Bankrupt Seattle real-estate magnate Michael R. Mastro and the trustee representing his creditors have settled a lawsuit in which the trustee...
Bankrupt Seattle real-estate magnate Michael R. Mastro and the trustee representing his creditors have settled a lawsuit in which the trustee sought to recover millions from Mastro for allegedly fraudulent transactions.
While admitting no wrongdoing, Mastro agreed to accept a court-ordered judgment that he owes creditors $7.1 million stemming from those transactions — the exact amount trustee James Rigby had been seeking from Mastro in a trial that began last week.
James Frush, a lawyer for Mastro, said Mastro agreed to the deal because he doesn’t have money to mount a defense and wanted to end the stress caused for him and his family by the 19-month-old case.
The settlement also will reduce Rigby’s legal bills and leave more to distribute to creditors from funds Rigby has recovered previously or may recover later, Frush said.
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Rigby called the settlement “a huge milestone. We’re very pleased.”
But he also said it’s unfortunate Mastro didn’t settle 18 months ago and save creditors millions in legal fees.
Mastro’s representatives have indicated he’s broke and can’t pay the $7.1 million judgment. Rigby said he still believes Mastro has hidden assets.
The judgment means that, if any can be found, “we’re going to be standing there ready to take them away from him,” the trustee said.
Mastro has nothing, Frush said, but has always wanted to find a way to pay his creditors back. “He’s never been afraid of judgments against him,” Frush said.
The settlement allows Rigby to sue Mastro again if he finds fresh evidence of hidden assets or illegal conduct.
Mastro, 85, a prolific real-estate developer and lender for 40 years, was pushed into the state’s largest bankruptcy in July 2009. He filed court papers showing debts of more than $570 million.
Rigby filed the lawsuit two months later. The trustee alleged Mastro had not reported some assets, including gold and cash, and had tried to shield other assets — including homes, jewelry and a Rolls-Royce — from creditors through a series of sham transactions.
Mastro denied the charges.
Mastro suffered a severe head injury in a fall at his Palm Springs, Calif., home nearly three months ago. The court deemed him incapacitated, and in March retired state Supreme Court Justice Faith Ireland was appointed guardian to represent his interests in the case.
It was Ireland, with the assent of Mastro’s lawyers, who first proposed the broad outlines of the settlement a week ago.
While the deal marks the end of Rigby’s litigation against Mastro, the trial continues for the lawsuit’s other defendants, including his son, Michael K. Mastro.
The settlement precludes Bankruptcy Judge Marc Barreca from issuing findings of wrongdoing against the senior Mastro, Rigby and Frush agreed. But there will be findings involving the other defendants, Rigby said, and they’re likely to touch on Mastro’s conduct as well.
Eric Pryne: 206-464-2231 or firstname.lastname@example.org