NJOY Inc., one of the nation’s largest electronic cigarette makers, filed for bankruptcy in Delaware on Sept. 16, owing close to $4 million in unpaid legal fees to several big firms, including DLA Piper and Goodwin Procter, the National Law Journal reported yesterday. The Scottsdale, Ariz.-based company seeks to remain in business while selling off assets is a leading manufacturer and distributor of e-cigarettes and other vaping products. Jeffrey Weiss, NJOY’s general counsel and interim president, said in a declaration of his own that the company’s bankruptcy was attributed to several issues. Among them were the market failure of NJOY’s King 2.0 disposable e-cigarette in 2013 and its unsuccessful attempt at a rebranding in 2014. Another contributing factor to NJOY’s chapter 11 filing was the substantial costs incurred by the company this year in order to comply with a series of regulations announced by the U.S. Food and Drug Administration in May controlling the registration and distribution of e-cigarettes, according to Weiss’ declaration.
BlackRock Inc. has joined a list of potential buyers for TerraForm Power Inc., a holding company founded and controlled by bankrupt wind-and-solar energy giant SunEdison Inc., Bloomberg News reported yesterday. Funds of the New York-based firm are assessing the value of TerraForm Power’s assets to prepare for a bid. TerraForm Power, along with sister company TerraForm Global Inc., own wind and solar assets, some of which are operated by SunEdison. Both said earlier this week that they seek to sell their entire businesses, or operate independently. The two yieldcos are not in bankruptcy, and SunEdison owns a controlling stake in TerraForm Power through Class B shares. SunEdison, which has been selling off assets in chapter 11, said earlier in September that it had reached an agreement with TerraForm Power and TerraForm Global over when and how they would bring claims as part of the bankruptcy.
The net keeps getter wider as the trustee overseeing the bankruptcy liquidation of Health Diagnostic Laboratory Inc. sues the company’s insiders and top executives along with a wide range of other players, VirginiaBusiness.com reported yesterday. In a 205-page lawsuit filed on Friday by trustee Richard Arrowsmith in federal bankruptcy court in Richmond, Arrowsmith says that he is seeking to recover losses to unsecured creditors that are estimated at more than $600 million. The lawsuit alleges 76 counts against 105 defendants — from HDL’s top officers, shareholders and directors on down to third-party sales contractors and others who benefitted from what the suit describes as “fraudulent business practices.” Heading the list are HDL co-founders Tonya Mallory, Joseph McConnell and Russell Warnick along with Robert Bradford Johnson and Floyd Calhoun Dent III, the executives at BlueWave Healthcare Consultants, HDL’s former sales contractor. Among the 76 counts against the various defendants are allegations of fraud, breach of fiduciary duty, conspiracy, corporate waste and unjust enrichment. Read more.
For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case.
Though there aren’t exact figures of how many GI Bill beneficiaries were affected by the closure of ITT Technical Institutes, the Student Veterans of America, a student veteran advocacy organization, estimates that 12,500 students were using the benefits at the school last year, MarketWatch.com reported yesterday. As the company winds down — ITT filed for bankruptcy last week — and officials deal with the political fallout of the school’s closure, some of our nation’s heroes are struggling to cope. The effect of the school’s shutdown on veterans is likely of historic proportions, said Derek Fronabarger, the director of policy at Student Veterans of America. Fronabarger said his organization is receiving about 15 to 25 calls a day from veterans asking for help. At its peak last week, the number of daily calls was closer to 40, he said. Federal student loan borrowers who attended ITT at the time it closed can have their loans forgiven as long as they don’t complete their programs elsewhere. But veterans who spent some of their GI Bill eligibility, which only lasts 36 months, at ITT can’t get that money back. “If that individual took out student loans and used up their GI Bill to attend ITT Technical Institute, they are now left with no degree, little or no GI Bill left and massive student loans,” Fronabarger said. Some politicians are hoping to change that. Sen. Richard Blumenthal (D-Conn.) first introduced a bill that would allow veterans to have their GI Bill eligibility restored in the event their school closed, shortly after the collapse of Corinthian Colleges, another major for-profit chain.
Caesars Entertainment Corp. will now contribute more than $5 billion to its operating unit’s restructuring in its final settlement offer to disgruntled bondholders, the Wall Street Journal reported today. David Seligman, a lawyer for the bankrupt Caesars Entertainment Operating Co., or CEOC, unit, said in bankruptcy court that a prior pledge of about $4 billion has increased by about $1.2 billion, which he called the “best and final proposal” in long-running negotiations with CEOC creditors and Caesars. The increased value includes setting additional Caesars equity aside for CEOC’s creditors, the result of current Caesars backers Apollo Global Management and TPG agreeing to surrender their equity, valued at more than $950 million, in the company. Another $100 million will come from directors’ and officers’ insurance policies, Seligman said.
The Diocese of Stockton, Calif., yesterday announced a plan that could result in its exit out of bankruptcy more than two years after legal costs stemming from dozens of child sexual-abuse lawsuits depleted its funds, the Stockton Record reported today. Bishop Stephen E. Blaire said that the diocese, which filed for bankruptcy in January 2014, negotiated with all the parties involved to reach a consensual plan, which includes:
- $15 million to survivors of sexual abuse and a trust for the benefit of survivors.
- Payment of at least 50 percent of what is owed to unsecured creditors.
- Restructuring of unsecured loans.
Funding from the plan will come from the Diocese of Stockton, settling insurance carriers and other entities associated with the diocese. The $15 million settlement agreed upon by the diocese, the plaintiffs' attorneys and insurance companies is to “provide for the healing of the survivors,” Blaire said. The diocese is responsible for $9.89 million of the total amount.
WakeMed Health and Hospitals will soon notify thousands of patients that their personal and medical information was disclosed in court filings over six years, the Charlotte (N.C.) News & Observer reported today. A federal bankruptcy court in Raleigh ordered the Raleigh hospital to send out the letters and to offer each patient one year of free credit monitoring. The court last month fined WakeMed $70,000 for disclosing Social Security numbers, birth dates and the full name of at least one minor in claims it had filed in federal bankruptcy courts to collect unpaid medical bills. WakeMed had disclosed the identifying patient information from 2007 to 2015. There is no evidence that anyone discovered the personal information in bankruptcy court dockets and used it to commit identity theft or some other abuse. However, U.S. Bankruptcy Judge Stephani Humrickhouse wrote in a court ruling that an organization like WakeMed that regularly participates in bankruptcy proceedings should have been a lot more careful.
NextEra Energy Inc. has boosted its offer for Energy Future Holdings Corp.’s Oncor electricity transmission business by $300 million, quieting creditor worries about the sale that will be the key to getting the Dallas company out of bankruptcy, the Wall Street Journal reported today. Over the weekend, NextEra agreed to increase the cash component of its deal to $4.4 billion from $4.1 billion. Additionally, NextEra is making other changes to the proposed Oncor buyout that will allow Energy Future creditors to receive $450 million more from the sale of the crown jewel business than previously planned. The changes were made in a 48-hour flurry of activity, Energy Future lawyer Chad Husnick told Judge Christopher Sontchi at a hearing Monday in the U.S. Bankruptcy Court in Wilmington, Del., to approve the deal. Judge Sontchi authorized Energy Future to move ahead on the NextEra deal after lawyers lined up to speak in favor of it.
