By JAMES FINK
Business First

The financial troubles for the historic Statler Towers in downtown Buffalo may get deeper, according to testimony presented Monday in U.S. Bankruptcy Court.

While negotiations are under way with two utilities that provide service to the 18-story Niagara Square landmark, at least one tenant has asked the court for permission to break its lease because of the building's uncertain fate.

That request was made by Erie County Bar Association Aid to Indigent Prisoners Society Inc., which leases nearly 5,000 square feet on the Statler's sixth floor.

The organization, which handles nearly 200 cases per day, has asked Hon. Carl Bucki, chief justice of U.S. Bankruptcy Court for the Western District of New York, to allow it to break its lease without penalty because of the uncertainty facing the Statler.

The Society's lease runs through February 2011. The organization said if it had to pay $80,000 in penalties to break the lease, it would financially cripple the organization.

"We are not like a private law firm," Robert Feldman, attorney for the Bar Association affiliate. "We cannot afford to buy our way out of the lease. We can't afford to sign a new lease somewhere when we would owe (court-appointed Statler trustee Morris Horwitz) $80,000."

Bucki reserved decision on the request, which was one of several issues he heard presented during the bankruptcy conference.

Bucki placed the Statler's owner, BSC Development Buffalo LLC, into involuntary Chapter 11 proceedings last month as bills continued to mount for the building, which is said to be losing $80,000 a month. The bankruptcy filing is one of several issues serving as a backdrop for the complex series of legal actions against BSC Development and its owner, British investor Bashar Issa.

The Aid to Indigent Prisoners Society is concerned that if utilities are cut off to the building, its employees and clients would be placed in serious danger, Feldman argued.

BSC Development Buffalo's debts include more than $210,000 owed to National Fuel Gas Corp.  The Amherst-based utility has threatened to shut off service but is meeting the terms of a temporary agreement with Horwitz to keep gas service going at the building.

Under that agreement, National Fuel will make weekly readings of gas service and submit the bill to Horwitz, who will pay the bill from rent proceeds. The Statler takes in about $100,000 a month in rents from its few remaining tenants.

"For the time being, they are happy with that," said Buffalo attorney Julia Kreher, who is working with Horwitz.

A similar agreement with National Grid for electric service is also being negotiated, Kreher said.

Horwitz said he is convinced that all of the utilities will remain on and no tenants will have to move because of cut-off service.

The goal is to find a buyer for the Statler, either through traditional sources or a court-mandated auction, by the summer.

"This type of case has to be handled quickly or it runs the risk of never being handled at all," Bucki warned.