A U.S. bankruptcy judge in Alexandria is scheduled this morning to reconsider an unusual order that clamps a lid on information on the failed EPIC real estate partnerships.
The Washington Post and The New York Times have asked Judge Martin V. B. Bostetter to overturn his sealing order on the grounds that it goes against bankruptcy code provisions permitting public access to court records. Although lawyers for the newspapers did not invoke any constitutional arguments in their briefs, a Post lawyer said the ruling might also violate First Amendment guarantees of freedom of the press.
Bostetter last week sealed certain financial information submitted by more than 350 bankrupt partnerships established by Equity Programs Investment Corp., the real estate subsidiary of troubled Community Savings & Loan of Bethesda. That order was sought by lawyers for about 100 savings institutions across the country who lent the EPIC partnerships money. The lawyers said disclosing the names of the lenders could cause a run among their depositors, even though they might in fact be financially stable.
In other documents filed last week, the lawyers for the thrifts contended the judge has "no alternative" but to continue the order, given the general crisis in the nation's S&L industry. They also argued that disclosure could hinder negotiations under way to solve EPIC's problems.
"The number of institutions, the sums at stake, and the perilous condition of many smaller savings and loans make this an unusual and exceptional case," their brief argued, "and justice requires that a . . . limited sealing order is required . . . pending the delicate negotiations."
Their brief also disputed the newspapers' right to participate in the case, and argued disclosure of the lenders' names, without additional information about their financial stability, would place them at an unfair competitive disadvantage with other savings institutions.