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A Texas judge overseeing the bankruptcy of a former Northwest Arkansas real estate developer has ruled the trustee can have access to certain privileged documents and reconsidered his ruling allowing access to other documents requested by an investment group.

In July of 2018, Bill Schwyhart and his wife filed for Chapter 7 bankruptcy protection in Texas, claiming more than $90 million in debt.

A complaint on the discharge of the bankruptcy made by CHP, an investment group, contends that Schwyhart and his wife lied about or failed to disclose their ownership in various business entities in order to defraud creditors and hide information about their finances. Later in February, Chapter 7 trustee Scott Seidel notified creditors that a special counsel is investigating the Schwyharts' transactions.

The Schwyharts argued that they have done nothing wrong. Their attorney asked that the complaint be dismissed and that their bankruptcy be discharged, saying the couple never intended to hinder, delay or defraud, and that all acts or failures to act outlined in the objection were justified under the circumstances of the case.

In May, Seidel asked the court to compel attorney Travis Story, who has served as the Schwyhart's personal attorney and represented other business entities involved in the bankruptcy, to turn over all his files concerning Schwyhart LLC.

Seidel argued that as the trustee, he acts as the debtor, and therefore he controls Schwyhart Holdings and can waive any privilege regarding the company. Story argued that the trustee lacked the authority to waive privilege and that he is not entitled to attorney work product or other attorney-client privileged communications.

Judge Harlin D. Hale granted Seidel's motion in part Monday, according to court documents. He ruled the trustee has the power to control the attorney client and work product privileges of Schwyhart LLC but that the trustee cannot wave the privilege of the individual debtors.

He directed Seidel and Story to engage in "good faith discussions" to reach an accord about what documents will be handed over to the trustee. He said if the parties can't agree, the court will decide the matter.

In August, TWG Resources, a business entity tied up with the Schwyhart bankruptcy, asked the court to reconsider its decision to disclose the content of an email to CHP that it contends is privileged. The email and attachment were between Alex Schwyhart, TWG's owner and the son of Bill, and his attorney. TWG argued the items are protected by attorney-client privilege.

CHP had asked the court to require attorney Story, to turn over certain documents. The court later ruled attorneys for CHP could examine some of the documents but also excluded others since they contained privileged information.

In his Monday order, Hale said the court looked at the information again, and decided the court would favor preserving attorney client privilege on the documents TWG pointed out.

During the Northwest Arkansas building boom, Schwyhart worked with late trucking magnate J.B. Hunt and Tim Graham on the Pinnacle Hills Promenade mall, which opened in 2006. After Hunt's death later that year, his widow, Johnelle Hunt, and Graham broke ties with Schwyhart.

Schwyhart was also one of the investors, along with J.B. Hunt, in the now-defunct charter-jet company Pinnacle Air LLC, which did business as Aspen JetRide and filed for Chapter 7 bankruptcy in early 2009.

Business on 10/02/2019

Print Headline: Judge gives trustee access to developer's documents


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