Bankruptcy Hearing for ‘Santa Barbara News-Press’ Stalls

The latest hearing in the Santa Barbara News-Press bankruptcy ended in a “dog ate my homework” episode, when the attorneys representing newspaper owner Wendy McCaw seemed surprised to be asked if the company’s accountant was ready to answer questions.

“Without divulging attorney-client communications, I was not aware that questions would be asked of the accountant,” said Anthony Friedman, attorney for McCaw’s Ampersand Publishing, LLC. “I was not told he was required to be here to have questions posed to him.”

Friedman’s surprise might be attributable to the length of time since McCaw’s first creditor meeting, which took place about five months ago on September 7, 2023. Since then, the matter was continued five times for unexplained reasons until the meeting on Thursday, which was held over the telephone between the debtor, attorneys, creditors, and other interested parties.

McCaw was the owner and publisher of Santa Barbara’s daily paper for 23 years, during which time it became notorious before it ran aground. A fight erupted between the news division and McCaw after she censored news stories in 2006, editors resigned en masse, a union formed to whose members McCaw now owes over $3 million for bad-faith bargaining, and the paper was the first to endorse Donald Trump in 2016. On July 21, 2023, the 150-year-old paper filed for Chapter 7 bankruptcy and ended operations.

The bankruptcy’s creditor hearings are an attempt to pinpoint business assets in order to be able to pay debts somewhere south of $10 million: Where are subscription lists, contracts, artworks, archived photographs and newspapers, or other records and the passwords to access them? McCaw’s answer to nearly all questions has been that she did not know. At this 20-minute hearing, she stated that she did not know if the company carried insurance, if “Travelers” on a remittance page might have provided insurance to her company, or if the buildings on Anacapa Street or Kellogg Avenue had insurance.

As during the previous questioning session, attorney Michael D’Alba of the law firm Danning Gill, which is representing the bankruptcy trustee, next asked who might know the answer. After McCaw’s attorneys objected several times to questions about McCaw’s residence and potential familiarity with insurance policies, D’Alba explained the questions were intended to learn if an auction could be held on the business premises. Having arrived at a dead end, D’Alba then asked to speak with the accountant, who had been identified as the most knowledgeable individual regarding taxes during the September session.

A new attorney appeared in the case, Zachary Elsea of the Eisner law firm in Los Angeles, representing the two LLCs that McCaw had set up for the company’s two properties: the historic News-Press headquarters next door to City Hall in downtown Santa Barbara and the printing plant at 725 South Kellogg in Goleta. These two properties are the subject matter of a fraudulent conveyance complaint D’Alba and the bankruptcy trustee, attorney Jerry Namba, a solo practitioner in Santa Maria, filed in December 2023 in an attempt to prove the properties belonged among the bankruptcy assets, not as McCaw’s separate property.

This strategy has been described as not unusual in bankruptcy practice, as contract law describes the need for a nominal payment, or “peppercorn,” when it comes to real estate. In the case of the two buildings, McCaw conveyed them from Ampersand to the two LLCs with no title transfer fee, indicating a payment-free transaction. They were conveyed nine years ago, just one year short of a 10-year IRS statute of limitations on fraud, a statute D’Alba was using to underpin this latest lawsuit, as payroll taxes owed to the IRS were among the business debts.

A new date of March 14 was proposed for the next bankruptcy hearing, pending the accountant’s availability, but Elsea and Friedman asked for the meeting to continue among the attorneys and off the record to arrange a new date.