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Date of Issue: June 14, 2007

Lawyers, accountants feed on GSR carcass

Who says bankruptcy doesn't pay?

In the GSR bankruptcy case, it would appear that the lawyers and accountants are doing quite well, even if the unsecured creditors of the failed real estate company are likely to get little or nothing back from their investments.

Federal bankruptcy court Judge K. Rodney May last week approved a payment of $412,632.48 to Stitchter Riedel Balin & Prosser, GSR's bankruptcy attorneys, covering six-and-a-half months of work. Attorney Richard Prosser of the firm had filed the claim for work performed from July 13, 2006 - the date the company filed bankruptcy - through Feb 28, 2007. There were no objections to Prosser's claim.

At the same time, May also approved payments totaling $155,253.56 to William Maloney of St. Petersburg, who was hired in October 2006 as GSR's chief restructuring officer. Maloney's claim was for work done through April 1, 2007.

The law firm of Gray Robinson, representing the unsecured creditors committee, has filed its own administrative claim of $224,677.45 with the court. May has yet to issue a ruling for that claim.

Maloney's effort to sell any of the company's considerable real estate holdings for more than the lien amount appears to have been wasted. No GSR properties have sold since they first went on the market in February 2007.

Several Island real estate agents said at the time that GSR's asking prices were simply too high. Maloney has refused to lower those prices because of the high mortgage amounts that must first be paid off. In addition, Maloney would receive a $125,000 bonus if all the claims against GSR, secured and unsecured, were paid in full.

That now appears to be a forlorn hope, as Maloney has proposed a reorganization plan to the court that calls for an auction sale of GSR properties that would likely pay off all the secured liens along with the claims from attorneys and accountants involved in the case, but leave little or nothing for the unsecured creditors of the company. GSR's unsecured claims total $4.6 million.

The court will hold a hearing at 10:15 a.m. June 29 at the federal courthouse in Tampa to discuss Maloney's proposal along with a financial disclosure statement from GSR.

But lawyers and accountants involved in the GSR bankruptcy don't have to worry about the sale of a few over-mortgaged properties at a good price to get paid.

Bon Eau LLC of Sarasota has agreed to establish a $750,000 fund for payment of administrative claims in the case. The money is part of Bon Eau's compromise settlement with the court regarding a questionable $7.5 million loan/mortgage it made to GSR regarding its Villa Rosa project in Anna Maria.