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Date of Issue: July 05, 2007

GSR owner OK's plan to give him $5.7 million

In somewhat of an odd twist to the ongoing GSR Development LLC bankruptcy, co-owner Robert Byrne stands to gain nearly $5.7 million if a reorganization plan is approved by the federal bankruptcy court and successfully implemented.

All 18 of GSR’s registered unsecured creditors, including Byrne and his estranged wife Arlene, have approved the reorganization plan that would sell off all the assets of the company to the highest bidder and, after paying off the secured claims, divide the remaining proceeds among the company’s unsecured creditors.

That would include Byrne, who has filed an unsecured claim with the bankruptcy court for $4.68 million. Byrnes’ former wife, Arlene, has also filed a claim for $49,000. In addition, the two have a joint claim for $917,331 with the court.

Byrne, who along with co-principal Steve Noriega, has claimed he took no money from the failed company. The $5.7 million is money Byrne alleges he put into the company in an unsuccessful effort to keep it operational and out of bankruptcy court.

Even more bizarre in a case that has featured more bizarre elements than a George Clooney-Brad Pitt movie is the fact that, while Byrne is part of the unsecured creditors committee, that same committee recently filed an “adversarial action” for $3 million in federal bankruptcy court against Byrnes, Noriega and other “targets” in the case.

The committee alleged that, among other accusations, Byrnes, Noriega and other “targets” operated a “conspiracy” to drain GSR of its cash, while hiding the true state of the company’s financial affairs from investors.

The total amount of unsecured GSR claims is nearly $7 million, although Byrne at one time displayed a net worth statement of approximately $30 million, while Noriega reportedly had a net worth statement of $23 million. Both men gave personal guarantees against their net worth statements to a number of investors, guarantees and net worth statements that now appear to be merely paper scraps for the shredder.

GSR filed for bankruptcy in federal court July 13, 2006, alleging assets of $46 million against debts of $33 million.

Objection

At least one party to the GSR bankruptcy has objected to the proposed reorganization plan.

United States bankruptcy trustee Felicia Turner filed her objection in federal court last week, claiming the joint plan approved by both GSR and the unsecured creditors committee fails to comply with several provisions of the federal bankruptcy law.

Turner also claimed that the joint plan “improperly” attempts to absolve GSR chief financial officer William Maloney, GSR’s “professionals,” the committee, the committee’s “professionals,” the reorganized debtor and any trust or trustee established by the plan “from any liability whatsoever,” for “any act taken or omitted to be taken in good faith in connection or related to various actions in connection with the joint plan,” that might violate the U.S. bankruptcy code.

The reorganization plan contains a “misstatement” of “current Eleventh Circuit Court law,” and is “not appropriate to include as a binding provision of the joint plan.”

Turner maintained that this provision “also appears to be an attempt to include improper releases in the joint plan” that violate a specific U.S. code.

Federal bankruptcy Judge K. Rodney May had not yet set a date to hear Turner’s objection by press deadline on Monday.