An examiner will be appointed to conduct an investigation into the bankruptcies of two affiliates of troubled Indianapolis-based developer HDG Mansur, according to court records.
HDGM Advisory Services LLC and HDG Mansur Investment Services Inc., which manage Shariah-compliant investment funds, filed petitions for Chapter 11 protection in Indianapolis on May 21 to fend off a $5.8 million judgment from a lawsuit filed in New York federal district court in January 2013 by funds previously managed by the bankrupt companies.
Longtime local developer HDG Mansur is led by Harold Garrison, who helped develop some of downtown's biggest projects, including the Omni Severin Hotel, Lockerbie Marketplace and Market Tower, which now is in foreclosure.
At a Sept. 16 hearing, a bankruptcy judge in Indianapolis, for the time being, denied a request to appoint a Chapter 11 trustee or convert the case to a liquidation in Chapter 7, according to court records. The request was made by KFH Capital Investment Co. and Kuwait Finance House Real Estate Co.
The judge granted the KFH entities’ request for an examiner. He also scheduled a Sept. 22 hearing to consider renewed requests by another creditor to appoint a trustee or convert the case to Chapter 7 liquidation, according to court records.
Creditors wanted the Chapter 11 reorganization switched to liquidation because they say there’s “nothing to manage” and “no prospect of rehabilitation.” They said the funds have no hope of reorganizing and are using Chapter 11 as a stall tactic to fend off the $5.8 million judgment.
The HDG affiliates filed papers opposing those requests on Sept. 11, saying significant progress has been made toward a plan and global settlement of claims.
The creditors, collectively known as KFH in court documents, filed suit in November against Garrison and affiliate Mansur Investment in a United Kingdom court, alleging breach of contract, fraud and negligent misrepresentation in connection with the development called Finzels Reach.
In the pending suit, KFH claims that Garrison and Mansur Investment concealed a misappropriation of funds invested in the project through false invoices submitted by various entities.