To debt due us part.

• Author: Overton, Sharon
• Position: Bankruptcy lawyer Larkin Pahl

He's won fame and fortune handling some of the state's biggest bankruptcy cases. But Larkin Pahl has discovered the devil is in the details.

In 12 years of presiding over Eastern North Carolina's federal bankruptcy court, Judge Thomas Small could probably predict with some degree of certainty what he'd encounter most mornings: a procession of lawyers in funeral-gray suits and conservative haircuts somberly disputing the finer points of the bankruptcy code.

But this May morning, Small's Raleigh courtroom teems with guys whose Italian-cut clothing, gelled hair and low-vamp loafers make them look more like highly paid hit men than hired legal guns. Big-city liquidators, they've come to bag a piece of the ailing Rose's chain. The stakes are high: $110 million in inventory in 59 stores, $1 million or more in fees to the winning bidder.

As the proceedings begin, the honorable Judge Small quickly excuses himself, as if not to be sullied by the spectacle of a courtroom bidding war. The liquidators huddle in their respective corners, hunched over cellular phones, keeping the lines open to their bosses in Chicago and Boston. Each quarter-point increase in the bid - which means a quarter of a million more for Rose's and its creditors - seems to raise the temperature another 10 degrees. At one point, one of the contenders, a 350-pound heavyweight with a string of big-time liquidations under his belt (Woolworth, the Sears catalog), actually growls at one of his opponents.

Left to referee this prizefight, Rose's attorney J. Larkin Pahl seems an unlikely candidate for the job. Soft-spoken and deferential, he looks like an Eagle Scout who has wandered into a street brawl. But after six grueling hours of negotiations, he has managed to secure a bid that guarantees Rose's $1.5 million more than the company would have gotten under a previous arrangement. The creditors are busy calculating their percentage of the take. The liquidators have holstered their cellular phones and gone home.

All things considered, Pahl would say later, "it was one of Rose's better days."

It was also just another example of the kind of work that's made Larkin Pahl the most highly sought-after bankruptcy lawyer in the state. Over the last 20 years, the Wake Forest University law graduate has become the attorney of choice to the falling stars of Tar Heel business. In the Eastern District, which runs from Wake County to the coast, he's handled nearly every high-profile bankruptcy in recent memory, including Pine State Creamery, Conner Corp. and FCX, as well as most of the major real-estate failures of the late '80s and early '90s.

Pahl estimates nearly half the businesses he's worked with over the years survived Chapter 11 reorganization. Nationally, only about 20% survive. "No one else has really snagged the kind of cases he has," Charlotte lawyer David S. Walls says. "I think that's because he's got a track record of bringing people out of bankruptcy and giving them a second chance."

But like so many of the high rollers he has represented, Pahl's success has created problems. This spring, he admitted writing himself unauthorized checks totaling nearly $85,000 for work he did as a trustee for seven different bankrupt estates. Under pressure from the bankruptcy court, he agreed to return the money and resign from the cases. But that wasn't his first run-in with the court. In the fall of 1989, Judge Small issued Pahl a stern reprimand and a hefty fine for representing competing entities, a real-estate client filing personal bankruptcy and a general partnership, of which the client was a member, that claimed he owed the partnership money.

Pahl maintains both incidents were unfortunate oversights and downplays their significance. "I deserve the punishment, but I didn't do anything intentionally wrong," he insists. "It's like being pulled over for a speeding ticket, and the policeman walks over and blows your brains out."

Others find what he did far more disturbing. Writing unauthorized checks "is something you just don't do," says a prominent bankruptcy lawyer who asked that his name not be used. "It could have been $100 or $100,000. ... The importance is really not the amount of money but the fact that it occurred."

The fact that it occurred in connection with Larkin Pahl is especially puzzling, many say. He didn't gain his reputation as the dean of debtors' counsel by playing fast and loose with the law. He's done it by the power of persuasion, talking people into seeing that if his client's business...