Trustee wants N.Y. lawyer jailed for not cooperating in firm bankruptcy

Signage is seen at the United States Bankruptcy Court for the Southern District of New York in Manhattan, New York City, U.S., August 24, 2020. REUTERS/Andrew Kelly
  • Kossoff trustee also asking judge to compel Manhattan DA to turn over records
  • Trustee has struggled for months to obtain law firm records

(Reuters) - The Chapter 7 trustee overseeing the dissolution of New York real estate law firm Kossoff PLLC asked a bankruptcy judge Tuesday to hold its founder in civil contempt and order him incarcerated if he continues defying court orders to cooperate.

The trustee, Al Togut, also asked the judge in a separate motion Tuesday to compel the Manhattan district attorney's office to turn over certain grand jury materials relating to its investigation of firm founder Mitchell Kossoff.

The filings underline Togut's mounting frustrations managing the estate of the Kossoff firm, which was forced into bankruptcy in May after creditors claimed it misappropriated more than $8 million from its escrow accounts.

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Kossoff's refusal to comply with multiple court orders to produce records has "dramatically increased the administrative expense of this estate, which prejudices the interests of the victims of Kossoff’s fraudulent activity," Togut wrote to U.S. Bankruptcy Judge David Jones.

Togut on Tuesday declined to comment.

Mitchell Kossoff, once a fixture in the New York real estate legal market, has argued he would be waiving his right against self-incrimination if he turned firm records over to Togut, adding that he would cooperate if he is granted immunity from prosecution. Jones rejected that position in July, and a Manhattan federal judge dismissed Kossoff's appeal on the matter Sept. 30.

Togut said Jones can "enforce the terms of an order of civil contempt by directing the incarceration of the party who fails to comply with a lawful order." Financial sanctions won't work, given Kossoff's apparent inability to afford bankruptcy counsel, Togut added.

Walter Mack, a criminal defense lawyer for Kossoff, did not respond to a request for comment.

Mack has said Kossoff is under investigation by the Manhattan district attorney. The district attorney has records that are "essential" to Togut's administration of the Kossoff firm's estate, but it has "turned a deaf ear," Togut wrote.

"The trustee seeks only copies of the debtor’s internal business documents. The trustee’s request is not about obtaining bombshell witness testimony," Togut added.

A spokesperson for the Manhattan district attorney declined to comment.

The case is In re Kossoff PLLC, U.S. Bankruptcy Court for the Southern District of New York, No. 21-10699.

For Togut: Neil Berger, Brian Shaughnessy and Minta Nester of Togut, Segal & Segal

For Kossoff: Walter Mack of Doar Rieck Kaley & Mack

Read more:

Fight over documents complicates Kossoff law firm bankruptcy

Embattled real estate lawyer Kossoff can't shield docs in bankruptcy

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David Thomas reports on the business of law, including law firm strategy, hiring, mergers and litigation. He is based out of Chicago. He can be reached at d.thomas@thomsonreuters.com and on Twitter @DaveThomas5150.