Bankruptcy Trustee Resigns Amid Debtor's Allegations

Former Phillies and Mets baseball star Lenny Dykstra’s long-running Chapter 7 bankruptcy saga took another dramatic turn when Bankruptcy Trustee Cisneros abruptly resigned “after consultation with the Office of the United States Trustee.”  Dykstra had requested that Cisneros be removed from the bankruptcy case for failing to disclose the full extent of his business dealings with J.P. Morgan Chase & Co., Dykstra’s largest creditor. 

Dykstra said Cisneros failed to disclose that he represented J.P. Morgan in some 300 bankruptcy cases. One product of this undisclosed relationship, Dykstra claimed, was that Cisneros agreed to settle predatory-lending claims Dykstra had alleged against J.P. Chase at a substantial discount.

Dykstra had claimed Washington Mutual, which J.P. Morgan purchased in 2008, put him into a $12 million loan he couldn’t afford in connection with his $17.5 million purchase of hockey legend Wayne Gretzky’s Thousand Oaks, Calif., mansion. The bank had denied wrongdoing.

Dykstra filed for bankruptcy last July but lost control of his bankruptcy case after a bankruptcy judge ruled that Dykstra could no longer mange his own finances.  At that point Cisneros was appointed to redirect the bankruptcy proceedings and generate cash for the repayment of creditors by auctioning off Dykstra’s assets, including many of his personal belongings and real estate.  Dykstra felt that Cisneros has an extra incentive to unfairly handle his bankruptcy case in a way that would be most advantageous for his largest creditor, J.P. Morgan Chase & Co.  Dykstra is hoping to petition the bankruptcy court for the return of some or most of the personal belongings that were auctioned off under Cisneros’s direction.