For several months, the U.S. Trustee’s office has accused Kaye Scholer and Capstone Advisory Group LLC of failing to disclose key facts and potential conflicts of interest when they were hired to work on investment firm GSC Group Inc.’s Chapter 11 bankruptcy case. Kaye Scholer appeared to put its part in the dispute in the past last week by agreeing to give up a total of $1.5 million in fees it had received or expected to receive for its work on the matter and to revamp its procedures for applying for future bankruptcy assignments. But the judge overseeing the case has put the firm back on the spot by ordering two of its lawyers to testify Tuesday about what a key figure in the case said at a critical meeting with U.S. Department of Justice lawyers.
Manhattan bankruptcy court judge Shelley Chapman ruled during an April 24 hearing [PDF] that she needs to hear live testimony from D. Tyler Nurnberg, the managing partner of Kaye Scholer’s Chicago office, and Matthew Micheli, a counsel based in the same office, as she tries to determine what exactly GSC liquidating trustee Robert Manzo said during the September 2012 meeting with the department’s attorneys with regard to an issue at the heart of the matter. Chapman said she is having trouble reconciling deposition testimony Nurnberg and Micheli provided in the case with statements Manzo made, and she needs to hear from the two attorneys in order to "make a judgment about the credibility of the different versions of the story."
