iPayment's Daily proposes creditor fund, monthly budget

Plans would make more than $30M available if lawsuit appeal fails, while allocating $42,000 for November household expenses

Email | Print By E. Thomas Wood

Amid signs that his bankruptcy case is about to go into a lengthy holding pattern, iPayment CEO Greg Daily has told a court he is willing to sell many of his assets to fund a trust that would benefit his creditors if he is unable to reverse a $350 million legal judgment on appeal.

At the same time, Daily has complied with a court order to submit a report every month on his planned personal expenditures. For November, his household budget is just over $42,000.

In filings made Friday and Monday in Nashville's U.S. Bankruptcy Court, payment-processing entrepreneur Daily has furnished an official plan for his Chapter 11 case and a disclosure statement with details on the plan, along with his November budget.

The documents spell out how he proposes to handle his affairs pending appeal of the huge legal verdict returned against him in Los Angeles Superior Court in May – $300 million in compensatory and $50 million more in punitive damages – in favor of Auerbach Acquisition Associates Inc., a company run by investor Douglas Shooker that claims Daily cheated it a decade ago out of a ground-floor opportunity to invest in iPayment, which went on to become a publicly traded company.

In previous court filings, Daily has strenuously denied wrongdoing. iPayment itself, which Daily took private in 2006 after long and contentious negotiations led to a $770 million buyout, is not a party to his legal troubles as a corporate entity.

The judgment against Daily is now on appeal in California, with no final ruling expected for a year or more. Daily's plan says if the judgment in favor of Auerbach is upheld, his assets will be placed in a liquidating trust for distribution to Auerbach and possibly other claimants. "If the judgment is reduced" to an amount Daily can afford to pay, the disclosure document states, "no trust will be needed."

The plan provides that once it is enacted, Daily will "sell his survivorship interest" in all bank accounts, household property and real estate that he claims to own jointly with his wife, Collie Daily. The sale, to unspecified parties who apparently could include Collie Daily, might at least partially address objections raised by Auerbach's attorney, Bob Mendes of MGLaw in Nashville, regarding Daily's claims about what property is in his wife's name and what is in his own name.

"All net proceeds will be held in an investment account pending distribution to creditors," the disclosure statement says. Daily's share of various assets, most co-owned with his wife, would be sold off. Among the assets involved:

• His wine collection, already slated for auction in New York soon, for which he now expects to fetch a net price of over $1.5 million.
• The Daily family's home on Hillsboro Road, which has been appraised at $6 million.
• Their vacation home in Montana, built at a cost of $6 million on a lot purchased in 2007 for $10 million; it now has an appraised value of $9.75 million, according to one of Monday's court filings.
• Daily's stake in Nashville financial start-up CapStar Bank, for which he paid $6.4 million in 2008.
• Shares of Nashville-based Ardent Health Services that he has owned since 2001.
• Interests in two emerging growth funds of Nashville's Claritas Capital for which Daily paid a total of $500,000, although his capital accounts now stand at a combined value around $239,000.
• An investment in Nashville-based Solidus Co. L.P. that Daily values at $2.1 million. (Disclosure: Solidus is a major shareholder in SouthComm Inc., parent company of NashvillePost.com.)

All told, Daily estimates the assets he would sell to fund the account are worth almost $31.5 million.

Daily's monthly budget, mandated after attorneys for Auerbach failed in a bid to put a trustee in charge of his worldly possessions, covers anticipated costs for his family's upkeep over the coming month. According to his filings, the family includes one dependent under 21 years of age. Its monthly needs include:

• $3,000 for food
• $5,800 for "car/gas repairs"
• $1,000 for water bills in Nashville
  
• $5,500 for a "property manager" and "housekeeper"
• $4,000 to cover electrical and gas costs at the Montana property

Bankruptcy Court Judge Marian F. Harrison is expected to set a December hearing on Daily's plan. Bill Norton of Bradley Arant Boult Cummings is his attorney.