washington or Canada. These documents should be easy to produce. However, we have not received them yet. Please provide a response to the Committees informal document request by the end of this week and inform the Committee of (a) what responsive documents are in the Debtors possession, custody or control and (b) whether the Debtors have any objection to specific requests. The Debtors should be able to provide responsive documents within 45 days. Asset Sales: We understand that the broker for Rice High School has received at least one nonbinding offer for the building, and has asked for a draft APA. If the Debtors are unable to provide an APA to the broker within 5 business days, the Committee is prepared to prepare the agreement. Please provide a sales plan to sell other real estate assets owned by the Debtors. We understand the Debtors want to retain a broker to sell a single family home in Chicago worth approximately $300,000. We applaud the Debtors efforts to sell this property. However, we are concerned that this relatively minor issue in the scope of this case is distracting the Debtors from addressing more pressing issues such as discovery and the bar date. We also understand that the Debtors have received overtures from Iona Prep and Kearney High School for two pieces of property. The Debtors should obtain firm offers or begin marketing these properties within 30 days.
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Ilan D. Scharf Pachulski Stang Ziehl & Jones LLP 780 Third Avenue, 36th Floor New York, NY 10017-2024 Tel: 212.561.7700 | Fax: 212.561.7777 ischarf@pszjlaw.com www.pszjlaw.com
Los Angeles | San Francisco | Wilmington, DE | New York CONFIDENTIALITY This e-mail message and any attachments thereto is intended only for use by the addressee(s) named herein and may contain legally privileged and/or confidential information. If you are not the intended recipient of this e-mail message, you are hereby notified that any dissemination, distribution or copying of this e-mail message, and any attachments thereto is strictly proh bited. If you have received this e-mail message in error, please immediately notify me by telephone and permanently delete the original and any copies of this email and any prints thereof. NOT INTENDED AS A SUBSTITUTE FOR A WRITING Notwithstanding the Uniform Electronic Transactions Act or the applicability of any other law of similar substance and effect, absent an express statement to the contrary hereinabove, this e-mail message, its contents, and any attachments hereto are not intended to represent an offer or acceptance to enter into a contract and are not otherwise intended to bind the sender, Pachulski Stang Ziehl & Jones LLP, any of its clients, or any other person or entity. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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Exhibit D
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Exhibit E
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Exhibit F
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From: Scott Markowitz [mailto:SMarkowitz@tarterkrinsky.com] Sent: Friday, November 18, 2011 1:37 PM To: James Stang Subject: RE: RE:
They are not insider. We intend to market. That is why I gave you the offer a while ago. We will advertise and all brokers In the area will be made aware of it. It will be high profile sale In the area. I really think it good price.
From: James Stang [mailto:jstang@pszjlaw.com] Sent: Friday, November 18, 2011 4:33 PM To: Scott Markowitz Subject: RE: RE:
Private sales to an insider/affiliate are subject to very high scrutiny. The fact that you are putting the schools existence above the marketing drives the point home. From: Scott Markowitz [mailto:SMarkowitz@tarterkrinsky.com] Sent: Friday, November 18, 2011 1:29 PM To: James Stang Cc: Ilan D. Scharf Subject: RE: RE: You will have to raise that with judge Drain. My reading of code and rule 6004(f) permits private sales. Do you have a better or higher offer you are not telling me about. Current offeror is going to keep the school which is important to the community From: James Stang [mailto:jstang@pszjlaw.com] Sent: Friday, November 18, 2011 3:49 PM To: Scott Markowitz Cc: Ilan D. Scharf Subject: RE: This property should be marketed and given the Debtors position vis a vis the schools, I dont think the Debtor should be selecting the broker. A sale subject to overbid without prior marketing is not acceptable.
From: Scott Markowitz [mailto:SMarkowitz@tarterkrinsky.com] Sent: Friday, November 18, 2011 11:15 AM To: Ilan D. Scharf Cc: James Stang Subject:
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Ilan, a few weeks ago, I sent you the offer letter for the Iona grammar property and the vacant land accross the street. We have a draft contract that has been circulated and we intend to file a motion to approve the sale subject to higher and better bids. I think you mentioned that you were doing some due diligence on your own, have you been able to get an feedback? Does the committee have position on the purchase price or the sale to Iona prep? Scott S. Markowitz, Partner Tarter Krinsky & Drogin LLP 1350 Broadway New York, NY 10018 Tel: 212.216.8005 Fax: 212.216.8001 Email: smarkowitz@tarterkrinsky.com www.tarterkrinsky.com
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Circular 230 Disclosure Notice: To ensure compliance with Treasury Department rules governing tax practice, we inform you that any advice contained herein (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein. Confidentiality Disclosure: The information in this email and in attachments is confidential and intended solely for the attention and use of the named addressee(s). This information may be subject to legal professional or other privilege or may otherwise be protected by work product immunity or other legal rules. It must not be disclosed to any person without our authority. If you are not the intended recipient, or a person responsible for delivering it to the intended recipient, you are not authorized to disclose, and must not disclose, copy, distribute, or retain this message or any part of it. This email is an informal communication that is not meant to be legally binding upon the sender unless expressly noted to the contrary. Circular 230 Disclosure Notice: To ensure compliance with Treasury Department rules governing tax practice, we inform you that any advice contained herein (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein. Confidentiality Disclosure: The information in this email and in attachments is confidential and intended solely for the attention and use of the named addressee(s). This information may be subject to legal professional or other privilege or may otherwise be protected by work product immunity or other legal rules. It must not be disclosed to any person without our authority. If you are not the intended recipient, or a person responsible for delivering it to the intended recipient, you are not authorized to disclose, and must not disclose, copy, distribute, or retain this message or any part of it. This email is an informal communication that is not meant to be legally binding upon the sender unless expressly noted to the contrary.
Circular 230 Disclosure Notice: To ensure compliance with Treasury Department rules governing tax practice, we inform you that any advice contained herein (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.
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Confidentiality Disclosure: The information in this email and in attachments is confidential and intended solely for the attention and use of the named addressee(s). This information may be subject to legal professional or other privilege or may otherwise be protected by work product immunity or other legal rules. It must not be disclosed to any person without our authority. If you are not the intended recipient, or a person respons ble for delivering it to the intended recipient, you are not authorized to disclose, and must not disclose, copy, distribute, or retain this message or any part of it. This email is an informal communication that is not meant to be legally binding upon the sender unless expressly noted to the contrary.
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Exhibit G
Iona Preparatory School
http://ionaprep.org/apps/pages/index.jsp?type=d&uREC_ID=86505
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Search website
Board of Directors
Board of Trustees Bro. Lawrence T. Murphy, CFC Chairman Bro. Daniel J. Casey, CFC Bro. Raymond Vercruysse,CFC, EdD. Board of Directors
John A. Verni, Esq. 80, Chairman Sr. Ona Bessette, CND Diane D. Brink Kevin J. Degen '74 Annemarie DiCola, Esq. William J. Falvey '86 Neil L. Lane '81 Bro. Thomas R. Leto, CFC Bro. James J. MacDonald, CFC Francis X. Mara 78 Robert H. McCooey, Jr. 83 Fr. Daniel O'Reilly Felix J. Petrillo '89 Directors Emeriti William F. Harrington* John P. Heffernan V to Verni (*Deceased)
Copyright Iona Preparatory School, 255 Wilmot Rd., New Rochelle, NY 10804 Phone: 914-632-0714 Fax: 914-632-9760
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Exhibit H
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11-22820-rdd

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The Prep School has a two-tiered board consisting of a Board of Trustees

/s/ Ilan D. Scharf Ilan D. Scharf

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