Digital Extra: The Station Fire

The Station nightclub owners' business holdings are "worthless," their lawyer says, and their personal wealth consists mainly of their houses and retirement savings.

01:08 AM EDT on Saturday, October 22, 2005

BY LYNN ARDITI
Journal Staff Writer

PROVIDENCE -- The owners of The Station nightclub, where 100 people died in a fire, yesterday filed detailed disclosures about their personal finances in federal bankruptcy court.

Brothers Jeffrey A. and Michael A. Derderian are asking the bankruptcy court to protect their personal property -- houses, cars, furniture, retirement money -- from potential claims by fire victims and their families and other creditors.

The Derderians' petitions for Chapter 7 bankruptcy protection each list the names of more than 500 fire victims and victims' family members.

"But for the fact that there are 500 potential creditors or claimants, this is very typical of most people who claim Chapter 7 bankruptcy protection," said bankruptcy lawyer Christopher M. Lefebvre, who is representing the Derderians. "Their business entities, for practical purposes, are worthless."

The Derderians' company, Derco LLC, owned the West Warwick nightclub that burned down in February 2003. A $3,500 securty deposit with the property's real estate company is its only asset.

Michael Derderian reported assets of $448,051, including a house in Narragansett valued at $375,000. He has a $365,000 mortgage on his house and he lists liabilities of another $88,541.

Jeffrey Derderian reported assets of $334,596, including a house in Cranston valued at $284,000. He estimated liabilities of $361,451.

The Derderians filed for Chapter 7 bankruptcy protection on Sept. 23, halting all civil claims against them stemming from the 2003 fire. Derco LLC also filed for Chapter 7 bankruptcy protection.

The filing came seven days before the Derderians were to stand trial on civil charges that they failed to pay more than $200,000 in workers' compensation insurance benefits to the families of four nightclub workers killed in the fire. It was also 25 days before a federal bankruptcy law took effect -- on Monday, Oct. 17 -- that makes it tougher for middle-class people who owe money to seek protection from creditors.

The fire, set off by a pyrotechnics display during a performance by the rock band Great White, killed 100 people and injured more than 200.

The Derderians and Daniel M. Biechele, the former Great White tour manager who set off the pyrotechnics that ignited flammable foam used as soundproofing in the club, each face 200 counts of involuntary manslaughter. All have pleaded not guilty.

At the time of the fire, Jeffrey Derderian was working as a television reporter for Channel 12 (WPRI). He lists his current occupation as being in business development for Lang Naturals, a nutritional and nutraceutical food and beverage maker, in Middletown. He reported wages -- after taxes and Social Security -- of about $3,700 a month.

By that measure, his annual income is roughly $44,400 a year.

Michael Derderian used to manage the nightclub and sold insurance. He lists his current occupation as financial adviser at Service Group, at his home address in Narragansett, and as a mortgage broker at Able Financial in Warwick. He reported monthly income of about $6,000, which comes to about $72,000 a year.

Among the personal property he reported is a 1997 Chrysler Town and Country van worth $4,500, furniture and other household goods valued at $9,000, a checking account with $2,800 and a watch and a wedding band worth $1,000. He lists a 1990 Regal boat, but says the equitable interest belongs to a third party.

He also has asked the court to exempt an IRA valued at $48,000.

Michael Derderian also reported that he received $17,167 during the last two years from subleasing a Cessna Skyhawk airplane with Corporate Air Charter of Rhode Island. Last month, the lease ended and he returned the plane to the Warwick charter company, according to the documents.

Among the personal property that Jeffrey Derderian reported: a $1,500 antique dining room set, a joint checking account with his wife containing $4,427, a digital camera and video camera valued at $275, a $200 wedding ring, and household furniture with an estimated value of $9,000.

Jeffrey Derderian also reported a 401(k) containing $15,306.

The filings catalog property right down to their household cats, whose values are listed as "unknown."

Among their expenses, the Derderians each list $1,500 per month in legal bills and $500 a month in payments to families of workers injured in the blaze.

Lefebvre, the Derderians' bankruptcy lawyer, described the brothers as having a "modest, average lifestyle," adding that Michael Derderian "has no equity in his house."

Lefebvre said, "I don't think Michael or Jeffrey ever anticipated, prior to The Station fire, that either one of them would have been a debtor in a bankruptcy court proceeding. This is just the unintended consequence of a very unfortunate tragedy."

The Derderians are scheduled to appear in federal District Court, Providence, on Nov. 9 -- the brothers' first public appearance since shortly after the fire -- to testify about the accuracy of the bankruptcy filing.

The bankruptcy court moved the hearing to the federal court to accommodate media and the public.

Lynn Arditi, a Providence Journal staff writer, can be reached at (401) 277-7335 or by e-mail at larditi [at] projo.com.