Digital Extra: The Station Fire

A lawyer for the fire victims argues that some holdings could be used for compensation.

01:00 AM EST on Thursday, November 10, 2005

BY LYNN ARDITI
Journal Staff Writer

PROVIDENCE -- A lawyer representing victims of The Station fire yesterday grilled nightclub owners Jeffrey and Michael Derderian about their assets during a bankruptcy court hearing.

From his front row seat, victims' lawyer Max Wistow demanded details about their mortgages, personal loans and property insurance, arguing that some of those assets could be tapped to help compensate the victims of the fire.

Documents at his feet, a legal pad propped on his leg, Wistow wanted to know, among other things, what the brothers did with the $100,000 property-damage claim paid on their nightclub after the fire.

And what happened to the $135,000 that bankruptcy-court documents say Jeffrey Derderian borrowed from David and Richard Lang?

At moments, Wistow's voice rose in apparent frustration at his inability to nail down certain details. The Derderians, who took turns before bankruptcy trustee Stacy Bettez Ferrara, appeared calm, responding in slow, measured tones.

The bankruptcy hearing of creditors marked the first time since the fire on Feb. 20, 2003, that the brothers have testified in open court. The fire killed 100 people and injured twice as many.

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 West Warwick club, each face 200 counts of involuntary manslaughter in connection with the 2003 nightclub fire. They have pleaded not guilty.

In bankruptcy cases, creditors hearings are designed to give those who are owed money an opportunity to question the bankruptcy filer about the truth of their claims.

Yesterday's hearing, which stretched for nearly four hours, was held in federal court to accommodate a crowd that never materialized. The two-dozen or so people in the audience were mainly lawyers and journalists.

Ferrara, the trustee, reviewed detailed financial information filed by the brothers on behalf of themselves and their company, Derco LLC, in their Chapter 7 petition for protection from creditors. If approved, Chapter 7 bankruptcies generally wipe out all debts.

Michael Derderian, appearing suntanned and relaxed in a dark suit, was the first to testify. He leaned into the microphone, occasionally raising his eyebrows at Wistow's questions.

Michael Derderian testified that he works as a financial adviser and mortgage broker. He reported gross monthly income of about $6,000.

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

Divorced from his first wife, Michael Derderian testified that in July he married Kristina Link, who used to take care of the nightclub's books.

His brother, Jeffrey, a former TV reporter for Channel 12 (WPRI), testified that he has been working for Lang Naturals, a nutritional and nutraceutical food and beverage maker, in Middletown.

During his testimony, Jeffrey Derdarian appeared subdued, keeping his eyes mostly on the table. He frequently responded "Yes, ma'am," and "Yes, sir."

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

The Derderians' petitions each list the names of more than 500 fire victims and victims' family members as potential claimants.

Michael Derderian testified yesterday that Essex Insurance Co. had paid a property-damage claim of $98,669 to Derco LLC, the company that owned the nightclub.

The money, Michael Derderian said, was deposited into a client account with one of his lawyers. Some of the money, he said, was used to pay legal fees. "Then the balance was distributed to myself and my brother," he said.

Wistow, part of a team of lawyers representing 165 people who were injured and another 87 people who died in the fire, said the Derderians should take the lead in pursuing claims against other parties. One example he cited was the landlord for the West Warwick club, Triton Realty. Wistow said the flammable foam that ignited the fire was installed before the Derderians signed their lease with Triton in July 2000.

Wistow also asked Jeffrey Derderian about two loans totaling $135,000 that he received during the past two years from David and Richard Lang. Jeffrey Derderian testified that he works for the Langs.

Wistow asked Jeffrey Derderian: "How much of the 135 [thousand] have you drawn down?"

Derderian: "Approximately $55,000."

Wistow: "So there's another $80,000 you can draw down?"

Derderian: "Yes."

Wistow: ". . .You can get that money any time you want, can't you?"

Kathleen Hagerty, a lawyer representing Michael Derderian, jumped in:

"My understanding is . . ."

Wistow cut her off, saying,"I'm not interested in your understanding. . ."

He turned back to Jeffrey Derderian. "Is there any restriction, on your going to the Langs today and getting that money?"

"For attorneys' fees."

Wistow said he wanted to see proof that the loan could only be used for lawyers' fees.

". . .Does the promissory note say that?"

The Derderians' bankruptcy lawyer, Christopher Lefebvre, handed Wistow a copy of the promissory note.

Silence.

"There's no condition here that it be used for attorneys' fees," Wistow said, handing the document back to Lefebvre.

The $80,000 not yet spent from the Langs' loan to Michael Derderian, Wistow declared, should be turned over to the estate to repay the creditors.

The hearing will continue Dec. 12 at 10 a.m. in the U.S. Trustees Office, on Dorrance St., Providence.

Contact Lynn Arditi by e-mail at larditi [at] projo.com or call (401) 277-7335.

See the Derderians' court filings in their personal bankruptcy case, and browse related coverage of The Station fire and its aftermath, at:

http://projo.com/stationfire