%1

The Justice Department and a medical whistleblower have tentatively agreed to settle a $256 million civil fraud judgment against a large nursing home chain for $4.5 million, according to court documents filed on Monday in U.S. Bankruptcy Court in Delaware, the Washington Post reported. Entities operating under Consulate Health Care, a chain based in Florida tied to private equity company Formation Capital, filed for chapter 11 protection in March. The sixth-largest nursing home chain in the country with 140 facilities from the Mid-Atlantic to the Gulf Coast, it said that it did not have the resources to pay the large False Claims Act judgment against it. A federal civil jury in 2017, in a decision later upheld by the U.S. Court of Appeals, concluded that nursing homes now owned by Consulate defrauded taxpayers through inflated billings for rehabilitation services for residents. The penalty was the culmination of a whistleblower case brought in 2011 against an earlier owner of Consulate’s nursing homes by Angela Ruckh, a nurse who worked at two of the chain’s nursing homes. In the proposed bankruptcy settlement, the United States will receive $3.375 million and Ruckh will get $1.125 million, according to a copy of the proposed agreement filed in court by Consulate’s lawyers. Consulate’s operations division, headquartered in Maitland, Fla., and two of its nursing homes will be sold to another entity that also is related to Consulate, according to public records and court documents.

Avianca Holdings SA won court approval to send its reorganization plan to creditors for a vote, bringing the Colombian air carrier one step closer to exiting bankruptcy under new ownership, Bloomberg News reported. Lenders and noteholders who agreed to refinance their debt at the beginning of Avianca’s bankruptcy case last year will get 72% of the airline’s equity in exchange for canceling about $934.7 million, according to court papers. U.S. Bankruptcy Judge Martin Glenn said he would approve a disclosure statement that will be sent to creditors in the U.S. and Colombia that they can use to decide whether to support the debt restructuring plan. Under the proposal, the company will eliminate about $3 billion in debt, the company said. Avianca was Latin America’s second-largest airline before the COVID-19 pandemic slowed air travel to a trickle last year, leading it to file for chapter 11 protection in a New York court in May of 2020. Latam Airlines Group SA and Mexico’s Grupo Aeromexico SAB also were forced into bankruptcy as the region suffered one of the world’s sharpest drops in flights.

Purdue Pharma, the bankrupt maker of the OxyContin painkiller, yesterday obtained court approval to pay up to $7.1 million in incentive payments for five top executives if they meet certain goals, despite opposition from U.S. government lawyers, Reuters reported. Bankruptcy Judge Robert Drain in White Plains, N.Y., signed off on the executive incentive plan at the conclusion of a virtual hearing. His ruling comes about two weeks after he said that he will approve Purdue’s reorganization plan, which rests on a $10 billion settlement of opioid-related litigation. The judge said repeatedly during yesterday’s hearing that he does not consider the incentive payments “bonuses” because even if they are paid out in full, the executives would still only fall in the middle of the total compensation range for executives at major pharmaceutical companies. The incentive payments, he said, are essentially part of the executives’ salaries, he added. “No doubt my ruling will be construed by some as authorizing large bonuses to executives. I do not believe that is in fact the case here,” he added. “A bonus is something you get over and above median compensation.” He rejected an argument from the U.S. Department of Justice’s bankruptcy watchdog, the U.S. Trustee, that Purdue failed to show that the 2021 incentive plan is truly incentivizing, rather than a bonus for executives who are simply showing up to work.

A federal judge wants PG&E Corp. to explain why it didn’t turn off power sooner to a utility line suspected of causing the second-largest wildfire in California history, Bloomberg News reported. At a hearing yesterday, U.S. District Judge William Alsup, who oversees PG&E’s criminal probation, questioned a PG&E troubleman who initially discovered that a tree had fallen on the line near the origin of the Dixie Fire. Alsup asked the worker, who the court wants to remain unidentified, why he didn’t consider shutting off power to the line while investigating the cause of the outage that occurred in a high-fire risk area. The troubleman said he initially didn’t see a tree on the line or signs of flames and needed to drive several hours before getting closer to the scene to investigate. When he arrived, he saw a tree leaning into wires and a small fire, which he tried to put out. It took PG&E almost 10 hours to respond to the initial sign of trouble on the early morning of July 13. “Wouldn’t it have been the prudent thing to do to turn that power off in case there was a tree on the line?,” Judge Alsup said during the hearing. Judge Alsup said that it was possible that the tree could have caused a ground fault with electricity flowing through it and eventually igniting it. He directed PG&E to identify the individuals who made the decision to respond to the event and answer his additional questions about the blaze by Friday.

A New York nanotechnology company will liquidate in bankruptcy after federal authorities charged its former chief executive last year with duping investors out of $12.2 million based on a cancer-detection technology that turned out to be bogus, WSJ Pro Bankruptcy reported. Nanobeak Biotech Inc. filed for chapter 7 protection in New York on Friday, listing as its largest asset a $5.2 million claim against former Chief Executive J. Jeremy Barbera. He faces federal charges that he bilked dozens of investors by telling them the company had developed breathalyzer sensor technology for detecting cancer and narcotics in human breath, based on research licensed from the National Aeronautics and Space Administration. In reality, the technology was “wholly fictitious” and was never developed by the company or by NASA, according to the criminal charges pending against him. Mr. Barbera has pleaded not guilty and is scheduled for trial in January. Nanobeak alleged in court papers Friday that Mr. Barbera misappropriated $5.2 million from the company, echoing allegations in the criminal case. Prosecutors in New York allege he embezzled millions of dollars in investor funds to pay personal expenses, including private school and college tuition for his children, the mortgage on his Central Park West apartment, luxury automobiles and other expenses.

Endo International PLC agreed to pay $50 million to settle with New York state and county authorities over the opioid crisis as the drugmaker pursues a broader resolution to its opioid-related liabilities, WSJ Pro Bankruptcy reported. The settlement with New York state, Suffolk County and Nassau County officials removes Endo from a continuing trial over allegations that it and other drugmakers contributed to widespread opioid addiction. Jayne Conroy, lead counsel for Suffolk County, said the settlement with Endo “ensures funding will be made available for critical abatement programs in a more expedited fashion.” Under the settlement terms, Suffolk and Nassau counties will receive $13.85 million each, while $22.3 million will go to the New York state attorney general’s office. Endo still faces nearly 3,000 other legal cases pending against it from states, counties, cities and Native American tribes over opioids, which the company said Thursday it is focused on resolving. The company, which has operations in Malvern, Pa., but is domiciled in Ireland following a 2014 corporate tax inversion, also said it is exploring strategic alternatives and “may seek to implement one or more of those alternatives” if it can’t reach a broad global deal to settle the opioid litigation.

Luxury furniture retailer ABC Carpet & Home on Friday secured court approval to tap part of a $5.7 million loan to fund operations while it is in bankruptcy, Reuters reported. During a virtual hearing, Bankruptcy Judge David S. Jones in Manhattan approved access by the company to $2.25 million of the loan on an interim basis and will consider the remainder later this month. The New York-based company filed for chapter 11 protection with plans to sell its assets on Wednesday with about $8 million in secured debt and another $80 million in unsecured debt. The company blamed the effects of the COVID-19 pandemic for its troubles, including the flight of many prospective customers who left New York. The company is looking to sell its assets by the end of October and has lined up a $15.3 million lead bid from 888 Capital, an entity controlled by Regal Investments. ABC owner Paulette Cole, the great-granddaughter of the company’s founder, holds a minority interest in 888 Capital. 888 Capital is also providing the bankruptcy loan.

The city of Harrisburg, Pa., can continue pressing legal claims that lawyers and bankers misled city officials into backing a $360 million incinerator project that wrecked the state capital’s finances, a Pennsylvania court said, WSJ Pro Bankruptcy reported. The Commonwealth Court of Pennsylvania on Thursday declined to dismiss the city’s lawsuit alleging that a working group of legal and financial advisers provided false information to get Harrisburg’s financial support for the ill-fated waste-to-energy project. Starting in 2003, Harrisburg pledged its taxing power to guarantee municipal debt sold to retrofit the incinerator, the revenue from which was supposed to repay bondholders. When revenue from the incinerator fell short, responsibility for the debt payments fell to Harrisburg, plunging the city of nearly 50,000 into insolvency. Harrisburg avoided defaulting on its general obligation bonds in 2010 only because the state stepped in with aid. State and city officials in 2018 sued underwriter RBC Capital Markets, financial adviser Public Financial Management Inc. and three law firms, alleging they made misrepresentations to get Harrisburg’s signoff. The professionals’ compensation was largely contingent on securing the city’s debt guarantee, which drove them to provide false information and conceal material facts about the project, according to the complaint.

A nearly 3-year-old bankruptcy case filed amid hundreds of child sexual abuse allegations has cost the Archdiocese of Santa Fe, N.M., more than $2.3 million in legal fees alone, the Santa Fe New Mexican reported. Federal court records show the Roman Catholic institution has used the services of at least four law firms with expertise in cases involving clergy sexual abuse and bankruptcy. The archdiocese seeks to reach a settlement with 385 claimants in its December 2018 chapter 11 filing with the U.S. Bankruptcy Court in Albuquerque. This archdiocese and many dioceses across the nation, including the one in Gallup, have claimed bankruptcy in the Catholic Church scandal that began to receive attention in the early 1990s. U.S. Bankruptcy Court records show the Albuquerque firm Walker & Associates this week billed the Archdiocese of Santa Fe $374,999 for work done over 13 months ending in July. Including bills for two previous periods, Walker's billings have totaled about $907,200. Walker & Associates meticulously detailed its phone calls, meetings, projects, time spent and amount billed in a 165-page court document. Depending on which attorney or staffer worked on a matter, the firm's fees ranged from $75 to $295 an hour. The court reviews the charges and has final say on whether they are reasonable.

Limetree Bay Refinery proposed new deadlines for the bidding and sale of its bankrupt oil refining operations on Friday that will be heard, and likely approved, in the Bankruptcy Court of the Southern District of Texas on Wednesday, Sept. 15, StThomasSource.com reported. Under the current schedule, Limetree was to have identified a stalking horse, or low-end bidder, by Friday, and close a sale by Nov. 8. The extension of more than a month allows prospective purchasers additional time to tour the physical plant on St. Croix, Limetree lead bankruptcy counsel Elizabeth Green said. The company reported in August that it had sent almost 20 non-disclosure agreements to possible buyers. While Green couldn’t discuss specifics of who they are, her motion suggests that Limetree, if given more time, could cultivate one who could set a bottom price point for the assets to prevent others from under-bidding the purchase price. As a debtor in possession, Limetree is operating on a short financial leash with a cash loan keeping it afloat until it can realize a sale that would allow its creditors to be paid. It filed for chapter 11 protection in July after a short-lived attempt to revive the circa 1960s St. Croix refinery, previously owned by Hovensa. The company owes over $1.2 billion to secured creditors, according to recent court documents. The proposed new schedule would not require other changes to the DIP order, Green wrote.