Lenard Schwartzer recalls that his father, the hard-working owner of a cafeteria in a midtown Manhattan office building, recommended he become a lawyer.
"Lawyers make a lot of money, and they don't have to work hard," his father said.
Over 35 years of law practice, most of it in bankruptcy court, Schwartzer discovered, though, that's not true.
"I never got to ask him if he was lying to me because he wanted me to become a lawyer or really believed it," Schwartzer said.
Since then, Schwartzer has represented the new management at USA Capital after the company filed for bankruptcy in 2006 with $965 million in assets. He earlier represented the creditor's committee in the Dunes hotel-casino bankruptcy, the Debbie Reynolds Hotel in bankruptcy, the bankruptcy trustee in one of the Aladdin cases and the city of Las Vegas in the Stratosphere case. He also works as a trustee in personal bankruptcy cases.
Question: What brought you to Las Vegas?
Answer: My parents had moved out here in 1972. So I came out here after my second year of law school and clerked for Sam Lionel (of Lionel Sawyer & Collins).
Sam told me I should always be well-prepared in court, because my reputation was on the line, not my client's. Sam is the smartest lawyer I ever met, and I learned how to practice law from him.
I became a partner at Mills, Galliher, Lukens, Gibson, Schwartzer & Shinehouse. Lamond Mills became U.S. attorney for the state of Nevada. Jim Gibson became mayor of Henderson. That's where I started doing bankruptcy law.
Question: What are some of the interesting bankruptcy cases you've handled?
Answer: The Debbie Reynolds Hotel case (in 1997) was pretty much a disaster, because Debbie Reynolds probably had bad financial advice all along. They made the Debbie Reynolds Hotel almost unsalable by doing a partial time-share. That meant to sell the Debbie Reynolds Hotel they needed to get permission from 2,000 time-share owners.
Vince McMahon, the co-founder of World Wrestling Entertainment, bought the hotel. The secured creditors in the hotel did not get paid in full. The unsecured creditors got nothing.
The USA Capital case involved mortgage fraud and embezzlement of millions of dollars. That turned out be less of a disaster, because there is money to pay to unsecured creditors.
The Crystal Palace Gambling Hall in Laughlin was also interesting. The casino was owned by a doctor and two dentists. They got into a fight, because one of them fired the other one's girlfriend. It was sold to Australian investors.
Question: What do you expect to happen to casino operators who are struggling because of the recession?
Answer: Nobody is going to shut down the casinos. Day-to-day, if they are well operated, they make money. The question is, can they support the amount of debt they borrowed in the last couple of years?
Question: Why are so many consumers filing for bankruptcy today?
Answer: It used to be that gambling or gambling debts were a major cause of bankruptcy in Nevada. But in the last year or two, I think I've heard one person out of 2,000 for whom gambling was an issue.
Their debts are from their houses, from credit cards, from medical bills. When the economy got bad, they did the right thing. They stopped gambling.
The main reason that people file for bankruptcy now is fear of foreclosures on their houses and fear that they will be sued for a deficiency on their mortgages.
The second things are the reduction in hours and lost jobs.
Everybody has such losses now that they have fewer tax problems. Three years ago, there were real estate salesmen who made $400,000 and sort of forgot to pay taxes.
Question: What typically leads to business bankruptcy filings?
Answer: Some problems come from past overfinancing, when lenders just lent way too much money and borrowers had grandiose plans. That goes for the people who built hundreds of thousands of square feet of office space in Las Vegas with no tenants.
The second issue is when lending stops abruptly. Anybody, for example, in the construction-supply business borrows to buy inventory. If you can't get the financing, you can't buy the inventory. If you can't buy the inventory, you can't do the sales. So basically you're out of business.
Question: Do you expect business bankruptcy filings to increase in any categories?
Answer: In Las Vegas, the next fairly large category will be commercial real estate. Vacancy rates are hitting record levels, and I think there are some people who are reducing rents to get in tenants at any price and the rental rates are actually below their costs.
Question: How long do you think this downturn will last in Southern Nevada?
Answer: I hope it will be over in 18 months. I don't think we are going to hit the 2005-06 numbers for a while after that. I don't see people spending $400 a square foot to buy a new home in the next 10 years. If I were good at prognosticating, I would be sitting on a yacht off of St. Bart's (in the Caribbean).
Question: Why do you like being a bankruptcy attorney?
Answer: I actually think I help people, and that's reward in itself. Secondly, I love the game. I love the lawyering part, to see if I can out-lawyer somebody else.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.
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