Monday, October 24, 2022, 8:48 pm
News Flash Archive
In several court filings last week, bankrupt Express Grain disclosed some errors in its previous filings, and filed corrected or supplemental schedules and an amended disclosure statement with the bankruptcy court.
Last Friday, an amended bankruptcy schedule listing several additional creditors was filed. EG owed U Communications LLC $42,512.00 in unsecured debt, but it was not listed on any of the filings or disclosures up until this point. According to the Secretary of State's website, U Communications is a subsidiary of Upchurch Telecom & Data, Inc. of Greenwood.
As a creditor, U Communications was entitled to notice from the bankruptcy estate that it was allowed to file a creditor's claim. Since that never took place until last week, the creditor now has 30 additional days in which to file a proof of claims. The creditor can also request that the US Trustee reconvene the creditors' meeting so that it can examine the debtor under oath. The creditor also has 60 days in which to file a complaint objecting to the discharge of the debtor.
To view the amended creditors schedule and the notice, see here: Notice to Added Creditors
It is unclear who would be called to be examined for Express Grain if a 341 Creditors Meeting is demanded by the newly discovered creditors.
More intriguing are the other three creditors just given notice: the United States Environmental Protection Agency, its regional office in Atlanta, and the Northern District United States Attorney, who represents the EPA in Mississippi.
EG's oil mill in Greenwood had an EPA operating permit, in part due to its use of hexane, a highly refined petroleum distillate used to extract fats and oils from the soybean mill. Hexane has a boiling point of around 156 ° F.
EG purchased hexane in railroad tank car loads. It owes its supplier around $85,000, which will apparently never be paid.
EG's oil mill had some losses of hexane into the atmosphere that triggered scrutiny last March by the Mississippi Department of Environmental Quality. MDEQ imposed a "restart plan" of repairs that EG must implement before it could begin operating the soybean oil extraction process again.
It is most likely that there is no actual enforcement action contemplated by the EPA against either EG or Thoroughbred, which now owns the oil mill. The new listing of the EPA as a creditor may simply be required as a formality whenever a business holding an EPA operating permit files for bankruptcy.
Additionally, last Monday EG filed an Amended Disclosure Statement, in which it slightly revises its plan to liquidate the company and conclude the bankruptcy.
The US Trustee filed a list of objections, which we reported on previously: US Bankruptcy Trustee files objection to Express Grain's liquidation plan disclosure. Some, but not all, of these objections are addressed in the amended disclosure statement.
In addition, UMB Bank reserved its right to object once the amended disclosure statement was filed, but indicated that it would consult with EG's attorney Craig Geno to try to work its concerns out first.
Apparently, EG was considering suing to claw back some large payments it claimed were made to Dr. Michael Coleman in the year preceding the bankruptcy filing. However, it appears that some of the schedules that EG filed contained erroneous information about those payments. EG now informs the court:
In addition, subsequent to the filing of the original Disclosure Statement, Dr. Michael Coleman's ("Dr. Coleman") counsel has provided information to Debtor's counsel regarding some of the transfers listed in Exhibit "B" that were purportedly made to Dr. Coleman. There are five (5) transactions involved as to which Dr. Coleman contends that he did not receive, directly or indirectly, any of the proceeds of those transfers.
Dr. Coleman further asserts that if these transactions are removed from the Chapter 5 avoidance causes of action, Dr. Coleman loaned more than he received in the approximate sum of $207,910.
It appears that five line items which were either internal transfers from one EG account to another, or payments to vendors, were incorrectly reported as payments to Dr. Coleman:
8/05/2021 $21,804.30 -- Suzhou Lexsong
9/08/2021 $91,950.00 -- Gallant
9/27/2021 $1,500,000.00 -- Xfer to BankPlus Account
9/27/2021 $750,000.00 -- Xfer to BankPlus Account
9/27/2021 $750,000.00 -- Xfer to BankPlus Account
An examination of the bankruptcy schedules listing the transfers to and from Dr. Michael Coleman show that he was making large loans to EG ($1.5 million in October 2020, several $500,000 loans, along with dozens of $100,000 loans) and then being repaid later, apparently to cover shortfalls and cash flow problems for the company. To view these transactions, see starting at page 47 here: Statement of Financial Affairs
Out of the ordinary payments to an insider would normally be subject to claw backs by the bankruptcy estate, but based upon these new revelations, EG states:
The Debtor will evaluate those claims and make a decision as to whether or not further claims or causes of action, arising out of Chapter 5 [claw back provisions] of the Bankruptcy Code, are warranted against Dr. Coleman.
According to EG, the process of pursuing the claw backs against other entities has commenced:
The Debtor has made demands for a select few potential Chapter 5 causes of action, and has received responses from the recipients of those Chapter 5 causes of action as a result of the demands. The Debtor is still evaluating those responses and will make a decision (likely post-confirmation) as to whether those claims or causes of action should be pursued or whether the responses establish conclusive defenses to the Chapter 5 claims and causes of action.
One of the US Trustee's objections centered around the question of what happens if the soon to be appointed EG Liquidating Trustee cannot complete her tasks, and needs to be replaced. EG added a mechanism for her replacement if it becomes necessary:
Replacement of the Liquidating Trustee
In the event the named and Court approved Liquidating Trustee is unable to complete the term of the Liquidating Trust, for whatever reason, Dennis Gerrard, CRO, shall suggest a replacement liquidating trustee. The Liquidating Trust will file a motion with the Court for authority to replace the initial Liquidating Trustee with a subsequent liquidating trustee suggested by Mr. Gerrard. In the event subsequent liquidating trustees are unable, for whatever reason, to complete the term of the Liquidating Trustee, Mr. Gerrard shall name a replacement, and the same procedure to approve the replacement liquidating trustee will follow. In the event Mr. Gerrard is unable, for whatever reason, to name replacement liquidating trustees, James Baring ("Mr. Baring") with CR3 will serve to name the replacement liquidating trustee.
In the original disclosure statement, EG gave notice to several hundred farmers and other entities that did business with EG that they would be subject to claw backs of money they received in the run-up to the bankruptcy filing of September 29, 2021. The language used by EG was quite fierce, even though the 557 Grain Settlement was supposed to release most of the farmers from any such claims by EG. See our previous reporting here: Beware the claw backs: Express Grain threatens to sue its own creditors and other companies that did business with it
In the Amended Disclosure Statement, EG tries to make it clear that all the farmers who either Consented or Disclaimed in the 557 Grain Settlement will not be sued or subject to any claw back claims:
As previously noted, the 557 Settlement Order (and underlying agreements) settled and compromised substantially all of the claims that farmers had asserted against the Debtor as a result of the Debtor's failure to pay all of the farmers who sold corn and soybeans to the Debtor in the fall of 2021.
Included in the Settlement Order/agreements are agreements that the Debtor has released Chapter 5 causes of action [i.e., claw backs] against those farmers who elected treatment under or within "Group 1" [Settling a/k/a Consenting farmers] and "Group 2" [Disclaiming farmers].
Accordingly, even though some of those farmers are listed in Exhibit "B" as recipients of potential Chapter 5 avoidance causes of action, the release provisions of the 557 Settlement Order and settlement agreements have released all the Debtor's claims, if any, arising out of Chapter 5 of the Bankruptcy Code against farmers electing treatment under Group 1 and Group 2.
Moreover, farmers electing treatment within Group 1 or Group 2 are also released from any other claims the Debtor may have against them, such as claims arising out of motions to assume executory contracts that those farmers may have been a party to at the time the bankruptcy petition was filed. As a result, the Court has entered numerous orders withdrawing many of those motions to assume executory contracts for the sale of commodities because those claims have been released.
To read the Amended Disclosure Statement, see here: Amended Disclosure Statement
A hearing was originally set for December 8th to consider the Amended Disclosure Statement, but it has now been rescheduled for December 20th due to a scheduling conflict.
Finally, the court approved the hiring of "special counsel" to apply for Employee Retention Tax Credits from the Internal Revenue Service. The federal government is giving substantial tax credits for those businesses who retained their employees during the COVID-19 pandemic. These are in addition to the PPP Loans that EG obtained from the SBA. The "outside counsel" will be paid a contingency fee of 20% of any tax credits they are able to obtain for EG. To view the court's order, see here: Agreed Order Authorizing the Hiring of ERTC Counsel
To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles
John Pittman Hey
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