Joey San Nicolas
THE subpoena to depose Loi Lam Sit has the effect, if not by design, of derailing Imperial Pacific International’s attempt to proceed with an orderly liquidation of its assets, attorney Joey San Nicolas said.
“It prejudices IPI and other general unsecured creditors; therefore, the deposition notice issued by CNMI and Joshua Gray should be found invalid,” San Nicolas added.
IPI has asked the federal bankruptcy court to approve the sale of its hotel-casino and other real estate assets to Sit for $10 million.
The federal bankruptcy court recently ordered Sit to explain in writing why he should not be held in contempt for failing to comply with federal subpoenas filed by creditors Gray and the CNMI government.
In response to the order to show cause, San Nicolas said he was hired by Sit on June 20, 2024 to represent Sit in the proceeding as debtor-in-possession lender.
“The current proceeding is not an adversary proceeding nor can Mr. Sit be considered a party,” San Nicolas said.
He added that his involvement in the case is very limited and “Mr. Sit expressly informed counsel that he was not authorized to accept services of the subpoena.”
According to San Nicolas, on Sept. 9, 2024, from New York, the counsel for creditor Joshua Gray issued a notice of remote deposition, which was set for Sept. 13, 2024, at 9 a.m., via Zoom. The notice was received by San Nicolas’ law office on Sept. 10, 2024, at about 1:09 p.m. local time.
The notice stated that “the deposition shall continue from day-to-day until completed.”
On Sept. 10, 2024, the CNMI government also issued a notice of deposition and for production of documents. The date of this remote deposition was also set for Sept. 13, 2024, at 9 a.m. local time via Zoom.
The notice was received by San Nicolas’ law office on Sept. 10, 2024, around 5:30 p.m. local time. The notice requests Sit to produce the following: 1) documents to show he has experience in construction and management of a hotel; and 2) documents evincing his ability to finish the construction of IPI’s hotel-casino that is estimated to cost $150 million.
The notice stated that “the deposition shall continue from day-to-day until completed.”
Given the extremely brief notice to Sit, and the procedural failure of the CNMI government to serve the same notice to other parties such as IPI and the Creditor Committee, the court should find the subpoena invalid, San Nicolas said.
“The order to show cause should not be considered until after the hearing on IPI’s bid procedure motion whereby IPI seeks to have Mr. Sit designated as the stalking horse purchaser at a proposed purchase price of $10 million subject to overbidding,” San Nicolas said.
If the court denies the bid procedures motion, the lawyer said, “Mr. Sit would likely withdraw his offer, and the deposition would become moot and irrelevant.”
“Similarly, the request made by the CNMI for Mr. Sit to produce documents related to his experience with hotel management and his financial resources to complete the construction, which is estimated at $150 million, is premature and simply not relevant for IPI’s bid procedure motion. By taking an aggressive position to depose Mr. Sit with such short notice and demanding the production of documents, the CNMI attempts to sideline Mr. Sit from acting as a stalking horse bidder. The loss of a stalking horse bidder would prejudice IPI and its general unsecured creditors who would benefit from having Mr. Sit as a stalking horse with a beginning bid of ten million dollars,” San Nicolas added.
According to online sources, a “stalking horse purchaser” refers to an initial bidder chosen by a bankrupt company to make the first offer on its assets. This bidder sets the minimum price that the assets can be sold for in a bankruptcy auction. The term “stalking horse” comes from the idea that the initial bid serves as a benchmark, encouraging other potential buyers to make higher offers.
Chief Judge Ramona V. Manglona has scheduled a hearing for Sept. 24 at 8:30 a.m. and ordered Sit to appear.
Sit, a resident of Hong Kong, is the general manager of Top Pride International Ltd., a wholesale distributor of cosmetic products, IPI said.
IPI filed for Chapter 11 bankruptcy in the District Court for the NMI on April 19, 2024, saying it owed creditors over $165.8 million.
