Dispute over deleted emails flares up in Xyience bankrutpcy

Everybody agrees that William Bullard gets a lot of mileage out of his BlackBerry.

But a dispute about how many messages the prominent Las Vegas businessman, who lists chief executive officer of Gordon Biersch Brewing Co. and chairman of Meadows Bank among his current activities, should have saved going back four years has ensnared him in the Xyience bankruptcy, now churning toward its fourth anniversary.

The trustee in the case has asked for unspecified sanctions against Bullard for not producing emails and documents as it tries to piece together a larger case that could be the last hope for creditors and shareholders to receive any money. At the time the case was filed as a Chapter 11 in January 2008, the company had piled up more than $42 million in debt but so far has recovered less than $2 million, not enough to get past the legal and administrative expenses.

However, Bullard's attorney Gregory Garmin contended, "We have produced everything we have and they just don't like what's there."

The assets of Xyience, the maker of the energy drink Xenergy, were purchased out of bankruptcy in 2008 and ultimately wound up under the ownership of an entity controlled by the Fertitta family to maintain the close marketing ties to its Ultimate Fighting Championship martial arts league. As such, Xyience products on the shelves have no current connection to the bankruptcy.

But in the court proceedings, now a Chapter 7 liquidation, Chicago-based trustee David Herzog contends that the $12 million that Fertitta entities loaned Xyience in 2007 as it faltered financially came with such heavy-handed terms that it scared off potential buyers. As such, he will try to recoup damages that could lead to "potentially significant recoveries," as described in court papers, at a trial now scheduled to start next spring.

Garmin, also representing the different Fertitta interests, has outlined a case where all transactions were done on normal terms. The $12 million, he noted, was approved by other creditors and shareholders at the time.

When Xyience was sold out of bankruptcy in 2008, Manchester Consolidated Corp. of Toronto paid $200,000 in cash and assumed Fertitta loans that had grown to $14.8 million. A year later, Manchester defaulted, opening the way for the Fertittas to take over.

Bullard, also an executive with Fertitta Enterprises, which holds nongaming businesses, became a target of the trustee because of his alleged obstinacy in handing over documents and emails concerning Xyience and his attempts to flesh out his case. The documents eventually were produced but Herzog still wants penalties for not coming as quickly as he thinks they should have.

Some of the Bullard emails have been erased, according to court papers, although some were found in the computer records of recipients. "It is inconceivable that a businessman with Mr. Bullard's experience did not have a document retention policy," said Chicago attorney Jonathan Backman, who is working with Herzog, at a Sept. 30 hearing.

But in contending Bullard was within bounds, Garmin noted, "It would be nice if everyone in the world saved every email they sent, but they are not required to."

On a broader front, he added, going after Bullard was a sign that Herzog had "thrown in the towel" on the main case and was now fabricating other disputes "in an outrageous attempt to justify his continued consumption of trust resources down a never ending black hole."

Much of Herzog and Backman's work to date has involved the standard bankruptcy work of gaining repayment of money they received from the company 90 days before filing Chapter 11. On Friday, for example, the court formally approved a settlement with Professional Bull Riders, accepting $20,000 as payment in full on a $100,000 claim.

To date, Backman said that $1.5 million has been recouped through these types of legal actions.

Contact reporter Tim O'Reiley at toreiley@reviewjournal .com or 702-387-5290.

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Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. ging Nov. 5, 2011 | 3:04 p.m. Report Abuse

   David Herzog contends that the $12 million that Fertitta entities loaned Xyience in 2007 as it faltered financially came with such heavy-handed terms that it scared off potential buyers. ...Does this sound familiar? When Boyd bid on Station properties, the Fertittas had a clause that inhibited potential buyers from competing with Stations offer. An outside bidder had to pay an additional 75 million to buy out Mother Fertitta as she owned the land under Texas Station. A neat little clause that thwarted any competing bids.

2. Xyience.Shop Oct. 16, 2011 | 2:08 p.m. Report Abuse

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3. stationary Oct. 9, 2011 | 4:31 p.m. Report Abuse

   Why would anyone have any financial relationship with these crooks?

4. dsmithvegas Oct. 9, 2011 | 1:29 p.m. Report Abuse

   Sounds like the Fertittas are up to their old tricks again. They are nothing but low life crooks in expensive suits. I hope they finally get what they deserve. That family has been screwing people over for generations. Google their history and see how corrupt these pillars of our town really are. Xyience was a thriving company run by good people. I'd say if the hearings were being held anywhere but Las Vegas, they'd already be in jail. Bye Bye Bullard, Lorenzo, and Frank and you can say goodbye to that gaming license when the truth comes out.

5. Janis G Oct. 8, 2011 | 1:56 p.m. Report Abuse

   As a Xyience creditor, I have been following this case very closely. The sanctions motions filed by the trustee show that William Bullard deleted his emails after he knew lawsuits were coming and after Zyen and Fertitta Enterprises were named as defendants. But it goes farther than that. The motions show that Gregory Garman admitted in a letter to the trustee attorney that Michael Levy, the CFO of Xyience and the CFO of the Fertitta owned new Xyience, deleted his yience emails in 2008. Then when the Fertittas took control of Xyience, the computer back-up tapes were mysteriously lost and the computer servers mysteriously crashed, destroying all the information. To top it off, when the hard drives were restored, an expert testified that the hard drives provided by Bullard and Garman were not the hard drives which contained the Xyience email records.
   
   It’s obvious that these people deliberately withheld and destroyed information and should be held responsible, both civilly and criminally. Real people lost millions of dollars because of the likes of Bullard and his cohorts. They should all be criminally prosecuted. It is incredible that this Bullard is the chairman of a bank.

6. Annie B Oct. 8, 2011 | 12:55 p.m. Report Abuse

   William Bullard has been on the boards of two banks and is an officer of several Fertitta companies. He is well aware that when lawsuits are threatened or filed, it is criminal to destroy any documentation. There could be only one reason why he would delete his emails. He is guilty as sin.
   How does a person like this become a bank officer anyway?

7. The Big D Oct. 8, 2011 | 10:34 a.m. Report Abuse

   As far as what Greg Garman told the LVRJ, "It would be nice if everyone in the world saved every email they sent, but they are not required to." Guess what, when litigation is anticipated or commences, in the case of Xyience in the fall of 2007, all parties must keep their documentation and especially emails. Any lawyer with half a brain knows this. Either Garman is the most pathetic attorney on the planet or the biggest liar in the courtroom, next to Bill Bullard of course. Garman, by not immediately informing his clients that they had to preserve all information, is as culpable as they are, even more so. His license to practice law should be revoked.

8. xyiencesucksdotcom Oct. 7, 2011 | 9:45 p.m. Report Abuse

   Jon Backman's dealing with a difficult situation. Four years could be a drop in the bucket compared to the full amount of time it might take to right this injustice through years of appeals. He is an underdog who is aggressive enough to get the job done, but it's sad to see him have to do it against a system here in Vegas that is clearly biased toward the casino and business owners in town. If he gets a fair shake on this case, it'll be bad news for Bill Bullard and his bosses.

9. v. Oct. 7, 2011 | 7:56 p.m. Report Abuse

   just went to boca park restaurant today, worst service ever!