%1

Defunct coal company Blackjewel LLC, which left hundreds out-of-work when the business collapsed last year, has filed a lawsuit accusing its founder and former chief executive of using his position to enrich himself and his family members at the company’s expense, WSJ Pro Bankruptcy reported. Jeff Hoops Sr., who resigned as CEO days after the coal producer filed chapter 11 last July, signed deals with other companies he or his family controlled that extracted millions of dollars from Blackjewel in the years leading up to the bankruptcy, according to a lawsuit filed Thursday in the U.S. Bankruptcy Court in the Southern District of W.Va., by lawyers who are liquidating the company. The lawsuit seeks to recover money from Hoops and his other businesses for what Blackjewel said were transactions that placed his financial interests above the company he founded and led until its failure. Blackjewel’s investigation of Hoops is one of the open-issues remaining in the company’s bankruptcy, which attracted national attention and scrutiny from the U.S. Labor Department after laid-off workers in Cumberland, Ky., spent weeks blocking a shipment of coal in protest of not receiving their final paychecks. Ultimately, the business receiving the coal shipment agreed to pay more than $5 million to cover the workers’ back pay.

Sable Permian Resources LLC has ended the threat of clawback attempts by junior creditors irked about the $16 million in executive bonuses the Texas fracker handed out to top executives months before it went bankrupt, WSJ Pro Bankruptcy reported. Sable Permian has reached a settlement with the junior creditors who had accused the company of timing its bonuses “with the express purpose” of evading bankruptcy-court supervision, according to documents filed with the bankruptcy court on Wednesday. In exchange for dropping the threat of litigation over the bonuses, and agreeing to back the restructuring and grant broad legal immunity, junior creditors will share $11 million in cash and warrants that entitle them to buy up to 10 percent of the equity of the reorganized fracker, provided the company is profitable once it emerges from bankruptcy. To dodge legal restrictions on bonus pay during bankruptcy, many troubled companies during the COVID-19 pandemic have paid tens of millions of dollars to corporate leaders just before filing for court protection, including retention bonuses that are severely restricted in the bankruptcy code. Sable Permian was one of those companies, handing out compensation to 18 corporate insiders before it filed for bankruptcy in June.

A new lawsuit against the Small Business Administration is targeting the questionnaire that the agency sent to borrowers that took $2 million or more in paycheck protection loans, the National Law Journal reported. The questionnaire, and the subsequent lawsuit, may have large implications for the 613 law firms across the country that borrowed $2 million or more, including 11 law firms that took the maximum $10 million. Questions over whether those loans will be forgiven loom over firm finances. The loan necessity questionnaire, the existence of which appeared on the federal register in October, asks the roughly 29,000 borrowers in all to describe their revenue and liquidity during the pandemic in order to justify forgiveness for their loan. The Associated General Contractors of America, which filed the suit on Tuesday against the SBA and the U.S. Office of Management and Budget, claim that the questionnaire contradicts the original guidance of the SBA, which was to certify that economic uncertainty at the time of the loan application justified the need for the loan.

Victims of Bernard Madoff’s $20 billion Ponzi scheme are set to start 2021 with checks totaling more than $190 million, the latest installment in loss-compensation payments from the trustee who’s been liquidating the con man’s business for more than a decade, Bloomberg News reported. The 12th distribution in the long-running case includes more than $74 million in settlements and courtroom recoveries since the last payout in February, trustee Irving Picard said yesterday. The payouts associated with 813 accounts will average $234,631 each and will boost total victim recoveries to 69.6 percent of approved claims, the trustee said. “With our next expected distribution, we will have returned to customers almost 70 percent of the money stolen by Bernard Madoff, much more than anyone ever predicted,” Picard said. Since Madoff’s New York-based firm collapsed in December 2008, the trustee has been reimbursing victims by suing investors who made money off the fraud by withdrawing more cash from their accounts than they put in. After the next payout, the total amount returned to victims will rise to $14.1 billion, he said. A hearing on the plan is set for Jan. 20 in U.S. Bankruptcy Court in Manhattan.

Junior creditors of Senior Care Centers LLC are suing the former controlling shareholder and a major landlord of the skilled nursing facilities operator for more than $100 million, saying that the business fell into bankruptcy after its assets were plundered, WSJ Pro Bankruptcy reported. Alan Halperin, a trustee for unsecured creditors in the chapter 11 case, on Thursday filed a complaint against Granite Investment Group and related affiliates, alleging they extracted tens of millions of dollars at the expense of other creditors. Those “self-dealing transactions,” Halperin said, included charging above-market-rate leases of skilled nursing facilities. Dallas-based Senior Care filed for bankruptcy in December 2018, partly blaming ballooning rents and saying it needed to address “burdensome debt levels and expensive leases” at skilled nursing and assisted- and independent-living facilities. Bankruptcy law gives struggling businesses more power to get out of or renegotiate leases. The company entered bankruptcy with about 110 facilities that served more than 9,000 patients.

Less than six months after the Diocese of St. Cloud, Minn., filed its chapter 11 bankruptcy petition, a bankruptcy court has approved a plan for reorganization jointly submitted by the diocese and the creditors’ committee of clergy abuse survivors, Catholic News Service reported. This reorganization plan, approved on Dec. 3, “represents the culmination of several years of respectful negotiations among all the parties involved,” St. Cloud Bishop Donald J. Kettler said in a statement. The plan provides for a $22.5 million trust to compensate survivors of clergy sexual abuse. The funds will be made up of insurance coverage settlements, $14 million; property sales, including the St. Cloud Children’s Home, $5.25 million; and contributions from parishes and a line of credit, $3.25 million. The plan also includes non-monetary protocols for the protection of children. The Diocese of St. Cloud filed a voluntary petition June 15 for relief under chapter 11 of the bankruptcy code after the diocese and abuse survivors reached agreement in May on a framework for a resolution of all clergy sexual abuse claims against the diocese and area parishes.

The century-old, shuttered St. Patrick’s Catholic Church in downtown Raton, N.M. is up for sale. And what a “great value,” a real estate listing touts, with an asking price of $199,500. A dispute over St. Patrick’s and hundreds of other church properties is at the crux of three new lawsuits pending as the archdiocese’s chapter 11 bankruptcy reorganization enters its third year without a settlement, the Albuquerque Journal reported. The lawsuits allege that more than an estimated $245 million in property owned by the archdiocese was fraudulently transferred to its parishes or their trusts and should be available to help pay claims filed by nearly 380 victims of clergy sexual abuse. Lawyers for the archdiocese and its 94 parishes deny any fraud and argue in one court filing that the litigation is intended to strip parishes of assets that have “always been beneficially or legally owned by the Parishes.” A hearing set for today could decide whether the lawsuits, filed by attorneys for the victims, should be halted pending an appeal to the 10th Circuit Court of Appeals. One of the victims’ lawsuits lists the St. Patrick’s parcel in Raton as among more than 400 properties purportedly held by the archdiocese for the “beneficial interest” of its parishes. But the lawsuit says that the parishes’ interests weren’t recorded in title or county real estate records and that the $59 million worth of property should be part of the archdiocese bankruptcy estate. Lawyers for the parishes say the properties are held in trust “under canon law.”

McKinsey & Co. agreed to forgo roughly $8 million in fees from advising a bankrupt Colorado coal miner after reaching a settlement with Justice Department watchdogs over concerns about the firm’s disclosure of possible conflicts of interest, WSJ Pro Bankruptcy reported. Under the deal announced yesterday, McKinsey agreed to withdraw an application to work as an adviser to Westmoreland Coal Co. on its 2018 bankruptcy filing. McKinsey also agreed to broaden the scope of disclosures made in future bankruptcy cases, including the names of confidential clients. In return, the Justice Department agreed to drop an objection it filed in the Westmoreland case alleging that McKinsey’s disclosures were at odds with the law. “This settlement ensures that McKinsey is held accountable for its conduct in this case,” said Cliff White, director of the U.S. Trustee Program. The deal won’t become final unless it wins approval from Judge David Jones of the U.S. Bankruptcy Court in Houston, who has been overseeing the Westmoreland case and long-running litigation related to McKinsey’s disclosure practices. The settlement was reached with the help of Judge Marvin Isgur, another Houston-based bankruptcy judge, who served as a mediator between McKinsey and the Justice Department. McKinsey didn’t admit wrongdoing as part of the settlement. It isn’t clear how the settlement will affect ongoing litigation against McKinsey in the Westmoreland case brought by Jay Alix, the retired founder of rival corporate turnaround firm AlixPartners LLP. A trial on Alix’s claims that McKinsey flouted disclosure laws was set to resume next month after being halted over the coronavirus pandemic. Alix, whose claims aren’t covered by the Justice Department settlement, has targeted McKinsey over its roles in a number of large bankruptcy cases, especially in how it disclosed information about the billions of dollars it invests on behalf of current and former employees. In addition to the fees McKinsey agreed to walk away from in the Westmoreland case, court papers show the firm has paid some $32.5 million in settlements related to its past bankruptcy disclosure practices, including a separate $15 million settlement in 2019 with the U.S. Trustee. McKinsey also didn’t admit any wrongdoing under that agreement.

The Roman Catholic Diocese of Rockville Centre, N.Y., is trying to shut the gates on sexual abuse claims too soon, lawyers for the diocese’s creditors say, WSJ Pro Bankruptcy reported. The Long Island diocese, which filed for bankruptcy in October to halt hundreds of lawsuits from victims of alleged sexual abuse by clergy, recently asked to set a Feb. 17, 2021, deadline for victims to assert claims. Lawyers for Rockville Centre’s unsecured creditors committee argued in court papers filed on Monday that the deadline ought to be Aug. 14, 2021, the same date set by New York state law. Last year, the state passed the Child Victims Act, opening a one-year window during which people who say they were abused as children can sue perpetrators, no matter how long ago the alleged abuse occurred. The one-year window was set to expire this summer, but Gov. Andrew Cuomo extended the period to Aug. 14, 2021, because of the COVID-19 pandemic. The new deadline grew out of a tough fight in the legislature that pitted Catholic dioceses and organizations such as the Boy Scouts of America against advocates who pointed to studies that indicate victims of child sexual abuse commonly take decades to come forward.