UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CORDILLERA GOLF CLUB, LLC/ Debtor.

Chapter 11 Case No. 12-11893 (CSS)

Re: Docket No. 8 Hearing Date: July 27, 2012@ 1:00 p.m.

OBJECTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO DEBTOR'S MOTION FOR AN ORDER, PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 6003, AUTHORIZING AND APPROVING (I) THE DEBTOR'S DESIGNATION OF ALFRED H. SIEGEL AS CIDEF RESTRUCTURING OFFICER, AND (II) RETENTION AND EMPLOYMENT OF CROWE HORWATH. LLC. NUNC PRO TUNC TO THE PETITION DATE The Official Committee of Unsecured Creditors (the "Committee") appointed in the above-captioned chapter ll bankruptcy case (the "Bankruptcy Case") of Cordillera Golf Club, LLC (the "Debtor") hereby files its Objection (the "Objection") to the Debtor's Motion for an
Order, Pursuant to Sections 105 and 363 of the Bankruptcy Code and Bankruptcy Rule 6003, Authorizing and Approving (i) the Debtor's Designation of Alfred H Siegel as Chief Restructuring Officer, and (ii) Retention and Employment of Crowe Horwath, LLC, Nunc Pro

Tunc to the Petition Date [Docket No. 8] (the "CRO Motion") and respectfully represents as follows: BACKGROUND
l.

On June 26, 2012 ("Petition Date"), the Debtor filed a voluntary petition for relief

under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"), thereby initiating the Bankruptcy Case. The Debtor remains in control of its business and affairs as a debtor-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.

The Debtor in this chapter II case, and the last four digits of its employer tax identification number, is: XX- XXX1317. The corporate headquarters address for the Debtor is 97 Main Street, Suite E202, Edwards, co 81632.

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2.

On the Petition Date, the Debtor filed the CRO Motion. Through the CRO

Motion, the Debtor is seeking authority to (i) designate Alfred H Siegel as the Chief Restructuring Officer ("CRO") of the Debtor, and (ii) employ Mr. Siegel's firm, Crowe Horwath, LLC ("Crowe"), to provide restructuring management and advisory services to the Debtor in the Bankruptcy Case. 3. On July 6, 2012, the United States Trustee filed its Notice of Appointment of

Committee of Unsecured Creditors [Docket No. 86], thereby forming the Committee. 2

4. counsel.

On July 9, 2012, the Committee selected Munsch Hardt to serve as its lead

OBJECTIONS TO THE CRO MOTION

5.

As an initial point, the Committee wants to make clear that it is not objecting to

Mr. Siegel's qualifications to serve as CRO of the Debtor. The Committee is cognizant of Mr. Siegel's reputation and experience in corporate restructuring matters. The Committee does, however, question whether the retention of Mr. Siegel and Crowe is appropriate in this Bankruptcy Case. 6. To begin with, it does not appear that Mr. Siegel will be operating as an

independent CRO with control over the Debtor's day-to-day operations. Instead, Mr. Siegel will be operating subject to the consent and control of the Debtor's existing management and, most likely, the input of the Debtor's largest equity holder, David Wilhelm. This lack of

independence raises serious concerns with the Committee and appears to undermine the basis

The Committee's current membership, comprised of various homeowner and trade creditors of the Debtor, is as follows: (i) John D. O'Brien; (ii) Cheryl M. Foley; (iii) Ken Ulickey; (iv) Kevin B. Allen; (v) Dennis S. Meir; (vi) JohnS. Lemak; and (vii) Ceres Design & Arborscape, LLC. All of the Committee's members have Colorado addresses.

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upon which the CRO is sought to be retained in the CRO Motion? Furthermore, because of the Debtor's distressed financial situation, the Committee has serious concerns about whether the estate can afford the expense of a CRO (and the other professionals within Crowe)---especially given the numerous professionals already being utilized by the Debtor in the Bankruptcy Case. Because of these concerns, as described in more detail below, the Committee objects to Mr. Siegel's and Crowe's retention at this time because such retention does not appear to be in the best interests of the Debtor's estate or its creditors.
A. Because the CRO Is Not Authorized to Act Independently of the Debtor's Current Management, There Is No Need for the Appointment of the CRO

7.

Pursuant to the CRO Motion, Mr. Siegel is supposedly being retained as CRO to

provide "independent direction and oversight to [the] Debtor, generally, and to the proposed sale of all or substantially all of the Debtor's assets, specifically." CRO Motion 'i[6 (emphasis
add~d).

The terms of Mr. Siegel's retention, however, are specifically governed by that certain

engagement letter dated June 22, 2012, attached as Exhibit B to the CRO Motion (the "Engagement Letter"). Id. at 4 n.2. The Engagement Letter states that Mr. Siegel "shall serve at the direction of and report to [the Debtor's] sole managing member." Engagement Letter at I (emphasis added). Furthermore, the Engagement Letter states that "the CRO and Crowe Partners and Representatives working on this engagement will operate under and pursuant to the
direction of [the Debtor's! Manager." Id. at 2 (emphasis added).

8.

Throughout, the Engagement Letter refers to the Debtor's sole managing member

as the Debtor's "Manager". Id. at 1. According to the Debtor's Voluntary Petition [Docket No. 1] (the "Petition") filed with the Court, there is no "sole managing member" of the Debtor.

It is clear that the CRO Motion is brought in recognition of the numerous allegations of impropriety that have been asserted by various creditors of the Debtor against existing management.

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Rather, there is a separate sole member of the Debtor-Cordillera Golf Holdings, LLC ("Holdings"}---and a separate sole manager of the Debtor-CGH Manager, LLC ("Manager").

See Written Consent of the Sole Member and Manager of Cordillera Golf Club, LLC (the
"Consent") at 1 (attached to the Petition). For all intents and purposes, however, this is a distinction without a difference, because David A. Wilhelm is listed as the manager of both Holdings and Manager. Consent at 4. Mr. Wilhelm is the purported equity owner of the Debtor, making him an insider of the Debtor. See Declaration of Daniel L. Fitchett, Jr. in Support of

Chapter 11 Petitions and First Day Relief[Docket No. 2] (the "Fitchett Declaration"), 20. Mr.
Wilhelm also purportedly holds a substantial junior secured claim against the Debtor. See CRO

9.

If appointed as CRO, Mr. Siegel's involvement in the Bankruptcy Case will not

be as a typical independent CRO; rather, in almost all matters, he will be able to operate only with the consent and at the direction of the Debtor's insider, Mr. Wilhelm. Even in matters directly involving the Debtor's current manager, Mr. Siegel will still be required to consult with the Debtor's management team: "Siegel, in consultation with [the Debtor's] management (other than [the Debtor's] Manager) and professional advisors, shall be responsible for all decisions on behalf of [the Debtor] with respect to any transaction involving [the Debtor's] Manager .... " Engagement Letter at 2. Based on the lack of independence afforded him, Mr. Siegel's role is better classified as a consultant or advisor to the Debtor. This is confirmed by the Engagement Letter, which, by and large, defines Mr. Siegel's tasks as "overseeing" the Bankruptcy Case. See

id. at 1-2. Rather than performing the typical duties of a CRO, it appears that Mr. Siegel is being
brought in to serve as a buffer between the Debtor's management and its creditors or perhaps to avoid or undercut any attempt to appoint a chapter 11 trustee in the Bankruptcy Case. In this

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limited role, it is difficult to understand the need for a CRO, because the CRO will only be assisting and advising the Debtor in completing those tasks which the Debtor and its present management have as obligations to perform as the debtor-in-possession. The Committee does not understand how such duplication of effort-by the Debtor and the CRO, in a case in which the Debtor is operating at a loss-will provide any true benefit to the estate or its creditors. Accordingly, the Committee objects to the appointment of Mr. Siegel as CRO and the employment of Mr. Siegel and Crowe.
B. The Employment of a CRO Will Likely Impose a Significant Financial Burden Upon the Debtor's Estate

10.

Based upon the Debtor's distressed financial situation, the Committee has serious

concerns as to whether the estate can afford to retain the CRO and Crowe, especially given the fact that, in substance, the CRO is acting merely as an advisor to the Debtor and doing what the Debtor's management should otherwise be doing. Based on the Forecasted Cash Flow Budget (the "Budget") filed by the Debtor as an attachment to its Supplement re Budget to Emergency
Motion of the Debtor for Entry of Interim and Final Orders Pursuant to 11 U.S. C. 105, 361, 362, 363(c), 364(d), and 364(e) and Fed. R. Bankr. P. 2002, 4001 and 9014 (i) Authorizing Debtor to Obtain Post-Petition Secured Financing, (ii) Granting Security Interests and Superpriority Administrative Expense Claims, (iii) Granting Adequate Protection to Pre-Petition Secured Parties, (iv) Authorizing the Use of Cash Collateral as Provided Herein, and (v) Scheduling a Final Hearing [Docket No. 96] (the "DIP Supplement"), the Debtor is

projecting a negative cash flow, before application of any (as of yet unopposed) DIP loan proceeds, of $4,602,297 for the 52-week period between June 29, 2012, and June 28, 2013. Budget at 5. Of this amount, the Debtor projects incurring restructuring costs of $2,330,011. !d. During this same period, the Debtor projects total revenues to be only $3,394,300 against costs

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of goods totaling $5,381,586. Id

While the Debtor is projecting a positive cash balance of

$215,055 at the end of the 52-week period after application of its requested DIP loan proceeds,
id., this small cash balance could quickly evaporate if-as is often the case in contested

bankruptcy cases-the Debtor's projections regarding the costs of restructuring are off even slightly. 4 Furthermore, the positive cash balance stated in the Budget is realized only if the Debtor makes no principal payments to its purported secured lender, Alpine Bank, or to the DIP Lender. See id. 11. While the CRO's and Crowe's estimated fees and expenses may be included in

the Debtor's estimated restructuring costs, the Committee cannot tell, based on the limited information available to it, what percentage of the restructuring costs these fees and expenses will constitute. Nevertheless, because of the limited role and lack of independence of the CRO, the Committee is concerned that the CRO's and Crowe's services will be largely duplicative of those of the Debtor-acting in its role as debtor-in-possession-and of the other professionals the Debtor has sought, or will seek, to retain. Because of the Debtor's tenuous financial

situation, and absent any more specific cost-benefit analysis regarding the retention of the CRO and Crowe, the Committee objects to such retention.
C. In the Alternative, if the Conrt Is Inclined to Grant the CRO Motion, the CRO and Crowe Shonld Be Required to Snbmit Their Fees and Expenses to the Court for Final Approval

12.

If the Court is inclined to grant the CRO Motion, the Committee respectfully

requests that the procedures for compensating the CRO and Crowe as set forth in the CRO

The Committee would note, for example, that the Debtor has projected a mere $220,000 for the estate's costs associated with the Committee's counsel and fmancial advisor for this 52-week period. Budget at 5. By way of comparison, the Debtor projects that its legal, restructuring, and U.S. Trustee fees for the same period will be $2,233,075. Id Due to the contentious nature of the Bankruptcy Case, the Committee believes that the Debtor has underesthnated the fees and expenses likely to be incurred by the Committee's counsel and its fmancial advisor.

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Motion be modified.

Pursuant to the CRO Motion, "[b]ecause Crowe and its personnel

[including Mr. Siegel] are not being employed as professionals under section 327 of the Bankruptcy Code, Crowe will not be submitting fee applications pursuant to sections 330 and 331 of the Bankruptcy Code." CRO Motion
~16.

Instead, the CRO Motion requests that the

CRO and Crowe be allowed to submit monthly reports regarding their expenses and fees, with such reports being subject to review and objection by the U.S. Trustee and the Committee. Id 13. The Committee is not opposed to the monthly invoice structure proposed in the

CRO Motion. But any approval of such monthly invoices, and any payment made by the Debtor regarding such invoices, should be deemed to be interim in nature. Because the CRO and Crowe are, as a matter of substance, acting as professionals for the Debtor, they should be required to seek final approval of this Court for any fees and expenses incurred in connection with their work in the Bankruptcy Case. Accordingly, the CRO and Crowe, if retained, should be required to submit final fee applications to this Court in accordance with the Bankruptcy Code and the rules of this Court. Furthermore, any interim payments received by the CRO and Crowe should be subject to disgorgement, to the extent the Court deems any of their fees and expenses to be unnecessary or unreasonable.
RESERVATION OF RIGHTS

14.

Because of the limited time the Committee has had to review the CRO Motion,

the Committee hereby reserves the right to object to the CRO Motion on any additional or alternative grounds not previously listed in this Objection. The Committee further reserves the right to amend, modify, or supplement this Objection, as necessary

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PRAYER WHEREFORE, PREMISES CONSIDERED, the Official Committee of Unsecured Creditors respectfully requests that the Court enter an order (i) denying the CRO Motion, and (ii) granting the Committee such other and further relief as may be just and proper.

Dated: July 13, 2012

SAUL EWING LLP

By:

---------MkMin~ 659) 222 Delaware Avenue, Suite 1200 P.O. Box 1266 Wilmington, DE 19899 Telephone: (302) 421-6840 Facsimile: (302) 421-5873 E-mail: mminuti@saul.com -and-

MUNSCH HARDT KOPF & BARR, P.C. Russell L. Munsch Texas Bar No. 14671500 Joseph J. Wielebinski Texas BarNo. 21432400 Jay H. Ong Texas BarNo. 24028756 3 800 Lincoln Plaza 500 N. Akard Street Dallas, TX 75201-6659 Telephone: (214) 855-7500 Facsimile: (214) 978-4335 E-mail: rmunsch@munsch.com E-mail: jwielebinski@munsch.com E-mail: jong@munsch.com

I I

Proposed Counsel for the Official Committee of Unsecured Creditors

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re: CORDILLERA GOLF CLUB, LLC, Debtor.

Chapter 11 Case No. 12-11893 (CSS)

CERTIFICATE OF SERVICE
I, Mark Minuti, hereby certify that on July 13, 2012, a copy of the foregoing Objection

of the Official Committee of Unsecured Creditors to Debtor's Motion for An Order, Pursuant to Sections 105 and 363 of the Bankruptcy Code and Bankruptcy Rule 6003, Authorizing and Approving (I) the Debtor's Designation of Alfred H. Siegel as Chief Restructuring Officer, and (II) Retention and Employment of Crowe Horwath, LLC, Nunc

Pro Tunc to the Petition Date was served on the parties on the attached service list in the
manner indicated therein. SAUL EWING LLP

By:~2659) -._ MkMil1Uti(N(;

222 Delaware Avenue, Suite 1200 P. 0. Box 1266 Wihnington, DE 19899 (302) 421-6840

Dated: July 13, 2012

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CORDILLERA GOLF CLUB, LLC Service List Via Hand Delivery: Michael R. Nestor, Esquire Joseph M. Barry, Esquire Donald J. Bowman, Esquire Young Conaway Stargatt & Taylor LLP Rodney Square 1000 North King Street Wilmington, DE 19801
Mark Kenney, Esquire Office of the United States Trustee J. Caleb Boggs Federal Building 844 King Street, Suite 2207 Wilmington, DE 19801 Mark D. Collins, Esquire Zachary I. Shapiro, Esquire Richards, Layton & Finger, P.A. One Rodney Square 920 N. King Street Wilmington, DE 19801 Tobey M. Daluz, Esquire Joshua E. Zugarman, Esquire Ballard Spahr LLP 919 N. Market Street, lith Floor Wilmington, DE 19801 Damien Tancredi, Esquire Cozen O'Connor, PC 1201 N. Market Street, Suite 1400 Wilmington, DE 19801 William P. Bowden, Esquire Ricardo Palacio, Esquire Ashby & Geddes, P.A. 500 Delaware avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Matthew P. Ward, Esquire Ericka F. Johnson, Esquire Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 Richard W. Riley, Esquire Duane Morris LLP 222 Delaware Avenue, Suite 1600 Wilmington, DE 19801-1659 Ellen W. Slights, Esquire United States Attorney's Office District of Delaware I 007 N. Orange Street, Suite 700 P.O. Box 2046 Wilmington, DE 19899-2046

Via Electronic Mail and First Class Mail: Erika L. Morabito, Esquire Brittney J. Nelson, Esquire Foley Lardner LLP 3000 K Street, N.W., Suite 600 Washington, DC 20007
Christopher Celentino, Esquire Mikel Bistrow, Esquire Dawn Messick, Esquire Foley Lardner LLP 402 W. Broadway, Suite 2100 San Diego, CA 92!01 Carl A. Eklund, Esquire Ballard Spahr, LLP 1225 17th Street, Suite 2300 Denver, CO 80202

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Vincent J. Marriott, III, Esquire Sara Schindler-Williams, Esquire Ballard Spahr, LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103 David L. Lenyo, Esquire Garfield & Hecht, P.C. 601 East Hyman Avenue Aspen, CO 81611 James J. Holman, Esquire Duane Morris LLP 30 South 17th Street Philadelphia, P A 191 03 Arthur J. Abramowitz, Esquire Cozen O'Connor, PC Libertyview, Suite 300 457 Haddonfield Road Cherry Hill, NJ 08002 Brad W. Breslau, Esquire Cozen O'Connor, PC 707 17th Street, Suite 3100 Denver, CO 80202 Melissa Maxman, Esquire Ronald Wick, Esquire Cozen O'Connor, PC 1627 I Street, NW, Suite 1100 Washington, DC 20006 Harlan W. Robins, Esquire Dickinson Wright PLLC 15 N. 4th Street Columbus, OH 43215 Kristi A. Katsma, Esquire Dickinson Wright PLLC 500 Woodward Avenue, Suite 4000 Detroit, MI 48226

Garry R. Appel, Esquire Appel & Lucas, P.C. 1660 17th Street, Suite 200 Denver, CO 80202 Peter A. Cal, Esquire Mark L. Fulford, Esquire Sherman & Howard L.L.C. 633 17th Street, Suite 3000 Denver, CO 80202 Michael S. Kogan, Esquire Kogan Law Firm, PC 1901 Avenue of the Stars, Suite 1050 Los Angeles, CA 90067

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