Attorney Seeks to Rally Those With Stake in Retailer : Bankruptcy: An Encino lawyer places an ad offering to help small shareholders in ailing Carter Hawley Hale form a committee to look out for their interests.

Despite persistent rumors that Carter Hawley Hale Stores would soon seek bankruptcy protection, the Los Angeles retailer kept mum about the filing for days before it finally was announced. But that didn’t keep Encino attorney Leon L. Vickman from shelling out $79 on the bet that the bankruptcy move was on the way.

On Feb. 8, just three days before the filing, Vickman ran an ad in the Western edition of the Wall Street Journal: “Carter Hawley Hale Share Holders’ Committee Being Formed.”

Now, Vickman, 59, is hoping dozens of small shareholders will contact him, aiming to salvage some of their investment in the ailing retailer, which was brought down by the recession and crippling interest payments on its junk bond debt. Their main hope, according to Vickman: that the company survives Chapter 11 and sees its stock climb again.

Whether Vickman gets to represent such shareholders depends on whether enough of them actually want to be represented. To date, however, only one such investor has responded to Vickman’s ad. “Maybe the ad was too small, in the wrong place,” Vickman said.

Another hurdle is that the judge in Carter Hawley’s bankruptcy case also must agree to have Vickman represent such shareholders.

This is Vickman’s first foray into forming shareholder committees. Most of his law practice--about 90% since the early 1980s--has been representing creditors and debtors in bankruptcy proceedings. For example, Vickman is one of several attorneys representing Pioneer Mortgage, a La Mesa, Calif., mortgage broker that filed for Chapter 11 reorganization on Jan. 9. But Vickman has never formed a committee to represent shareholders, which usually only happens in very large bankruptcies, such as Carter Hawley’s.

Even if Vickman gets a shareholders committee together in the Carter Hawley case, there may not be a great deal the attorney can do for the group.

Carter Hawley’s management filed the bankruptcy petition and will play a big role in deciding the company’s future after bankruptcy. Theoretically, managers have to look out for their shareholders’ interests. But in a bankruptcy, “shareholders are the last people they have to be concerned about,” he said of Carter Hawley’s management.

Likewise, creditors--such as banks, clothing manufacturers and the holders of Carter Hawley’s junk bonds--will surely be represented in bankruptcy proceedings. And creditors who want to get as much of their money from Carter Hawley as quickly as possible may not be in any mood to help shareholders in the company.

Still, Bill Fiore, president of Local 1100 of the Department Store Employees Union in San Francisco, which represents about 900 employees of Carter Hawley in Northern California, said he’s hopeful that shareholders can get something for their stock. Many Carter Hawley employees bought stock in the company through their savings plan.

“Theoretically, yes, I think there’s a chance the stock will rise,” Fiore said.

Carter Hawley’s stock, which hit a high of $14.63 per share in 1989, steadily sank in value as the company’s hefty debts and weak performance pushed it to seek bankruptcy protection. On Friday, Carter Hawley’s stock closed at $1.75 per share.

Vickman hopes to represent small investors. “A person who has very limited savings and put his money into this stock to see it drop has no place to go. His only hope is the stock goes back up,” Vickman said. Such investors are probably far more worried about Carter Hawley’s fate than are institutional investors “who are used to taking losses,” Vickman said.

His main weapon, Vickman said, would be filing a plan of reorganization for the company. Carter Hawley’s management will be able to file the first such plan, but later other interested groups will be allowed to submit such plans. Such a plan, for instance, might call for stock dividends to be paid even before all the debts have been paid off.

That would be “very unusual,” Vickman said, but “it might be that the creditors would be willing to agree to something like that for the overall health of the company.”

Getting assigned would bring in fees for Vickman’s practice--but not necessarily big ones. A judge would have to approve Vickman’s compensation, which most likely would be on an hourly basis, he said.

Although Vickman has only had one response to his Carter Hawley ad, he plans to run more ads or possibly send a letter seeking small shareholders. “I’m doing everything I can, ethically, to round up such people,” Vickman said, referring to restrictions by the State Bar of California on advertising by attorneys.

For an attorney such as Vickman, though, in recessionary times, there are other possibilities worth investigating. Vickman has already had one response to another ad he ran in the Wall Street Journal on Friday, seeking to form a committee of investors in Property Mortgage Co., a Sherman Oaks mortgage broker that filed for Chapter 11 protection Thursday.