PEORIA — Gary Matthews may soon have his day in court, bankruptcy court, that is.
The developer of the Marriott Pere Marquette and adjoining Courtyard by Marriott may be called on to testify at a hearing at U.S. bankruptcy court on April 20.
Matthews, who filed for Chapter 11 bankruptcy, has been at the center of financial problems that have plagued the Downtown hotels. His last-minute filing for bankruptcy postponed a foreclosure auction that had been planned last month.
U.S. Bankruptcy Judge Thomas Perkins heard arguments at Tuesday's hearing from attorneys for GEM Hospitality LLC, a company owned by Matthews and his partners, the city of Peoria and the INDURE Build-to-Core Fund, the union pension fund that provided primary financing for reconstructing the historic structure.
INDURE, referred to by Perkins on Tuesday as "the 800-pound gorilla in the room," being the largest lien holder in the case, was set to bid on the hotel properties last month had the auction taken place.
Tuesday's hearing was marked by legal wrangling between GEM's legal team and those of the city who charged that the Matthews company has mismanaged the properties and failed to pay bills that's led to foreclosure and bankruptcy proceedings.
While GEM attorneys defended keeping Jeff Varsalone as chief restructuring officer at the helm of the hotels during the hearing process, city attorneys had filed a motion calling for the appointment of a Chapter 11 trustee.
Perkins ruled, after conferring with INDURE's attorney, to keep the CRO in place.
The issue of fees was also raised at the hearing with concerns expressed by attorneys for INDURE and the city on how much GEM personnel would be paid while overseeing hotel operations.
Janaki Nair, one of the attorneys for the city, questioned the connection between CRO Varsalone and GEM Hospitality. "The CRO is subject to be terminated at the discretion of the same management that got us into this pickle," she said.
Elizabeth Vandesteeg, one of GEM's attorneys, said that day-to-day operations were going smoothly under the interim management arrangement. "The hotels are operating on a positive cash-flow basis, showing an increase of $250,000 ahead of budget," she said.
Perkins urged all sides to try to come to agreement on some of the issues. "I've urged the parties to find a resolution. The quicker we can get to a sale, the better for everybody," he said.
The judge also denied a motion by GEM to keep the names of small investors out of the press.
Steve Tarter covers city and county government for the Journal Star. He can be reached at 686-3260 or firstname.lastname@example.org. Follow him at Twitter@Steve Tarter and facebook.com/tartersource.