A bankruptcy judge today ordered that former baseball player Lenny Dykstra lose control of his Chapter 11 bankruptcy, and that management of his financial affairs be handed over to a court appointed trustee.
Judge Geraldine Mund said an outside trustee is in "the interest of creditors and Mr. Dykstra, even if he doesn't think so."
Judge Mund told Dykstra last month that in order for him to stay at the helm of his reorganization, he had to come to court today with proof that both of his multi-million dollar homes were insured and were listed for sale. She also wanted him to submit a business plan showing how he would generate enough income to manage a Chapter 11 reorganization.
Dykstra's assistant testified that one of the two homes was insured, though the bill had yet to be paid. When asked where the money would come from to pay it, she said she didn't know. The other home, the larger mansion Dykstra bought from Wayne Gretzky for $17.5 million, is not insured as Dykstra and Fireman's Fund are in the midst of a dispute.
Dykstra took the stand to say both homes are listed for sale, though he only produced listing documents for one house, and the document was deemed inadequate because it did not include the signature of his estranged wife. Dykstra also told the judge he has a $12 million offer for the Gretzky home from someone "who runs a hedge fund." That amount would cover the first mortgage from Washington Mutual (now Chase). With no documents to support the claim, and with other liens on the house, the judge called the offer "speculative".
As for his business plan, Dykstra testified that Louis Vuitton has promised to commit $10 million to take a 49 percent stake in the relaunch of his Players Club Magazine, with plans to expand it in Europe. The Players Club is a publication meant to help professional athletes manage their finances.
"We give them hope," he testified, acknowledging the irony of his own situation.
The judge declared as hearsay the evidence Dykstra produced to support the Vuitton offer -- an e-mail signed "Bernard", a Bernard Juhen, whom Dykstra referred to as "Mr. Vuitton."
The e-mail promised a potential meeting with Dykstra if he sent more information, but it did not commit to giving him $10 million. The judge asked when the $10 million would be paid.
"When the magazine prints," was his response.
In ruling to appoint a trustee, the judge said the business plan was speculative and that she didn't "have the proof I need to let you go forward as a debtor in possession under these circumstances."
Dykstra was clearly disappointed, though for the moment he's avoided having the Chapter 11 converted to a Chapter 7 liquidation. Dykstra pleaded with the judge for one last opportunity to prove he can manage his own affairs, but Judge Mund told him the appointment of a trustee would be "the best thing that could happen to you."
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