Legacy Cares’ case requires Chapter 11 trustee, U.S. trustee says

By Sarah Lizee

Olympia, Wash., June 28 – Legacy Cares, Inc.’s bankruptcy case needs to have a Chapter 11 trustee appointed to it, a U.S. trustee said in documents filed Wednesday with the U.S. Bankruptcy Court for the District of Arizona.

In the alternative, the case should be dismissed, the U.S. trustee said.

Region 20 U.S. trustee Ilene J. Lashinsky said there is evidence of dishonesty, incompetence or gross mismanagement of the affairs of the debtor by prepetition management before the start of the case, and evidence of incompetence or gross mismanagement by current management after the start of the case.

Legacy Cares, a non-profit entity whose mission was to create a youth sports facility, obtained financing for the project through the issuance of tax-exempt bonds by the Arizona Industrial Development Authority (Azida) in August 2020. The borrowing was memorialized in a loan agreement between the parties.

The initial issuance raised more than $250 million in funds that were loaned by Azida to the debtor for the project. Another $33 million was raised in June 2021.

The loan agreement contains specific instructions on how the proceeds were to be used in connection with the project.

Lashinsky said the debtor’s tax returns and financial statements show that Legacy Cares made millions of dollars of loans and advances to or on behalf of project manager Legacy Sports USA, LLC during the 28-month period following an initial bond issuance.

Neither the loan agreement nor the offering memo authorized or contemplated the use of any bond proceeds to provide loans to insiders or third parties.

The U.S. trustee said, among other things, this unauthorized use of the debtor’s assets is well-established ground for the appointment of a Chapter 11 trustee.

Legacy Cares is a non-profit corporation that owns Legacy Park, formerly known as Bell Bank Park, a 320-acre sports and entertainment complex in Mesa, Ariz. The company filed bankruptcy on May 1 under Chapter 11 case number 23-02832.

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