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Originally published Tuesday, May 22, 2012 at 4:54 PM

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Mastro creditors unlikely to recoup more money in near future

Creditors of bankrupt former real-estate magnate Michael R. Mastro probably won't get more than a penny on the dollar for several years, the court-appointed trustee in the case said in a report this week.

Seattle Times business reporter

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Absolutely outrageous. Rigby has performed the Bleak House maneuver by spending all of... MORE
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Creditors of bankrupt former real-estate magnate Michael R. Mastro probably won't get any more money back from his estate for several years, the court-appointed trustee in the case said in a report this week.

And any further payout is far from certain, James Rigby told creditors; it hinges on "very significant success" in bankruptcy proceedings against Mastro business associate Thomas Hazelrigg III and several other lawsuits.

Mastro, a longtime Seattle real-estate developer and lender, was forced into one of Washington's largest bankruptcies in 2009. He and his wife disappeared last summer after failing to comply with a court order that they turn over jewelry, valued at $1.4 million.

Mastro's debts to unsecured creditors have been estimated at $250 million. Earlier this year those creditors received about 1 percent of that sum back, from funds Rigby had recovered by finding and liquidating Mastro assets.

In his report to creditors this week, Rigby said he has about $2 million in unencumbered cash on hand.

But he also asked a bankruptcy judge to approve payment of nearly $1 million of that total to himself, his attorneys and other professionals for work on the case since fall.

Rigby's team — which gets paid only if assets are recovered — already has received about $6.8 million for earlier work, while $2.8 million has been paid or set aside for creditors.

But Rigby said creditors have come out ahead. "I could have avoided all these expenses by throwing up my hands at the beginning and saying, 'There's no assets here,' " as Mastro and his lawyers maintained, he said Tuesday.

"But if we hadn't started this, the creditors wouldn't have got anything — and they wouldn't know what Mastro was up to."

In response to a Rigby lawsuit, a bankruptcy judge found last year that, before entering bankruptcy, Mastro had engaged in a host of transactions designed to illegally shield valuable assets, including the jewelry and his Medina waterfront mansion, from most creditors.

In his report this week, Rigby said his best shot at getting more money for creditors is a bankruptcy proceeding he initiated last year against Hazelrigg, a longtime Seattle "hard money" lender.

Rigby has obtained $76 million in judgments against Hazelrigg, mostly for real-estate loans from Mastro that weren't paid back and that Hazelrigg had guaranteed.

But Hazelrigg's lawyer repeated last week that his client is broke.

And Hazelrigg has refused to provide information on his finances, invoking his Fifth Amendment protection against self-incrimination because he, like Mastro, is the subject of a federal criminal investigation.

Any payment from Hazelrigg's assets "is at a minimum several years in the future," Rigby wrote.

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

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