Baseball legend and investor Lenny Dykstra is being accused of "dishonest conduct" by the US Trustee's office of federal bankruptcy court. As a result, the trustee is asking the judge to consider converting Dykstra's Chapter 11 reorganization to a Chapter 7 liquidation.
The trustee looks into the legitimacy of claims brought by all sides in bankruptcy proceedings, and in court papers filed Friday, it said Dykstra claimed his $24 million mansion, pictured at left, was insured when it wasn't. Dykstra filed bankruptcy in July, one day before his home was to be auctioned off in foreclosure.
George Griffith of the trustee's office said Dykstra signed a "real property questionnaire under penalty of perjury," claiming insurance on the mansion did not expire until December. But the court filing says that on the very day Dykstra signed the document, July 14, the insurance was cancelled "for failure to pay."
"Undoubtedly, the debtor had received prior notices that the insurance would be cancelled if the premium was not paid," the filing said, calling Dykstra's actions "dishonest."
The trustee is asking the judge to either appoint someone else to oversee the Chapter 11 reorganization, and take that authority away from Dykstra, or perhaps something more dire.
"In the alternative, the court also may convert the case to Chapter 7, or dismiss the case" where "no reasonable possibility of reorganization exists," the filing said.
Dykstra's attorney, Jon Hayes, said he will file his own motion in the case Monday.
"The allegations that Lenny misled anyone about the insurance are absurd," he said.
The trustee's office said the lack of insurance suggests Dykstra may not have the money to reorganize, and it also creates a risk to the property.
A hearing is scheduled for Tuesday.
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