U.S. says Borders must prove it can afford to pay bankruptcy attorneys, others

By Nathan Bomey Business news director

Posted on Fri, Apr 29, 2011 : 2 p.m.

The U.S. Justice Department today filed an objection to Ann Arbor-based Borders Group Inc.'s plan to pay its lawyers and other bankruptcy costs, saying the book store chain must first prove that it can afford to so.

U.S. Trustee Tracy Hope Davis said in the filing that Borders should not be allowed to pay certain costs, including more than $1 million to bankruptcy law firm Kasowitz, Benson, Torres & Friedman LLP, for now. The company should be forced to file an operating report detailing its financials from the date of its Feb. 16 Chapter 11 bankruptcy filing through March 31, Davis said.

"Without such report, it is impossible to determine if the debtors are paying their non-professional administrative expenses on a timely basis and have the financial wherewithal to pay the fees and expenses requested by their professionals," Davis wrote.

Davis also said Borders had not paid a quarterly fee due to the U.S. Trustee and that the fee should be paid before Borders pays other costs.

Other firms whose fee payments Davis objected to include real estate consultancy DJM Realty Services, compensation consultancy Mercer Inc. and several arms of Deloitte Consulting LLP.

A spokeswoman for Borders did not immediately respond to a request for comment.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.

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