Aspen Skiing Co., ex-executive at odds over bankruptcy
October 20, 2014
When Paul Cherrett negotiated with Aspen Skiing Co. in February 2007 to become its senior vice president of hospitality, the company enticed him to relocate from Wyoming by offering him a $500,000 home loan.
Cherrett would work at Skico for more than four years, but the loan is at the center of a legal dispute playing out in a California court, where Cherrett and his wife filed for Chapter 7 bankruptcy nearly a year ago.
Skico has intervened in an effort to have the case dismissed, claiming the Cherretts earn too much money to qualify for Chapter 7 protection, which allows the debtor to sell some of their assets to pay back their creditors.
"Now that Paul's personal relationship with his lender is over, he hopes to leave his lender holding the bag, despite his ability to pay the debt in full," Skico said in a March court filing. Skico also contends the condo has lost its value since Cherrett bought it.
The Cherretts' lawyers have countered by saying the bankruptcy is legitimate.
So far, Skico has failed to convince the court to throw out the case, and Aspen's largest private-sector employer has taken its argument to the U.S. Bankruptcy Appellate Panel for the 9th Circuit in California.
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Skico declined comment for this story, and the Cherretts' attorney did not return a telephone message. But court documents spell out both sides' arguments.
Before Cherrett came to Skico, he had been working at the Four Seasons Resort in Jackson Hole, Wyoming, where he still owns a home. But Skico floated him a $500,000 home loan to lure him away. Skico also said Cherrett would lead the opening of a new Little Nell hotel in Jackson Hole, where he would be able to move back to, and his starting salary would be $300,000, according to court pleadings.
Cherrett joined the company in April 2007 and secured a second deed of trust for $417,000 from another lender, enabling him to buy a Basalt condominium for $995,000 on June 15, 2007. Meanwhile, Cherrett considered his Wyoming house his primary residence, and his family lived there while he worked in Aspen.
"The Colorado property was a small (1,400 square feet/2 bedrooms) condominium, compared with the larger home owned by the Cherretts in Jackson, Wyoming (4,000 square feet/4 bedrooms)," the Cherretts' attorneys said in a court filing. "The Colorado property was not large enough for the Cherretts' family to live in. When the family visited the condominium, someone would have to sleep on the sofa."
Skico, in the meantime, shelved its plans to build a Little Nell in Jackson Hole after the economy crashed. Colleen Cherrett moved to Basalt in 2009, while Paul Cherrett worked at Skico for more than four years, overseeing the operations at the Little Nell Hotel, The Residences at the Little Nell and the Sundeck. He also was instrumental in leading Skico's effort to buy the old Limelight Hotel and replace it with a new one.
In June 2011, Cherrett resigned from his post to take a resort job in California. More than two years later, in August 2013, the Cherrett couple filed for Chapter 7 bankruptcy protection in California.
Skico has contended that the Cherretts have "abused" bankruptcy laws because the husband and wife "have $687,268.20 in disposable income over 60 months to pay all debts in full," according to a court brief filed by Skico in March.
Skico's first bid to have the bankruptcy thrown out fell short in January, when U.S. Bankruptcy Judge Scott Clarkson disagreed with the company's contention that the Cherretts' debts were "primarily consumer debts." Attorneys for the Cherretts, however, contended the debts they had were for a "non-consumer business venture" because Paul Cherrett needed a home near his place of work.
"I can tell you that it is this court's opinion that the purpose of securing that debt, or incurring that debt, was for employment purposes," Clarkson said at a court hearing Jan. 22. "The man needed to make money. He wanted to take the job. He knew he — to leave a secured position — wanted to make more money. So, I have to say, and I'm going to rule, that primarily this loan was incurred for a business purpose."
The judge continued to counter Skico's argument that Cherrett took out the loan for a personal purpose by saying, "Did he purchase this home for a personal reason? A personal purpose? No. He did it for a business purpose. He did it so he could work at a very prestigious, top-of-the-line equal to the Four Seasons, equal to the best hotels in the world, and I include the facilities owned by Aspen Ski Co. and operated as some of the best in the world. I will take judicial of that having been there and seeing the greatness of what they've created in that fine community."
Skico appeals ruling
Clarkson's ruling, however, didn't dissuade Skico. In February, the company appealed the ruling, and in June, the Cherretts' attorneys filed court papers saying that the judge got it right in determining that Paul Cherrett's loan, which came in the form of a deferred compensation package, was not a consumer debt but a business one because the loan was used to lure him to Skico.
A hearing is scheduled for the matter Thursday at the appellate courtroom at Pepperdine University School of Law in Malibu, California.