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Originally published Friday, March 4, 2011 at 5:34 PM

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Guardian to represent ailing Mastro in bankruptcy case

A guardian will be appointed to represent bankrupt Seattle real-estate magnate Michael R. Mastro's interests in court because he has been incapacitated by severe head injuries suffered a month ago in a fall at his Palm Springs home.

Seattle Times business reporter

A guardian will be appointed to represent bankrupt Seattle real-estate magnate Michael R. Mastro's interests in court because he has been incapacitated by severe head injuries suffered a month ago in a fall at his Palm Springs home.

U.S. Bankruptcy Judge Marc Barreca approved the guardianship move Friday. It came after a lawyer for Mastro's wife, Linda, filed an affidavit from the neurologist treating Mastro in California.

Mastro no longer is in a coma, the doctor wrote, but isn't competent to handle his personal or business affairs.

"It is not possible to predict with any medical certainty when or whether Mr. Mastro will regain part or all of his pre-accident mental acuity," Dr. Nina MawMaw wrote.

Mastro, 85, a prolific real-estate developer and lender, was pushed into what probably is Washington's largest bankruptcy ever in July 2009. He listed debts totaling more than $570 million, mostly unsecured by property or other collateral.

Barreca also ruled Friday that a longtime friend and business associate of Mastro has no claim to proceeds from the sale of Mastro's former Medina waterfront mansion.

The ruling increases the likelihood that hundreds of Mastro's creditors will get at least a small amount back, said Gayle Bush, an attorney for the court-appointed trustee in the case.

The mansion was sold last fall, netting $8.35 million after expenses. Palm Springs developer Terry Durst contended most of that should go to him because the house was collateral for more than $10 million he had loaned Mastro.

But Durst's name doesn't appear on any legal documents filed with King County concerning the mansion. Trustee James Rigby said that meant Durst had no claim, and Barreca agreed.

Rigby also contends the Durst claim was part of a complex scheme by Mastro and others to put some of his assets out of most creditors' reach as bankruptcy loomed. Mastro has denied that.

Durst argued that a document bearing Mastro's signature and a December 2008 date gave him a secured interest in the house.

But Rigby believes Mastro's signature on the document was forged, his lawyer told Barreca at a hearing this week. Barreca didn't address that, but said he found the memorandum "quite vague."

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Rigby has maintained almost from the case's start that the Medina mansion is the Mastro asset most likely to generate some payback to the unsecured creditors the trustee represents.

They will get money, however, only after Rigby's legal and accounting team. It has done work valued at more than $2.7 million for which it hasn't been paid, court papers say.

A Monaco businessman's claim to $1.3 million of the proceeds from the house sale also is still to be decided in a trial next month. Rigby maintains it, too, is part of Mastro's allegedly fraudulent scheme.

As for Durst, his lawyer indicated in court papers that because of Mastro's bankruptcy he faces loss of his home and potential bankruptcy.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com

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