%1

A man who was charged in federal court last month after allegedly lying to obtain a $60,000 Paycheck Protection Program loan is preparing to open a taco restaurant in Maine, the Bangor Daily News reported. Nathan Reardon registered the Taco Shack LLC name with the Maine secretary of state’s office on March 3, about five weeks before he was charged in U.S. District Court in Bangor with bank fraud and attempted wire fraud in a national emergency on April 8. A week later, on April 15, Reardon filed for chapter 13 bankruptcy in U.S. District Court in Maine, listing more than $280,000 in claims from more than 100 creditors. Many of them are owed wages from Reardon’s business ventures, but they also include the federal government and the states of Maine and Florida, which are owed more than $36,000 in taxes, according to Reardon’s 129-page bankruptcy filing. Reardon, who owns multiple businesses in both Maine and Florida, allegedly lied about his business’ payroll to get a $60,000 loan from the Paycheck Protection Program, and attempted to obtain additional federal funds fraudulently, in April and May of 2020. Reardon allegedly used the PPP money to pay his lawyer and a local veterinarian, make donations to a Florida church and shop online. His purchases included a men’s 14-carat yellow gold wedding band, clothing, shaving products, toys, an LED barber pole light and a pair of caiman skin cowboy boots, a federal agent’s court affidavit said. Reardon also allegedly withdrew more than $10,000 of the loan in cash. In addition, he tried to get an Economic Injury Disaster Loan from the Small Business Administration using the same false information about his business expenses, according to the affidavit filed in federal court in April.

The three largest U.S. drug distributors, who are accused of helping fuel the opioid crisis that has resulted in nearly 500,000 overdose deaths in the U.S., will defend themselves in a trial that kicks off today, Reuters reported. The trial against AmerisourceBergen Corp., McKesson Corp. and Cardinal Health Inc. in Charleston, West Virginia, involves a lawsuit seeking more than $1 billion brought by the city of Huntington and Cabell County. They claim that the companies ignored red flags that opioids were being diverted to illegal channels, flooding the state with hundreds of millions of highly addictive pills. The distributors have denied the claims, arguing they cannot be liable for distributing pills that were prescribed by doctors. Huntington and Cabell, along with other West Virginia towns and counties, opted out of a proposed $26 billion nationwide settlement with the three distributors and drugmaker Johnson & Johnson. A verdict in the trial could help lay the groundwork for settlements in the sprawling nationwide litigation over the opioid crisis, which encompasses more than 3,300 lawsuits by local governments around the country against opioid manufacturers, distributors and pharmacies. Read more. 

In related news, the Sackler family who own Purdue Pharma, the maker of Oxycontin, have for months tried to portray their bid for immunity from future opioid lawsuits as a kind of fait accompli, a take-it-or-leave it fix to a legal morass. In exchange for what amounts to a legal firewall for the Sacklers and their remaining empire, members of the family have offered to forfeit control of their bankrupt drug company and pay $4.2 billion from their private fortunes. Judge Robert Drain who is presiding over the case in White Plains, N.Y., has suggested such a deal may be desirable and achievable along these broad lines. A negotiated settlement could preempt years of costly litigation — the Sacklers deny any wrongdoing — and might accelerate financial aid to communities struggling to recover from an opioid epidemic that has already cost more than 450,000 lives. But a growing group of public officials and activists are mounting a last-ditch effort to derail the plan, describing it in legal briefs as an unethical, and possibly unlawful, use of the bankruptcy court's power, NPR reported. Late last week, 25 state attorneys general filed a new brief describing the proposed settlement as "unprecedented," "unjust" and "unconfirmable as a matter of law." "The bankruptcy system should not be allowed to shield non-bankrupt billionaires," said Massachusetts Attorney General Maura Healey. "It would set a terrible precedent. If the Sacklers are allowed to use bankruptcy to escape the consequences of their actions, it would be a roadmap for other powerful bad actors." State AGs aren't alone in objecting to the deal. In recent weeks, attorneys representing local and state governments, native tribes and opioid activists filed briefs raising legal and ethical concerns about the plan. A division of the Justice Department that oversees bankruptcy cases also filed a brief questioning whether the bankruptcy court has the "authority and jurisdiction" to approve such a plan. Read more. 

Texans left in the dark during February’s winter storm blackout now risk being frozen out from claiming damages from Brazos Electric Power Cooperative Inc. and Griddy Energy LLC as the bankrupt power companies rush to shield themselves against potential claims for property damage and wrongful death, WSJ Pro Bankruptcy reported. The Houston judge overseeing Brazos’s bankruptcy proceedings said Thursday the cooperative only needs to place notices in newspapers and a magazine to alert Texans about the requirement that they file claims to seek compensation over the deadly February storm. Under the judge’s ruling, those published notices about the Brazos chapter 11 case are enough to alert potential claimants that their rights are at risk and failure to respond by the August deadline would strip them of their chance to collect damages from Brazos. Among the claimants in the Brazos bankruptcy is Larry Ford, son of Elzie D. Ford, a 68-year-old man who was found frostbitten and unresponsive in his home five days after losing power and heat in below-freezing temperatures, according to court papers filed by the younger Mr. Ford. He died in a Waco, Texas, hospital on Feb. 20. Mr. Ford filed a claim against Brazos and sued others including HILCO Electric Cooperative Inc., one of the member cooperatives that collectively own Brazos, alleging negligence when the power was cut to his father’s house. The Texas Department of State Health Services is still tallying the fatalities but has identified 151 deaths related to Winter Storm Uri as of Wednesday. Some Texans are continuing to repair homes damaged by burst pipes. “They shouldn’t wake up and find out” their legal rights against Brazos were washed away just months into its bankruptcy, said Thomas Mayer, lead lawyer for the unsecured creditors committee, during a hearing on Thursday in the U.S. Bankruptcy Court in Houston. The committee wanted a broader noticing program to reach out to potential claimants, saying that Brazos could easily alert its 1.5 million customers directly by text messages, emails and direct mailing of the deadline to file claims. Brazos said the customer lists belong to its member cooperatives, which have refused to hand over the information. Mr. Mayer said customers who try to sue member cooperatives for personal injury or property damage will be met with the argument that any negligence was Brazos’s fault. By that time, the deadline to file claims against Brazos may have passed.

As Frontier Communications emerged from chapter 11 bankruptcy on Friday, officials with the Norwalk-based telecommunication company made it clear they expect high-speed internet service — delivered by fiber optic cable — to deliver them from the financial wilderness, the New Haven (Conn.) Register reported. “The focus is on fiber,” said John Stratton, the incoming executive chairman of the board for Frontier, which saw its executive team undergo a dramatic reorganization during the full year it was under chapter 11 bankruptcy protection. “The goal is to replace our existing copper network with fiber.” Stratton and other Frontier executives explained the company’s strategy during a call with financial analysts reporting on its first quarter earnings. The company had earnings of $60 million in the three-month period that ended March 31 — a dramatic reversal from the same period in 2020, when the company lost $186 million.

More than 700 properties or land parcels tied to the Roman Catholic Church of the Archdiocese of Santa Fe are expected to be up for auction in July as part of an ongoing bankruptcy case, Albuquerque Business First reported. The sales are necessary because of a December 2018, chapter 11 reorganization bankruptcy stemming from child sexual abuse claims filed against the Archdiocese. The claims led to nearly 300 settlements, according to the Albuquerque Journal. The list of 732 properties likely won't be all sold individually. Most are parcels of vacant land scattered across 20 New Mexico counties. The properties include five acres of vacant, non-residential land in the Paradise Hills subdivision on Albuquerque's Westside. Several parcels of land are available as well in Sandoval County throughout the Rio Rancho Estates subdivision.

A National Rifle Association board member said Wednesday that appointing a receiver to take charge of the organization — a tactic the NRA worried New York authorities would pursue before it filed bankruptcy — would spell the end of the 150-year-old gun rights group, the Wall Street Journal reported. “It would be disastrous,” board member retired Lt. Col. Willes Lee testified during the third week of trial over the organization’s January bankruptcy filing and allegations of spending abuses by management brought by New York Attorney General Letitia James. The NRA has said that it filed bankruptcy to prevent New York from putting the group into receivership. Ms. James sued to dissolve the NRA in August and is now seeking to either have the chapter 11 case thrown out or to bring in an independent trustee to take charge of the NRA in bankruptcy. Lt. Col. Lee’s testimony kicked-off the NRA’s defense of chief executive Wayne LaPierre and his decision to file the chapter 11 in January. Lt. Col. Lee and fellow board member Tom King on Wednesday praised Mr. LaPierre’s character and his leadership. The NRA has argued Mr. LaPierre is critical to the group’s survival. The NRA is seeking to keep control of its chapter 11 case so it can propose a reorganization plan and defeat a bid by New York authorities and its former ad agency Ackerman McQueen Inc. to wrest control of the bankruptcy from NRA management via a trustee. The NRA board will consider approving a reorganization plan at a meeting scheduled for May 1, Mr. Lee said. The group has been a New York registered not-for profit since 1871.

A Canadian renewable energy firm yesterday sued Citigroup Inc. for rejecting force majeure declarations during a February winter storm and billing it over $100 million for replacement power, according to lawsuits filed in a Texas state court, Reuters reported. Shannon Wind and Flat Top Wind, subsidiaries of Innergex Renewable Energy Inc., operate North Texas wind farms that halted their wind turbines during an arctic deep freeze. Both had agreements to physically deliver power to Citi Energy, a unit of Citigroup Inc., at fixed prices. Unusually frigid temperatures knocked out nearly half of the state’s power plants in mid-February, leaving 4.5 million people without heat or light for days and bankrupting at least three companies due to high wholesale power prices. The wind firms, partly owned by Starwood Energy Group Global and a fund run by BlackRock Inc, respectively, declared force majeure after their turbines froze. But, their lawsuits in a Texas court claimed Citi ignored the declarations and invoiced them for electricity it bought at inflated prices.

Hertz Global Holdings Inc. agreed to provide some value to equity holders when it leaves chapter 11, vindicating the individual traders who have insisted the company is worth something despite its bankruptcy filing. Hertz yesterday proposed in a chapter 11 exit plan that current stockholders receive warrants to purchase up to 4% of the restructured business, the first time the company has said it is worth enough to distribute some value to its owners, WSJ Pro Bankruptcy reported. The shareholder distribution would amount to a recovery of 60 to 70 cents per share, a “material return to equity,” Hertz lawyer Thomas Lauria said yesterday during a court hearing. If approved by the U.S. Bankruptcy Court in Wilmington, Del., that outcome would make Hertz a relative rarity in corporate bankruptcies, in which equity ranks behind debt and most often is wiped out. Hertz shares closed at $1.74 on Wednesday, down 8.4% on the day but up 36% year to date.

The New Hampshire attorney general's office will allow Concord (N.H.) Hospital to acquire LRGHealthcare, a two-hospital system in Laconia, N.H., out of bankruptcy, according to an April 20 announcement, Becker's Hospital Review reported. LRGHealthcare filed for chapter 11 protection in October 2020. The bankruptcy was necessary to relieve the health system's debt load of more than $100 million, LRGHealthcare's CEO Kevin Donovan said. He added that filing for bankruptcy was necessary after it became clear its debt would be an impediment to any deal. Concord Hospital had made a $30 million bid to purchase LRGHealthcare's assets out of bankruptcy in December 2020. LRGHealthcare's assets include Lakes Region General Hospital in Laconia, Franklin (N.H) Regional Hospital and a network of ambulatory care networks. The consent of the attorney general's office included some requirements for the deal to move forward, including protections against anticompetitive practices, unfair price hikes and disruptions to clinician referral patterns or contracts. The deal is expected to save the two hospitals as Kevin Donovan, the CEO of LRGHealthcare, warned in February that the facilities could close within two months if the deal fell through.