Thursday, December 11, 2008

Going After Airola, Pickett and Trenk

James Lisowski, the Chapter 7 Trustee in the Silver State Helicopters bankruptcy case, has filed an Application for an Order Approving Employment of Fennemore Craig, PC as Special Litigation Counsel to the Trustee. The Trustee's Application states that he "requires representation for the following services: Special Litigation Counsel to assist the Trustee in investigating and analyzing objections to claims, potential claims, and causes of action by Debtors against Jerry M. Airola ("Airola"), Steven Pickett ("Pickett"), Steven L. Trenk ("Trenk"), their family members and any companies in which Airola, Picket or Trenk are officers, directors, members, partners, or shareholders, and to prosecute those objections to claims, potential claims and causes of action, including the initiation and conduct of discovery and the filing of claims objections, adversary proceedings and other litigation as appropriate." I support this action by the Trustee. The hearing on the Trustee's Application to Employ Special Litigation Counsel is set for December 17, 2008 at 2:30 pm.

Wednesday, November 12, 2008

Notice of Filing Official Transcript

Many of my clients have contacted me regarding a notice that they received from the Bankruptcy Court in the SSH case. This notice is entitled "Notice of Filing Official Transcript" and is dated November 4, 2008. No action is required by any of my clients with regards to this notice. I used my CM/ECF and PACER logins to read the entire 61 page transcript to see if it contains any personal information for any of my clients that should be redacted. The transcript does not contain any such personal information. The transcript is entitled "TRANSCRIPT OF PROCEEDINGS OF STATUS HEARING RE: TRUSTEE'S MOTION TO SELL REAL PROPERTY IN PROVO, UTAH, NO. 1135 AND ORDER SHORTENING TIME RE: TRUSTEE'S MOTION FOR PROTECTIVE ORDER REGARDING SUBPOENA AND MOTION TO QUASH SUBPOENA ON ORDER SHORTENING TIME, NO. 1142 VOLUME 1 16 BEFORE THE HONORABLE MIKE K. NAKAGAWA UNITED STATES BANKRUPTCY JUDGE." The transcript is for a Court hearing that took place on October 22, 2008. The Trustee in the SSH bankruptcy case James Lisowski appeared, as did his counsel, counsel for the Student Loan Corporation ("SLC"), Counsel for Orix Finance Corporation, and counsel for Jerry Airola. At the hearing, the parties and the Court discussed the Trustee's request for a protective order and The Student Loan Corporation's objection to a Proof of Claim filed by Jerry Airola. Counsel for the Trustee spoke of the time, difficulty and expense in locating specific documents requested by SLC. He spoke about how the documents sought by SLC were consolidated from 35 different locations and now housed in 5 different storage facilities, intermixed with confidential student records. SLC's counsel spoke of SLC's interest not only in objecting to Airola's Proof of Claim, but possibly also in filing an Adversary Proceeding against Airola and other individuals. She referred to allegations that SSH never had the ability to provide the services that it was advertising and stated that SLC may have Nevada Deceptive Trade Practices Act claims and racketeering claims. Judge Nakagawa granted a protective order for 90 days, and set a continued status conference on the matter for January 21, 2009.

Monday, November 10, 2008

Citibank Surrenders!

On November 5, 2008, Citibank began offering 100% loan forgiveness of Citibank SSH student loans in exchange for an assignment of the student's claims against SSH and against Citibank. We highly recommend that all of our clients with Citibank loans accept this offer. 100% Loan forgiveness has always been our highest goal for each and every one of our SSH clients. It is a complete victory for each and every one of our Citibank clients. It sets the bar high for KeyBank and Student Loan Xpress, the 2 other banks that wrote the majority of the SSH student loans.

The Citbank offer is being extended to all former SSH students with Citibank loans in every state except for California. I am working with counsel for Citibank to have this offer also extended to all my California Citibank clients who specifically request it. The Citibank offer is not yet generally available to California Citibank clients, apparently due to the pendency of a class action lawsuit.

Here is a complete copy of the November 5, 2008 Citibank letter that has already been received by several of our Citibank clients:

"Re: Master Student Loan Promissory Note between you and Citibank, N.A.

Our records reflect that Citibank, N.A. and the Student Loan Corporation (collectively "Citibank") made the above-referenced loan to you for flight training and education at Silver State Helicopter School ("the Student Loan"). As you may know, Silver State filed bankruptcy in Bankruptcy Court in Nevada and ceased operations earelier this year.

Cibank sent funds to Silver State for your flight training tuition. While you remain obligated to repay these amounts to Citibank under the promissory note you signed, Citibank will agree not to seek collection of those amounts from you on the terms set forth below.

Specifically, if you assign to Citibank any and all claims you may have with respect to your Silver State loan, whether against Silver State, Citibank, or there present and former officers, directors, and employees, Citibank will not seek to collect these amounts from you. This assignment will enable Citibank to pursue a claim in the bankruptcy court for return of the money it advanced on your behalf.

If you do not sign and return the letter to us, we will assume that you have not agreed to assign your claims to Citibank, and you may keep and pursue any claims against Silver State in the bankruptcy court and make arrangements with Citibank for a repayment plan.

If you agree to assign your claims to Citibank in exchange for Citibank's agreement not to pursue any amounts from you related to your Silver State loan, you and any cosigner should review carefully, sign below and return this letter to Citibank at the following address by November 21, 2008:

Citibank South Dakota
Attention Executive Communications
701 E. 60th Street N.
Sioux Falls, SD 57104

Please be advised that the statements herein apply only to the Student Loan and do not in any way modify, amend or otherwise relate to any other accounts you may have with Citibank or its affiliates. If you and any cosigner do not timely sign and return the enclosed assignment, then Citibank reserves all rights and remedies against you under the Student Loan.

If you have any questions or need additional information, please call Mary Bakker at 605-331-7219

Sincerely yours,

Citibank, N. A. and The Student Loan Corporation

By signing below, the undersigned borrowers agree to assign to Citibank any and all claims we may have with respect to our Silver State loan, whether against Silver State, Citibank, or other present or former officers, directors, and employees. In exchange for this assignment, Citibank agrees not to pursue collection of the Student Loan from the undersigned borrowers.

________________________ ______________
Borrower Signature Date

________________________ _______________
Cosigner Signature Date

What This Offer Means

This offer means that former SSH students with student loans from Citibank can now walk away from 100% of their loans. They are being made whole. Students who owed $23,300.00, $46,600.00 and $69,900.00 + interest can now pay nothing to Citibank and move on with their lives. No principal, no interest, no attorneys' fees, no costs, nothing of any value whatsoever with the exception of the assignment of their claims against SSH and Citibank and its present and former officers, dirctors and employees. The most famous of these ex officers and directors is, of course, Jerry Airola. The assignment of these claims in exchange for 100% debt forgiveness seems 100% fair to me. Former SSH students are not entitled to a double recovery, and were never going to get one anyway. As discussed in my last post to this blog on November 4, 2008, unsecured creditors in the SSH bankruptcy are likely to recover much less than the full value of their claims. Trading these claims to Citibank for 100% debt forgiveness is a deal that I highly recommend -- it cannot be beat.

Why Is Citibank Doing This?

Why is Citibank making such a good offer? That is an interesting question on which there can be many different opinions. Is it a response to the pending lawsuits against Citibank and the additional threatened lawsuits? Is it due to political and public pressure? Is it the result of a cost benefit analysis in which giving in to the demands of its borrowers and their attorneys is seen as less costly than litigating and possibly losing and setting a precedent that would be bad for Citbank? Is it simply Citibank deciding to do the right thing?

Tuesday, November 04, 2008

What Is Happening In The SSH Bankruptcy

It has now been 9 months since Silver State Helicopters, LLC ("SSH") filed bankruptcy in United States Bankruptcy Court, District of Nevada, Case No. 08-10936-mkn. This case is being jointly administered with the related case Silver State Services Corporation, 08-10935-mkn. To date, 1078 different documents have been recorded on the docket in the SSH case. Documents filed include, but are not limited to, Debtor’s original bankruptcy petition and schedules and amended schedules, Motions for Approval of Procedures, a Motion to Limit Notice, Verified Petitions Designating Local Counsel, Notices of Appearance and Requests for Special Notice filed by Creditors, Applications to Employ Counsel, Accountants, Real Estate Brokers and Auctioneers, Applications for Administrative Claims/Expenses, Motions for Order Shortening Time, a Motion to Use Cash Collateral, Motions to Assume or Reject Leases and Executory Contracts, Motions for Examination, Motions for Relief From Stay, Motions to Compel, Motions to Quash, Motions for a Protective Order, and Motions for Sale/Use/Lease of Property. SSH assets sold to date include helicopters, airplanes, cars, real estate, office furniture and office equipment.

United States Bankruptcy Court Judge Mike Nakagawa has conducted dozens of hearings in this case and has generally given the Trustee James Lisowski and his counsel Anthony Zmaila ("Tony Z") and Victoria Nelson what they want. The big winner to date has been secured creditor Orix Finance Corp which has been getting paid regularly out of the ongoing asset sales while the former students of SSH and all of its other unsecured and priority creditors wait and receive nothing.

The Proofs of Claim

3,417 Proofs of claim have been filed in the SSH case. The total amount claimed is $515,697,336. This is far more than is likely to be recovered in this case. Here is the breakdown for the proofs of claim: $463,723,615.62 unsecured, $41,759,763.95 Secured and $4,885,143.87 Priority. The largest secured proof of claim is from Orix Finance Corp for $33,117,417.20. The most interesting secured proof of claim is from Jerry Airola for $1,502,388.18 based on an Assignment of a Deed of Trust for a property in Provo, Utah which was owned by the debtor and has now been sold in the SSH bankruptcy proceeding.

The Trustee has not objected to any proof of claim yet, and appears to be waiting to see if there are any funds to distribute to creditors before deciding to review all of the proofs of claim filed and determine which claims if any should be objected to.
For now, it appears that the SSH bankruptcy estate is administratively insolvent. This means that there is no money to pay to unsecured creditors and that administrative creditors may receive less than full payment on their claims.

One thing that could put substantial additional cash into the SSH bankruptcy is the institution and successful prosecution of Adversary Proceedings against third parties that received preferential payments from the Debtor or for other reasons are liable to the debtor. Only one Adversary Proceeding has been filed so far -- an Adversary Proceeding filed against the Trustee and against Orix Finance Corp by AICCO, Inc. for Declaratory Relief and Turnover of Property. A Summary Judgment hearing is set in that case for December 11, 2008.

My Conversations With Tony Z

I spoke at length with The Trustee's lead counsel Tony Z last month in an effort to increase the level of our mutual cooperation to benefit all former students of SSH. Tony Z informed me that he has sent out "hundreds of letters" threatening to sue individuals and companies that received preferential payments from SSH prior to the filing of the SSH bankruptcy, but has not filed any Adversary Proceedings to date. He also shared with me his opinion that the ongoing governmental investigations of SSH and its former principals are likely to result in governmental prosecution.
I spoke to him about my ongoing efforts to help my clients reduce or eliminate their outstanding loan balances to KeyBank, Student Loan Xpress, and Citibank, and discussed with him certain strategies. Tony Z encouraged my efforts and promised to cooperate with me.

I have been working closely with Andrew August and Kevin Rooney, 2 attorneys who have filed actions in California on behalf of California residents who obtained loans from KeyBank, Student Loan Xpress, or Citibank to attend SSH and were still enrolled at SSH at the time that it filed bankruptcy. While the proposed class outlined in their actions is narrower than my nationwide group of former SSH student clients, we share the same objectives -- to eliminate or reduce as much as possible the loan balances for our clients. I am attempting to facilitate cooperation between these 2 attorneys and the trustee and the trustee's counsel -- something that appears to be on the verge of breaking down now. After several weeks of trying to get access to the relevant documents from the Trustee on a voluntary basis, Andrew and Kevin were forced to get a Court Order for a Rule 2004 Examination of the Trustee with document production. Now the Trustee and his counsel have filed a Motion for a Protective Order and asked the Court to quash the examination. A hearing on the Trustee's Motion is set for November 19, 2008.

Confidential Settlement Negotiations

Settlement negotiations with the lenders are subject to a written confidentiality agreement, but are still going forward. I hope to have something positive to report about this before the end of the year.

The SSH bankruptcy case itself appears likely to continue all through 2009 and well into the future.

Saturday, September 20, 2008

Harward & Associates Dissolve and Drop SSH Matter

Rumors began circulating last week that James Harward and Spencer Robinson of Harward & Associates were no longer doing any work on behalf SSH students. I spoke to Andrew August of Pinnacle Law Group and Dan Reed formerly of Harward and Associates and confirmed the truth of these rumors.

Dan Reed told me that Harward & Associates has dissolved, that Mr. Harward and Mr. Robinson will not be doing any more work on behalf of SSH students, and that he is attempting to take over representation of the approximately 300 former SSH students that paid Harward and Associates to represent them. Dan Reed's new engagement letter requires that his clients pay him a contingent fee that ranges between 30% and 50%.

Dan Reed posted this information on his website: "The relationship between Dan Reed Law and Harward & Associates has been discontinued effective September 2008. Mr. Dan Reed has been designated the primary point of contact with former Silver State Helicopter students. Mr. Reed has been an attorney since the fall of 2007."

In February, March and April of 2008, I competed with Dan Reed and James Harward for clients, and suggested that I was better qualified to help former SSH students. Now James Harward is gone, and I have reached out to Dan Reed to try to help him and his clients. Dan told me that this SSH matter was his first case right out of law school, and that he joined with Harward & Associates in an effort to help his clients. Unfortunately, Mr. Harward did not deliver what Dan and his clients expected from him. I will be meeting in person with Dan Reed in Utah after the St. George Marathon to discuss how we can cooperate with each other to help our SSH clients.

SSH Confidential Settlement Discussions

Settlement discussions with the lenders have not resulted in any offer that I can recommend to my clients. Still, all parties are talking and all parties say that they are interested in a fair settlement. Settlement discussions will soon be entering a critical phase during which I will not post further information about these discussions unless and until they are resolved one way or the other.

It is interesting to note that not one of my SSH clients has been sued by KeyBank, Student Loan Xpress or Citibank for his or her unpaid loan balance. To me, this indicates that these lenders are not eager to file thousands of individual collection lawsuits and that they may in fact be interested in trying to resolve these claims in a more economical manner.

Pending Motions to Dismiss against the pending class actions have also been postponed to give more time for settlement discussions.

Many of you know that my Senior Associate Georgeann Nicol and I enjoy running Marathons. My next Marathon will be on October 4, 2008 in St. George, Utah. Keep in mind that this SSH matter is much more like a Marathon than a sprint. We will continue to work on all aspects of this matter and to do everything that we can to help each and every one of our SSH clients. This matter is sure to go on to 2009 and may continue for years after that. As in a marathon, and as in life, the important thing is not how you start, it's how you finish.

Friday, August 22, 2008

Multi-State Group of Attorney Generals Investigating SSH And Its Lenders

I have been carefully following the ongoing separate and joint efforts of 16 different states to investigate SSH, its owners, and its lenders KeyBank, Student Loan Xpress, and Citibank. The Attorney General's Offices for 15 different states have joined together to form a multi-state group to investigate SSH and its lenders. The 14 states that have agreed to be part of this joint effort are Arizona, California, Florida, Georgia, Idaho, Illinois, Nevada, New York, Missouri, Montana, Oklahoma, Oregon, Texas, Utah and Washington. 2 additional states, North Carolina and Colorado, were asked to participate in this group, but have so far declined to do so. All parties to the multi-state investigation have signed on to a Common Interest Agreement agreeing to share documents and strategies. I am attempting to get permission to publish a copy of this Common Interest Agreement on my blog. I believe that as a part of this multi-state effort, one or more lawsuits will be filed by the different State Attorney Generals' Offices against KeyBank, Student Loan Xpress, and Citibank. Details of the ongoing investigations are confidential. All of this is good news for all former students of SSH. I will continue to cooperate in every way possible with all government agencies investigating SSH, its owners and its lenders, and I urge my clients to do so as well. In that regard, I wrote to Associate Attorney General Andrew Shull of the Oregon Department of Justice earlier today and gave him and his investigators permission to speak directly to my Oregon clients who attended SSH. I spoke earlier today with an Associate Attorney General in a different state who is considering writing a letter to Citibank urging it to forgive the student loans that Citibank made to students that attended SSH in that state. This is based in part on the fact that the SSH school established in that state was never licensed to operate, and is also based on the fact that Citibank failed to adequately investigate the operations of SSH.

Thursday, August 07, 2008

Sue The Lenders Now Or Try To Settle First?

Sue the Lenders now or try to settle first? This is the choice that I have to make on behalf of our SSH clients. Three separate class action lawsuits have been filed against one or more of the lenders that SSH referred its students to. Pinnacle Law Group, LLP of San Francisco, California filed class actions in California and Nevada against Student Loan Express and KeyBank on behalf of students from those two states who were enrolled at SSH at the time of the SSH bankruptcy. James Harward of Salt Lake City, Utah is co-counsel on the Nevada action. Chris Casper of James, Hoyer, et al. of Tampa, Florida filed a national class action in Florida against Student Loan Express only. I am carefully monitoring all of these actions, and am in regular contact with Andrew August and Kevin Rooney of Pinnacle Law Group. These class action lawsuits face serious obstacles, including, but not limited to, pending Motions to Dismiss and a certain fight over class certification. Many of my clients are not covered by any of these class actions, which do not include in their class definitions students who obtained loans from Citibank, students who obtained loans from Student Loan Express but do not reside in Nevada or California, and all students who were not enrolled at SSH at the time of its bankruptcy filing.

In addition to monitoring the existing actions against KeyBank and Student Loan Xpress, I have been carefully researching prior actions against the lenders by or on behalf of students who attended schools that closed before they could graduate. I want to learn everything that I can about what has worked for Plaintiffs and what has not worked.

While all of this has been going on, I have initiated contact with counsel for Student Loan Xpress and KeyBank and begun my exploration of all settlement possibilities. I want to see if fair settlement agreements can be reached for my clients. These agreements would take into account the amount of education received by my clients and the amount of education that they were promised and paid for, but never received. They might also take into account the current financial condition of the student and any cosigner. Class counsel has been involved in similar discussions. I want to see what results I can achieve for my clients by way of settlement. All of us are working both separately and together in an effort to determine whether or not we can get these lenders to agree to enter into fair settlement agreements that we could all recommend to our clients. Counsel for the lenders and class counsel have asked that the specifics of these discussions remain confidential until there is something more concrete to report.

Settlement negotiations are expected to continue over the next two to three months, at which time I will be in a position to convey detailed information regarding the best specific settlement proposals that I can obtain for my clients and either recommend the acceptance or rejection of these settlement proposals. I hope to get Citibank actively involved in these settlement negotiations. If a good settlement appears to be unlikely, I will have plenty of time to institute my own litigation against the lenders. Meanwhile, I believe that my clients will benefit by my monitoring how the other litigation against the lenders proceed, and by giving more time to the various ongoing civil and criminal investigations of SSH.

Student Loan Xpress, the lender that made the most loans to SSH students, stopped writing new student loans in April and went out of business in May, 2008. My typical SSH client borrowed $69,900.00 from Student Loan Xpress to attend SSH, and incurred origination fees and high interest rates that push the total repayment amount over $200,000.00. The lenders and their counsel are well aware of the risks that their clients face, and I am well aware of the risks that each and every one of my clients faces. I ask that you all be patient during this settlement negotiation period. Please understand that not everything that I do on behalf of our SSH clients can be put on the blog. I want to help all former SSH students, but my first allegiance is always to my clients.

Wednesday, July 16, 2008

Good New for Our Clients Who Borrowed Money From KeyBank

Many of our KeyBank clients have written to us or called us to complain about collection efforts by KeyBank, including telephone calls, letters, and demands for immediate repayment. I am very pleased to report that I have found a way to stop all of this for our KeyBank clients. I have provided KeyBank's counsel with a list of all of my KeyBank clients and gotten KeyBank to agree to place all of my clients' accounts into administrative forbearance (which suspends their payment obligations, but interest continues to accrue). The debt will be reported as disputed, KeyBank will request that all collection calls cease, and all written communications (including billing statements and delinquency letters) will also cease. KeyBank will begin doing all of this immediately, and will provide me with written notice when all of this is done. Because KeyBank works with outside vendors to perform some of the functions outlined above, it is possible that something may fall through the cracks. Thus, I ask that my KeyBank clients please bring any failure by KeyBank to do this on or before August 1, 2008 to my attention, and I will in turn bring it to the attention of KeyBank's counsel. This action by KeyBank is a good thing for all of our KeyBank clients.

Monday, July 14, 2008

Our SSH Clients By Lender

3 major lenders made "student loans" to the students that attended SSH: KeyBank, Student Loan Xpress, and Citbank. Most of our 1372 paid SSH clients obtained their loan from Student Loan Express. Here is the breakdown of where our SSH students obtained their loans from: Student Loan Xpress 1,113. KeyBank 150. Citibank 72. The remaining students paid cash, or obtained loans from other sources.

Thursday, July 03, 2008

Tucscon Weekly Story About Silver State Helicopters Bankruptcy

Permanently Grounded
A helicopter school took student money and suddenly went bankrupt

Silver State Helicopters school filed for bankruptcy, leaving students in shock and on the hook for tens of thousands of dollars in student loans.

At least a year before the Silver State Helicopters school filed for bankruptcy in February, 18 of its Arizona students sued the company and its owner for fraud.
But that didn't prevent the school from continuing to recruit new students--and many of them are now on the hook for up to $70,000 each in student loans, for flight training they never received.
One of those suing is firefighter Paul Mischel, 39, a 19-year veteran with Northwest Fire District.
"I'd heard the ads on the radio: 'You can be flying in 18 months.' It sounded too good to be true," Mischel said. "But everything promised was attainable. It's not like they were offering to make elephants fly."
The first sign of a problem: Even though flight training requires hundreds of hours in the air, there were no helicopters available for the first three months when Mischel started in the summer of 2004, he said. After that, the school provided one helicopter and two flight instructors for 80 students.
Part of the school's attraction was its lure of full-time employment for top students after training. "People who grumbled were warned that they were on a perpetual job interview if they wanted to work for Silver State," he said.
Mischel, who owes more than $50,000 on his school loan and has spent $5,000 to $6,000 in legal fees to sue the company, said he spent 28 months in the program, but completed only half of it by November 2006, when he dropped out in disgust.
"In my class of 80 students, only eight or 10 got a private license"--the first of five required licenses and ratings--"and only seven had become Silver State employees" by the time of the lawsuit.
Silver State's former president and CEO, Jerry Airola, started the company in Henderson, Nev., with one helicopter in 1999, and eventually enrolled some 2,500 students in more than 30 schools in 15 states, three of them in Arizona (Mesa, Glendale and Tucson).
In a release sent to students from Silver State's public-relations firm, MassMedia, the company cited the "unprecedented downturn in the U.S. credit markets, which severely curtailed the availability of student loans for the company's flight academy students and resulted in a sharp and sudden downturn in new student enrollment."
On Feb. 4, 2008, the company filed for Chapter 7 bankruptcy. In its filing, the company estimated that it had 5,000 to 10,000 creditors and $10-$15 million in liabilities, but only $50,000 in assets. Because of the bankruptcy, the fraud lawsuit, filed by Mesa attorney C. Randall Stone and Georgia attorney Peter C. Lown in U.S. District Court in Phoenix on behalf of the 18 Arizona students, is on hold.
The whereabouts of Airola, a high-powered Republican fundraiser and failed candidate for Nevada's Clark County sheriff in 2006, are unknown. His Las Vegas bankruptcy attorney, Jeanette E. McPherson, of the Schwartzer and McPherson Law Firm, referred calls to MassMedia, where a representative had "no idea" where he was. Silver State's Las Vegas headquarters no longer has phone service, and its Web site has been shuttered.
Michael Berger, the attorney representing more than half of Silver State's former students as creditors in the company's bankruptcy, said he believes Airola is AWOL. "Let me put it this way: I don't know anyone who's talked to him."
Lon Enos, 39, an ex-forklift driver who had worked for 16 years for Costco before he quit to attend Silver State, did get work with the company as a certified flight instructor, but was fired after six months when a student of his rolled the helicopter's throttle, which can damage the rotor system.
He now commutes between Tucson and a flight school in Virginia, where he's still an instructor, which is considered an entry-level position for a pilot.
"My biggest problem now is that I can't get a job anywhere else because of having Silver State on my résumé," Enos said, explaining that other employers who hire pilots shy away from the school's name.
Like most students, Enos enrolled at Silver State after attending a glitzy sales seminar during which Airola pitched the dream of earning more than $100,000 a year after 18 months of training.
Enos' retirement account, with about $90,000, paid the bills while he attended flight school full-time. "We were told that if we had good availability, we'd get more flying time. So I quit my job and spent my 401(k) plan over two years, and didn't get done any sooner."
Berger represents 1,330 former Silver State students--including 28 from Arizona--as creditors in the company's bankruptcy proceedings.
"A lot of people seem to be investigating Silver State. The biggest problem is that students are stuck with these large loans. Co-signers are on the hook as well," he said.
In Florida, where Silver State had 200 students (including one who was killed along with an instructor in a March 2007 crash), U.S. Sen. Bill Nelson has described the school's practice of arranging large, unsecured student loans and then delivering little as a pyramid scheme. He has called for the Federal Trade Commission to investigate.
"With the crunch in the consumer credit market, (Silver State) ran out of banks to get loans," Berger explained. "It depended on a stream of new investors to keep everything going. Without that, everything fell apart."
Berger said he's suspicious about a pattern of early loan disbursements to Silver State--sometimes, the entire amount of the loan was paid to the school after only three months--and that his firm is looking into any unusual relationships between Silver State and its lenders.
"I haven't seen student loans like this before," he said. One of school's private lenders, Student Loan Xpress, is no longer in the business.
"With a federally guaranteed loan, if the school closes, you can discharge the loan, but there's no equivalent for these private loans," he added. Silver State was a "part 61" flight school; only flight schools certified by the Federal Aviation Administration, or "part 141," are eligible for federal financial aid.
Last fall, the private-equity firm Eos invested $30 million to purchase a 60 percent ownership share in Silver State. The firm typically invests in companies that have an annual revenue base between $30 and $500 million, according to its Web site.
"Some of the folks at Eos walked away with millions" according to testimony recorded by the trustee in the company's Nevada bankruptcy case, Berger said. "Airola walked away with $13 million. Then in February, the company's in bankruptcy." (For more on the first meeting of Silver State's bankruptcy creditors, see Berger's Web site.)
One of Berger's Tucson clients, Britta Penca, 42, was about a third of the way through her training, with 90 of 200 promised flight hours, when the school abruptly shut down. The paperwork for her $69,900 loan through Student Loan Xpress and American Education Services shows three disbursements to Silver State in February, April and July 2007--comprising the entire amount of the loan, disbursed in the first five months of what should have been 18 months of training.
"It was a disaster--shock, loss, my own personal tsunami," Penca said about the school's closing. "I'd given up everything--and suddenly, (the school) didn't exist." She paid another $4,000-$5,000 to finish her private pilot's license through another school.
Penca is considering leaving the Tucson area to finish at a part 141 school, where her loan will be federally backed. "It's a little scary. We don't know what's going to happen with the current litigation. It seems risky to take out another loan--and pay for (the training) twice, with interest."

The original of this story is available online @

Wednesday, July 02, 2008

Proof of Claim Bar Date in the SSH Bankruptcy Case is July 21, 2008

The Bar Date in the Silver State Helicopters Bankruptcy Case, also known as the last day to file a proof of claim, is July 21, 2008. This Bar Date has been extended twice by the Bankruptcy Court. The original bar date was in June, and the first extended bar date was July 7, 2008. No further extension of time to file a proof of claim in this case is likely. As set forth in the document entitled "Trustee's Notice of Finding Assets, Notice to File Proof of Claim and Notice of Time Limitation" e-filed on April 16, 2008, "Claims not filed by the Bar Date are generally not allowed . . . The Bar Date, or last date to file a Proof of Claim in this case is July 21, 2008."

We have completed our filing of Proofs of Claim for each and every one of the 1,367 former SSH Students that we represent. We have sent individual confirmations to many of these clients at their request. On July 7, 2008 I will send out an e-mail to each and every one of our SSH clients confirming that we have in fact filed his or her proof of claim in this case.

We have double checked each and every proof of claim that we filed to be sure that it shows up in the Claims Register for the Silver State Helicopters, LLC Bankruptcy Case No. 08-10936 MKN on PACER (Public Access to Court Electronic Records). Individual Clients who want to use PACER to check to be sure that his or her proof of claim has been filed or to monitor all documents filed in the Silver State Helicopters, LLC Bankruptcy case (or for any purpose) may register by going to and then clicking on the "Register for Pacer" link on the left hand side of the page. There is a charge of $.08/page to use Pacer.

We filed a proof of claim for each individual student client that attended SSH, not for his or her cosigner. Filing 2 separate claims, one for the individual and one for the cosigner, would be asking for a double recovery.

We believe that part of each student's claim qualifies as a priority claim under 11 U.S.C. Section 507(a) (7). This code section allows a priority claim of up to $2,425.00 for, amongst other things, deposits toward "the purchase of services, for the personal, family or household use of such individuals, that were not delivered or provided." We believe that the the helicopter training services that our clients purchased from SSH but did not receive fit this definition. By making part of our clients' claims priority claims, we increase the likelihood that they will receive a recovery from the SSH bankruptcy estate and increase the likelihood that they will receive a greater recovery than creditors with lower priorities or no priority. Priority claims get paid before general unsecured claims.

When available, we have attached the SSH Training Services Agreement and the Student Loan Agreement to each individual Proof of Claim.

If you are our client in the SSH case, the preparation and filing of your Proof of Claim is just one of the services that we provide for you. If you are a former SSH student and you are not our client, we urge you to file your Proof of Claim before the July 21 Bar Date.

Friday, June 27, 2008

Citibank Deferment Request Letter

Many of our SSH clients with loans from Citibank have received a letter regarding a deferment request. The first paragraph of the letter states, "At this time we are in the process of updating our records to ensure that we have current enrollment information for our customers. We would appreciate it if you would assist us with this process. Please read this information in Section 1 and have your school's Registrar complete Section 2. Be sure to sign, date and return this request in the envelope provided. Failure to complete and return this form may result in your CitiAssist Loan being placed in immediate repayment." The letter only allows for a deferment if the borrower is currently enrolled in school. Any deferment request made pursuant to this letter requires a certification from an authorized schoold official. If you are not in school, you do not qualify for a deferment under the terms of this letter. Here is how I suggest that our Citibank clients respond to this letter. Write the following on the letter: " I was a student at Silver State Helicpoters. The school closed and filed bankruptcy on February February 4, 2008. I request that this loan be placed on a no interest, no payment status while the facts regarding this bankruptcy are reviewed. I am represented by attorney Michael Jay Berger with regards to both the Silver State Helicopters bankruptcy and my loan from Citibank. Please have your legal counsel call Mr. Berger at his office, 310-271-6223 to discuss my loan and the loans of Mr. Berger's other clients who borrowed money from Citibank to receive training from Silver State Helicopters."

Thursday, June 19, 2008

AES/Student Loan Xpress Suspends Interest Accrual and Payments on SSH Student Loans

Many of our SSH clients with loans from Student Loan Xpress that are serviced by AES have received letters from AES regarding the suspension of interest accrual and payments on their SSH Student Loans. The letters are dated or or about May 27, 2008 and state in pertinent part, "Dear Customer: As you may know, Silver State Helicopters filed for bankruptcy and ceased operations on February 4, 2008. We continue to assess the situation created by the closure of the school. Although you may have received a prior letter from us regarding your account, this is to advise that, as a courtesy to you, we have elected to treat your account as being "in grace" status and to suspend interest accrual, from the date the school filed for bankruptcy. Accordingly, until you receive further written notice from us, your loan will remain in grace status, interest will not accrue, and you will not be required to make any payments. We are not waiving any of our rights under the terms of your loan, including our rights to restart accrual of interest or to begin the repayment period, however, we will provide you with written notice of any decision to restart the accrual of interest or to being the repayment period. No action on your part is required at this time and we will update your loan status with the loan servicer, Amercian Education Services. " This letter is a good thing for all of our AES/Student Loan Xpress clients, and a good example for KeyBank and Citibank to follow. It may ultimately prove to be the first step towards a mutually agreeable settlement with the lenders.

Sunday, June 15, 2008

More Publicity For Our Cause

The following is a transcript of a story that aired on the local ABC television station on Friday, June 13, 2008 on the 5:00 pm news. It appears on the website under the Title "Consumer NewsSchools close, but students still pay."
By Ric Romero
LOS ANGELES (KABC) -- Trade schools and vocational schools provide a wonderful service for students who find traditional colleges are not for them. But what happens when the school you attend goes bankrupt and has to close? You may be left with a huge bill that still has to be paid off.
Many of these schools require you to pay up front, and often the money comes from a loan from a private finance company who expects you to pay them back no matter what happens to the school.
When they're in the air, professional helicopter pilots can feel like they're on top of the world. It's a rewarding job that requires months of training to master. Christian Shaffer of Oro Grande thought he had the right stuff. Shaffer signed up for instruction with Silver State Helicopters Flight Academy and thought he was on his way to becoming a chopper pilot.
"They promised me a long-term career with Silver State themselves, promised me good pay, and a lot of credentials that would help me to further my career," said Shaffer.

A North Las Vegas company, Silver State thought there were no limits and had operations in 28 locations across the country, including Long Beach and Chino. In handout video, Silver State makes the 18-month-long training program look very exciting.
But as with all students, it was going to cost Shaffer plenty. Silver State got the aspiring pilot a loan through an outside private lender to pay the tuition.
"The first $24,000 was taken out before I even started class," said Shaffer.
Six months later, Christian was even deeper in debt and far from living his dream.
"I was already $48,000 in debt, owed $48,000, with only four hours of flight time logged," said Shaffer.
Helistream in Orange County is a helicopter school that's been around for over 20 years. According to Helistream's Director of Operations, Rod Anderson, Silver State's requirement of students to pay so much up front was unusual for the industry.
At Anderson's chopper school there is a three-to-one teacher/student ratio, with plenty of hands-on training. Silver State emphasized more classroom instruction and a large student class-to-teacher ratio. But remember, Shaffer was told he would have a job once he graduated from Silver State.
The only thing is, Silver State declared bankruptcy well before Shaffer finished his training, and after he had paid nearly $70,000 to attend the school.
"It was pretty devastating to the family -- very. I can't explain it enough, how it really put a damper to our life and our future," said Shaffer.
With the school closed and Silver State with his money, Christian's only choice now is to hire an attorney and attempt to get Silver State's president and CEO, Jerry Airola, to give him his money back.
"We're certainly going to investigate all the avenues of recourse against the lenders. If there's been fraud or collusion by the lenders, we hope to use this to wipe out these student loans," said attorney Michael Berger.
"They will have lost time, they will have lost their hopes, but at least maybe they won't have a huge burden on them," said attorney Gail Higgins.
At this point, Christian's only hope is with a lawsuit. But before you enter into a contract with a trade school or vocational school, make sure you know your rights and know how to protect yourself

Saturday, June 14, 2008

Proofs of Claim

The deadline to file a proof of claim in the Silver State Helicopters Bankruptcy Case is July 7, 2008. If you are one of our SSH clients, we handle this for you. We have already filed hundreds of proofs of claim for our clients, and we anticipate having all remaining proofs of claim for our clients filed by July 1, 2008. I have 2 employees working full time on this 5 days a week, with an additional 2 employees helping out. We already have all of the information that we need to file these claims for most of our SSH clients. If we need further information from any individual client, we will contact him or her by telephone and by e-mail. The most important piece of information that we need for each SSH client is the amount that he or she paid to attend SSH. This can be paid paid in cash, or by obtaining a loan, or in some combination. The typical SSH student years borrowed $69,900.00 to attend SSH, and obtained his loan from Key Bank (earlier students), Student Loan Xpress (most of the students), or Citibank (later students). Liberty Bank acted as an originator for some loans, and then sold the loans to Student Loan Xpress. AES is the loan servicing agent for Student Loan Xpress. It is helpful for us to know the name of the bank in preparing the proof of claim and to have a copy of the loan agreement and a recent statement from the lender. When the documents are available, we attach a copy of the loan agreement and the SSH Training Services Agreement to the Proof of Claim.

Thursday, May 29, 2008

Helping the FBI With Its Criminal Investigation of SSH

Many of our clients have received a letter and a questionnaire from the Federal Bureau of Investigation (FBI). The letter is from Maureen Seitz, Victim Specialist at the Las Vegas Branch of the FBI and references the FBI's Case Number 318E-LV040690. The letter states in pertinent part, "Your name was referred to the FBI's Victim Assistance Progaram as being a possible victim of a federal crime. We appreciate your assistance and cooperation while we are investigating this case. . . . The case is currently under investigation. This can be a lengthy process and we request your continued patience while we conduct a thorough investigation. Enclosed is a questionnaire concerning your association with Silver State Helicopters. Please fully answer the questions, however if you cannot or choose not to answer specific questions, please leave them blank. Thank you for your assistance and participation"

I called the FBI to make sure that this letter is authentic and spoke with Maureen Seitz. The letter is authentic and the FBI criminal investigation of SSH is real and ongoing. Maureen told me that the FBI will be continuing to contact former SSH students, including my clients. I reccomend that you cooperate 100% with the FBI criminal investigation of SSH. Criminal prosecution of the individuals and companies responsible for the SSH scam may be of great help to our clients and to all others in a similar situation. As stated in the FBI's letter, one of your rights as a crime victim is "the right to full and timely restitution as provided in law." Criminal sentencing of SSH Defendants may include an order that restitution be made. We look forward to continuing to cooperate with the FBI, the Federal Trade Commission, The United States Department of Justice, The Attorney General's office in many of the different states involved, and all other law enforcement agencies actively investigating SSH.

Tuesday, May 13, 2008

Notice of Appearance Filed Today

Today we filed a Notice of Appearance and Request for Service of Notices and Pleadings with the Bankruptcy Court in the SSH case. Attached to our Notice was a complete list of all clients that we represent in this case. We check the docket in the SSH case several times a week to keep on top of all developments in the case. The docket in the Silver State Helicopters, LLC case reflects 600 separate entries from the bankruptcy petition filing date of February 4, 2008 through today, May 13, 2008.

Sunday, May 11, 2008

Running, Racing, Riding, and Raising Funds for Charity

Working on the SSH case has already required strength and endurance to go along with our determination and intelligence. Much more will be required. In April and May, my Associate Attorneys and I continued the athletic efforts that bring us balance, happiness, health and fitness. On April 5, 2008, Senior Associate Attorney Georgeann Nicol ran the St. Louis Marathon and acted as a pacer to help other runners meet their goals. On April 21, 2008, I ran the Boston Marathon, my fifth Boston Marathon. On May 10, Associate Attorney Ayana Guy made her road racing debut at the Revlon 5K Run/Walk for Women in Los Angeles. This event is dedicated to raising money to fight women's cancers.

Looking forward to June, Senior Associate Attorney Georgeann Nicol will once again be riding her bicycle 545 miles from San Francisco to Los Angeles as a participant in AIDS/Lifecycle 7. This event takes place June 1-7, and is always a part of Georgeann's calendar. Georgeann has personally raised hundreds of thousand of dollars to fight AIDS. I am proud to say that my law firm is one of the many contributors to AIDS/Lifecycle.

Continuing Education

Next week, 2 important bankruptcy conferences will be taking place in California. I will be attending the 20th Annual California Bankruptcy Forum in Indian Wells, California. This 3 day conference begins on Friday, May 16, 2008 and concludes on Sunday, May 18, 2008. This conference gathers together hundreds of bankruptcy attorneys and bankruptcy judges and their guests and gives them a forum to learn and socialize together. I attended last year's event in Napa, California, and it was both great fun and great education. I will use this year's event to discuss the SSH bankruptcy with other bankruptcy experts, Trustees, and Judges.

Also next week, in Los Angeles, California, Senior Associate Attorney Gail Higgins will be attending the National Association of Consumer Bankruptcy Attorneys (NACBA) 16th Annual Convention. NACBA's Annual Convention provides a unique opportunity to network and trade ideas with colleagues from around the country.

Instructor Gail Higgins

Senior Associate Attorney Gail Higgins is once again teaching bankruptcy law at UCLA Extension in the mornings, and then coming to work with us in the afternoons. Instructor Gail 's intensive course in bankruptcy is part of UCLA Extension's Paralegal Training Program. Classes began on Wednesday, May 7 and will conclude on Monday, May 12. Several of Gail's students have expressed an interest in assisting us on the SSH matter.

Friday, May 09, 2008

Disputing Your AES Accounts Part 2

Several of our SSH clients asked for a further explanation as to how one of our SSH clients got Transunion to remove AES from his credit report. Here is the explanation, direct from our client: "It was actually really simple. I went to on a whim just to check my credit, and in the process I saw the “Dispute” option and decided to give it a try. I just followed the step by step process it provided for each of the credit bureaus and chose the option “fraudulent account” for each of the 3 AES accounts, certainly seemed to be the most reasonable option. I didn’t leave any additional comments or anything and it just said it would provide a response sometime in the following 30 days. Like I said, it was a simple process. However, TransUnion so far, has been the only bureau to delete the AES accounts, the other two have not even provided a response and it is over the 30 day limit, so I may be out of luck on those two.

Hope that helps,

Wednesday, May 07, 2008

ABC 7 News San Francisco Tonight

ABC 7 News San Francisco is running a story on the SSH bankruptcy tonight @ 6:00 pm. I was interviewed via satellite for this story by ABC reporter Rene Koury. Several of our SSH clients were interviewed for the story as well, including James Edwards of San Francisco, CA and David Ross of Walnut Creek, CA.

Saturday, May 03, 2008

From The Higher Ed Watch Blog

Fueling Sham Trade Schools
Stephen Burd -
May 1, 2008 - 1:20am
We have written a lot recently about Silver State Helicopters, a Nevada-based company that left the 2,500 students who attended its flight academies in the lurch when it shut its doors without warning on Super Bowl Sunday and filed for bankruptcy liquidation.
As we noted yesterday, Silver States' entire existence depended on the willingness of loan companies -- in this case, the infamous Student Loan Xpress and the Pennsylvania Higher Education Assistance Agency (PHEAA) through its national brand American Education Services -- to make and service high-cost private loans to help students cover the $70,000 cost that they were required to pay up front to attend the unlicensed and unaccredited flight schools. Unfortunately, Silver State students are now stuck repaying these private loans for training they did not ultimately receive.
Silver State is hardly an isolated case.
There has been in recent years a proliferation of unlicensed and unaccredited trade schools that do not participate in the federal student aid programs and therefore go largely unregulated. Their growth has been fueled by lenders that have willingly and irresponsibly "partnered" with these institutions to provide expensive private loans to the at-risk students these schools tend to attract. The lenders have then turned around and, like subprime mortgage lenders, securitized the loans, shifting the risk of the loans onto unsuspecting investors.
Reviving Trade School Scams
These practices first came to light several years ago when dozens of unaccredited computer training schools unexpectedly shut down, leaving their students without training and with heavy private loan debt. Just like Silver State, these schools (owned by now-defunct chains such as Ameritrain, Solid Computer Decisions, and The Academy Schools, among others) had forged sweetheart deals with the loan giants Sallie Mae and Key Bank to provide their students with tens of thousands of dollars of private loans to cover the full cost of tuition upfront before any classes were provided.
Consumer lawyer Tom Domonoske exposed these deals in an article entitled "The Finance Industry Fuels Revival of Trade School Scams," which ran in late 2003 in the trade journal The Consumer Advocate but received little attention at the time. In the article, Domonoske explained how the easy availability of private loans helped disreputable schools thrive by allowing them to attract students without having to worry about being regulated by the federal government.
In the late 1980's and the early 1990's, the federal government was forced to take emergency actions to crack down on an explosion of fly-by-night trade schools set up solely for the purpose of reaping profits from the federal student aid programs. To avoid another student loan-proprietary school debacle, policymakers began requiring schools that participate in the federal student loan program to demonstrate, among other things, that they are financially stable. The schools must show that they do not pose a danger of closing precipitously.
But disreputable trade school owners found a way to around these rules -- by staying out of the federal aid programs and pushing private loans to their students. Meanwhile, lenders, Domonoske wrote, have proved more than willing to provide "liquidity" to these sham schools. "[T]he current problem of school closures in the computer training field would not exist if entities like Sallie Mae and Key Bank were applying similar restrictions" to those of the government, Domonoske wrote at the time.
The Loan Industry's Complicity
Under pressure from consumer advocates, Sallie Mae eventually agreed to stop serving unlicensed schools. But Key Bank apparently continues to do so. And, in light of the Silver State Helicopters case, other lenders, like Student Loan Xpress and the non-profit state agency, PHEAA, appear to have picked up the slack.
Why would lenders ever agree to make such risky loans in the first place? Don't loan providers pay a price for making loans to students attending sham schools? Not if they securitize the loans and get them off their books. As Domonoske puts it:
"Key Bank's willingness to fund bad loans seems at first glance to be counterproductive for its own bottom line. However, Key Bank does not intend to hold all the loans during their repayment period; instead it pools and sells the loans to investors. Through a process called "asset-backed securitization," Key Bank obtains full value for the loans by selling them to an investment trust. It sells the loans as if they were honest and legitimate transactions solicited by schools that were acting properly...Consequently, the investors pay full value without a disclosure of the inherent defects in the loan."
In other words, by providing huge private loans to students attending unlicensed, unaccredited schools and then securitizing the debt, the lenders have not only caused great harm to students but have also deliberately misled investors.
As policymakers consider a bail out the student loan industry from the credit crunch beyond legislation passed in the Senate yesterday, they need to remember that lenders have brought a good part of these problems onto themselves. Lenders have dumped lots of bad private student loans onto the marketplace, knowing full well that much of this debt was likely to go into default. Is it any wonder that investors are now wary of student loans?

Friday, May 02, 2008

Working on the Proofs of Claim and the Adversary Proceeding Complaint

In May, we are focusing on preparing the proofs of claim for all 1289 of our SSH clients (not including cosigners) and on the preparation of our Adversary Proceeding Complaint against the lenders. We would greatly appreciate keeping requests for status reports and individual calls or letter to the lenders to a minimum so that that we can focus on this important task. We will be contacting each and every one of our 1289 SSH clients to go over his or her proof of claim.

Thursday, May 01, 2008

Disputing Your AES Accounts

Earlier today, I received the following e-mail from one of my clients:

"Hey Michael,

About 3 weeks ago I went in and disputed the AES accounts on all 3 of my credit reports and I just got an email back from TransUnion confirming that they have deleted all 3 of the AES accounts on my credit report. I wanted to let you know about this because I think it shows that something positive is happening and I know that your firm has a lot to do with that. I really appreciate your hard work and am getting more and more excited about the end result which is our ultimate goal of a full release of the debt. Hope all is well! Thanks again, Jason." I called Jason to get his permission to share this e-mail and to get the details of how he disputed the entries from AES. Jason went online and disputed the AES entries with Equifax, Experian and TransUnion. If any of our other SSH clients out there want to try this, please e-mail me and let me know if it works for you. I know that many of you have had difficulty getting other loans because the loans that you obtained to attend SSH are still on your credit records.

Wednesday, April 16, 2008

Brown Dean Out

Texas based law firm Brown Dean has decided to drop all 35 of its former SSH student clients and urge them to immediately seek legal counsel elsewhere. The majority of these former Brown Dean clients have already committed to joining our SSH client group. We welcome them, and wish a full and speedy recovery to Charles Mitchell, the attorney who formerly was handling this matter for the Brown Dean firm. Mr. Mitchell is the father of two former SSH students. He is recovering from a heart attack that he suffered in March and quadruple bypass surgery.

AES Changes Course

This week, many our our clients received letters from AES stating that they do not have to begin making any payments to AES. This is a 100% reversal of the position taken by AES in late March when it issued payments demands to most of its SSH student borrowers. Here is an exact quote of one of these new letters from AES:

"On March 25, 2008, we sent you a letter regarding your outstanding loan and your repayment schedule. Please disregard that letter. It was sent to you in error.

We are in the process of reviewing the current situation and options, and, until you receive further information from us, your outstanding loan will be treated as it it is still in the grace period. During that time, interest on your outstanding loand will accrue, but you will not be required to make any payments.

If you have any other concerns please contact at the address or telephone number shown above. Our office hours are Monday though Friday 7:30 A.M. to 9:00 P.M., Eastern Time

American Education Services"

Who or what is responsible for this 100% change in AES' position? When AES says that it is "reviewing the current situation and options," does that include the fact that we now represent 999 former SSH students and have unequivocally proclaimed our intent to sue AES to void these bad loans? Gail and Georgeann believe that we are what caused AES' change of position. I can only say that we welcome AES's change of position. Our advice not to make payments on these loans while they are in dispute is now easier for everyone to take.

Thursday, April 10, 2008

Final Deadline: April 18, 2008

The final deadline for all SSH students to hire me and my law firm to represent them in the SSH case is April 18, 2008. Any retainer fees and contracts must be postmarked and in the mail on or before April 18, 2008. There will be no further extensions of time. There will be no exceptions. We will be filing our Request for Special Notice listing all of our SSH clients later this month. Our lawsuit against the lenders will be filed in late April or early May and you will either be with us or be left out. This is NOT a class action lawsuit. We are seeking relief only for our clients. If you are still unrepresented in this case, I urge you to consider hiring the attorneys that you feel are most qualified to represent you. As of today, we represent 901 former SSH students -- more than twice the number of former SSH students represented by all of the other attorneys in the country put together. While I am proud that so many SSH students have chosen us, I am concerned about the many SSH students that are not represented by any legal counsel. It is my belief that most of these students will end up being sued by the lenders and found liable for the entire balance of their student loans plus interest and attorneys fees. So please, if you know any of these unrepresented students, tell them about us.

New Deadline For Filing Proofs of Claim in the SSH Case

Trustee James F. Lisowski filed and served a Trustee's Notice of Finding Assets, Notice to File Proof of Claim and Notice of Time Limitation on March 31, 2008. Many of our clients have asked us about this Notice. Here is what you need to know: (1) The trustee has found assets in the estate from which a payment of dividends to creditors appears possible; (2) The deadline for creditors to file a proof of claim has been extended from the former date of June 9 to July 7, 2008; and (3) If you are our client, we will file the Proof of Claim for you. We will be filing the proofs of claim for you in April and May, long before the July 7 deadline. We will contact our clients one by one if and when we need additional information from you to prepare the proof of claim. We will notify each and every one of our clients by e-mail when his or her proof of claim has been filed.

There is a typo in the Notice sent out by the Trustee. The Case Number refers to the Silver State Helicopters, LLC bankruptcy, but the caption says "Silver Helicopters." This is not a third Silver State case, it is simply the Silver State Helicopters, LLC bankruptcy case.

As Seen On TV

The local ABC affiliate Channel 7 will air a story about the SSH bankruptcy on Thursday, April 10 @ 5:00 pm. on its ABC7 Eyewitness News program. This story features former SSH student Christian Shaffer and attorneys Michael Berger and Gail Higgins. Rick Romero is the on air reporter and Elaine Hogue is the reporter who interviewed all of us for the story.

Saturday, April 05, 2008

Road Show

Geo and Gail hit the road this weekend to spread the word about what we are doing for SSH students. Georgeann is in St. Louis, Missouri where she will meet with SSH students today, April 5, at 3:00 pm at Culpeppers Restaurant in O'Fallon, Missouri 4401 Hwy K. To relax on Sunday, Geo will run the St. Louis Marathon.

Gail is in Melbourne Florida where she will meet with SSH students today, April 5 at 1:00 pm at the Atlantic Jet Center, 1401 General Aviation Drive in Melbourne, Florida 32935. Gail will lead an additional meeting with Florida SSH students at Bennigan's Grill & Tavern on Monday, April 7 at 6pm. Bennigan's is located at 900 S Apollo Blvd., Melbourne, FL 32901

Tuesday, April 01, 2008

Why You Should Hire Me And My Law Firm To Represent You

Here are the highlights of why you should hire me and my law firm to represent you in the SSH matter:

1. We are Certified Specialists in Bankruptcy Law and this is a bankruptcy matter. I am Certified as a Specialist in Bankruptcy Law by the California Board of Legal Specialization of the State Bar of California. My Senior Associate Attorney Gail Higgins is Certified as a Specialist in Bankruptcy Law by the American Board of Certification. To see my resume, follow this link:

2. We have substantial experience in bankruptcy law (26 years of experience for me). This includes handling major fraud cases and suing lenders to discharge student loans.

3. We are top rated attorneys. Martindale-Hubbell publishes peer review ratings regarding an attorney’s legal ability and ethics. I have been awarded their highest rating, "AV," A for excellent legal ability and V for very high ethics. My firm and I have had this rating for more than 15 years. This can be independently verified by you by going to or go directly to the webpage with my profile or the web page with my law firm's profile

Here is more information about the Martindale-Hubbell pier review process as posted on the website:
"For over a century, lawyers have relied on the Martindale-Hubbell® Law Directory for authoritative information on the worldwide legal profession. The Martindale-Hubbell® Peer Review Ratings™ play an integral role in this service to the legal community.
Buyers of legal services, as well as those making referrals, consider Martindale-Hubbell Peer Review Ratings invaluable when evaluating a lawyer. Whether choosing between two equally qualified candidates or looking for counsel in another jurisdiction, lawyers and consumers need to have confidence in the individual under consideration. Using ratings, they can select counsel with superior ethics, as well as the desired level of professional experience.
Martindale-Hubbell Peer Review Ratings attest to a lawyer's legal ability and professional ethics, and reflect the confidential opinions of members of the Bar and Judiciary. They appear in all formats of the Martindale-Hubbell Law Directory, in the online listings on, on the LexisNexis® services, on CD-ROM, and in print.
An objective way to assess a lawyerA Martindale-Hubbell rating guides buyers of legal services and those referring business in making faster, smarter decisions. A rating's third party validation of ethics and legal ability provides that extra level of confidence that the right lawyer or firm has been selected. By combining a rating with a review of other data in a lawyer's Professional Biography - such as practice areas, bar memberships, professional affiliations, education and clients - a person can be certain he or she has made the right choice for that particular legal matter.
A cooperative effort with the legal professionMartindale-Hubbell Peer Review Ratings are established by lawyers. The legal community respects the accuracy of ratings because it knows that its own members — the people best suited to assess their peers — are directly involved in the process"

4. Our clients consistently give us 5 star ratings and tell the world about how we have helped them. To verify this, go to the City Search Los Angeles website and look up Michael Berger in Los Angeles, or go directly to this link:
These reviews are independent reviews and are posted on an independent website.

5. We are geniuses. Both Gail Higgins and I are members of Mensa, the International High IQ Society.

6. We are compassionate. We enjoy helping people. This is why I chose to be a bankruptcy lawyer. This is why my Senior Associate Attorney Georgeann Nicol does the AIDS ride every year, riding her bicycle from San Francisco to Los Angeles and raising tens of thousands of dollars to fight AIDS in the process.

7. We are high energy people, and we put that energy into helping our clients. I am a 17 time Marathon finisher with a Boston qualifying personal best time of 3:24:18 set at the St. George Marathon on October 7, 2006. I will be going back to Boston this April 21 for my 5th Boston Marathon. Senior Associate Georgeann Nicol paces others in Marathons, teaches spin, and is an Ironman Triathlete.

8. We are the overwhelming choice of the Silver State Helicopter Students. As of today, more than 700 SSH students have hired us to represent them in the SSH case. This is far more than every other law firm combined. The combination of our experience, intelligence, compassion, hard work and reasonable fee has made us the choice of SSH students from every location across the Country. Again and again, students who have done their research and consulted their attorney friends have chosen us.

9. Attorney Peter Lown of Jonesboro, Georgia has given us his unqualified endorsement and referred his SSH clients to us. Mr Lown represented approximately 40 SSH clients, making him the attorney with the third largest group of SSH clients, behind the Law Offices of Michael Berger and the Dan Reed/Harward & Associates firm. On Tuesday, March 18, Mr. Lown sent the following e-mail to all of his SSH clients:"Folks:I have been continuing my investigation and research on the evolving situation with Silver State post bankruptcy. In this vein, I have reviewed and spoken to two other law firms stepping up to represent former Silver State students, the Brown, Dean law firm in Texas and the Berger law firm in California. At this point I feel you will be better represented by one of the other firms and it is my recommendation that you all sign-up with the Berger Law firm without delay. I have reviewed Mr. Berger’s qualifications and discussed his litigation plan with him. I believe Mr. Berger is eminently qualified to handle this litigation and he has now signed up over 400 other students. There is considerable strength in numbers, and Mr. Berger has already made a considerable investment in the case. I also met two of his attorneys at the bankruptcy 341 hearing and they were very aggressive and on target in their questioning. I will be refunding any remaining trust funds and I plan to have the meeting with you scheduled for April 6th at the usual location in Casa Grande.Pete Peter Charles LownHARRINGTON & LOWN9425 South Main StreetJonesboro, GA 30236-6023Tel.: 404-520-0171Fax: 404-506-9149"Earlier that same day, Mr. Lown sent me the following e-mail:"Michael:Thank you for taking the time to speak with me today. With the information you have provided regarding your plan for litigation against the various parties involved the Silver State operation and your substantial client base, I am convinced that you are best positioned to represent former Silver State students in attempting to make them whole. I will be recommending that the 40 clients Randall Stone and I represent in Arizona retain your firm to continue their litigation with Silver State. I am very pleased that someone of your ability and determination has come forward to help these people.I am looking forward to working with you.PetePeter Charles LownHARRINGTON & LOWN”

Attorney Steven Sayler of San Diego, with approximately 20 SSH students, has followed suit and has referred all of his SSH clients to us.

10. Our flat fee of $800/SSH client is the only flat fee being offered by any law firm, and is by far the most reasonable fee. There is no hourly fee, no contingent fee, and no chance of us asking you for any more money on this matter, ever.

11. We have already been highly active on this case. For example, when other attorneys stayed home, we sent our 2 Senior Associates to the First Meeting of Creditors in this case, and took a leading role in the questioning of the debtor. For more information about this and our other work on this case, check out my blog

12. Our 4 part plan of attack makes sense:

A. Assisting with filing a proof of claims and assisting the Trustee and Office of the United States Trustee in actions to recover fraudulent and preferential transfers so that assets can be brought into the SSH bankruptcy estate for the benefit of creditors.

B. Negotiating with AES, Student Loan Xpress, KeyBank and Citibank re discharge/voiding of loans made to our SSH student clients and the filing of one or more Adversary Proceedings in the SSH bankruptcy to accomplish this.

C. Cooperate with all governmental authorities interested in criminally prosecuting and fining all individuals and entities criminally responsible for the disappearance of tens of millions of dollars in student loan funds.

D. Investigating every government program, state and federal, that may provide relief to our clients.

13. We take the time to answer every phone call and every e-mail.

There is much, much more to say, but I think that is enough for now. We are the law firm that is best qualified to represent SSH students.

Silver State Update

To our Silver State clients:


Yesterday, March 31, 2008 we received almost 150 calls about a billing memo from AES. Each student wanted reassurance and an explanation. It took up most of the day for 3 of our 4 lawyers. It also taught me a valuable lesson. When we are besieged by dozens of SSH clients all asking the same question, we will immediately post an answer to the question on our bankruptcy blog, We are putting our explanation of the AES letter on our blog, We will follow the same procedure for common questions in the future. We want students with questions to look to our blog first, then email their questions to us. When the same question comes in many times, we will compose an answer and cover that question quickly and then concentrate on the unique problems.

Most of the happenings are things we have previously explained or warned about but this is a good time to go over the issues.

AES is the present servicing company for several of the banks that made loans for Silver State Students. Many of you signed original documents with US Bank, KeyBank, or Student Loan Express and now are getting letters from AES. AES now owns the notes; AES is the company expecting payment.

Many of the Students have paperwork stating that their repayments were not to start until June or ‘09 or later. Unfortunately, the small print says – ‘or when you are no longer a student’. Well, Silver State closed; you are no longer a student (and yes, I know it was through no fault of your own) – so AES accelerated all the loans and wants payment in June 08.

Most of the loans are scheduled out in 3 groups – from when they supposedly paid the money to Silver State – so the letter says $200 something on loan disbursement #1 and $200 something on loan disbursement #2 and so on… - for a total of over $600 per month - starting June 2008.

This loan is what we are trying to get eradicated in the bankruptcy court. (I chose that word carefully – there are tax ramifications of getting a loan forgiven; we want it nullified as to you and your cosigner.

To Pay Or Not To Pay?

The students are asking: should we pay it? We think that the loans are fraudulent and that we will prove it up in Court. We don’t want you to pay anything. However, if you don’t pay, AES may place negative entries on your credit reports. We are contacting the 3 major credit bureaus to give them a heads up and maybe forestall some of that problem, but we anticipate that your lender will place negative entries on your credit reports if you do not pay your lenders what they want when they want it. You could get sued. You could get a nasty phone call. (Oh, please let that happen, because you will all tell them to contact your lawyers: us).

So, what do you do? Wait a bit. Give us time to do the ’lawyer stuff’. We are working on our Adversary Proceeding Complaint and will be filing it in May, 2008.

The Proofs of Claim must be in by July 7, 2008. We will do them for you and will be contacting you all through May to see that they are done.

One piece of good news: those students who were ‘inadvertently’ filed in the wrong case when they sent in their Proofs to the Debtor’s attorney, are in the right case now. The Trustee listened to us when we complained about her and merged the cases.

AES / Xpress Loans Request for Hardship Forbearance

Don’t sign the Xpress Loans Request for Hardship Forbearance form being sent by AES to SSH students. This form contains language such as “I intend to repay my loan(s)” that is not true and that can be used against you later in Court. The AES form is not appropriate for SSH students who are planning on suing AES and their lender.

Time Extension

To accommodate clients referred to us by attorney Peter Lown of Jonesboro, Georgia and attorney Steve Sayler of San Diego, to accommodate clients who had difficulty raising our $800.00 fee, and to further increase the size and strength of our group, we are today announcing a final extension of time for SSH students to hire us to represent their interests in the SSH matter to postmarked by April 18, 2008. Due to the need to commence legal action against the SSH lenders, there will be no further extensions of this deadline.

The Winner Is

I am proud to announce that as of today, we have signed up more than 700 SSH students. This is far more than every other law firm combined. The combination of our experience, intelligence, compassion, hard work and reasonable fee has made us the choice of SSH students from every location across the Country. Again and again, students who have done their research and consulted their attorney friends have chosen us. We thank you for your trust. We will continue to use our best efforts on your behalf. We are passionate about helping you.

Road Show

Georgeann and Gail, my two Senior Associates, are hitting the road again to meet with SSH students, to tell them about our work on their behalf, and to answer all of their questions in person.

Georgeann will be in St. Louis, Missouri on Saturday, April 5 @ 3 pm. For more information about this meeting, send an e-mail directly to

Gail will be in Melbourne Florida on Sunday, April 6. For more information about this meeting, send an e-mail directly to

Thursday, March 20, 2008

Attorney Peter Lown Endorses Michael Berger

Attorney Peter Charles Lown of the Georgia Law Firm of Harrington & Lown has decided to stop working on the SSH matter and refer all of his SSH clients to the Law Offices of Michael Berger. Mr Lown represented approximately 40 SSH clients, making him the attorney with the third largest group of SSH clients, behind the Law Offices of Michael Berger and the Dan Reed/Harward & Associates firm. On Tuesday, March 18, Mr. Lown sent the following e-mail to all of his SSH clients:


I have been continuing my investigation and research on the evolving situation with Silver State post bankruptcy. In this vein, I have reviewed and spoken to two other law firms stepping up to represent former Silver State students, the Brown, Dean law firm in Texas and the Berger law firm in California. At this point I feel you will be better represented by one of the other firms and it is my recommendation that you all sign-up with the Berger Law firm without delay. I have reviewed Mr. Berger’s qualifications and discussed his litigation plan with him. I believe Mr. Berger is eminently qualified to handle this litigation and he has now signed up over 400 other students. There is considerable strength in numbers, and Mr. Berger has already made a considerable investment in the case. I also met two of his attorneys at the bankruptcy 341 hearing and they were very aggressive and on target in their questioning. I will be refunding any remaining trust funds and I plan to have the meeting with you scheduled for April 6th at the usual location in Casa Grande.


Peter Charles Lown
9425 South Main Street
Jonesboro, GA 30236-6023
Tel.: 404-520-0171
Fax: 404-506-9149"

Earlier that same day, Mr. Lown sent me the following e-mail:


Thank you for taking the time to speak with me today. With the information you have provided regarding your plan for litigation against the various parties involved the Silver State operation and your substantial client base, I am convinced that you are best positioned to represent former Silver State students in attempting to make them whole. I will be recommending that the 40 clients Randall Stone and I represent in Arizona retain your firm to continue their litigation with Silver State. I am very pleased that someone of your ability and determination has come forward to help these people.

I am looking forward to working with you.


Peter Charles Lown
9425 South Main Street
Jonesboro, GA 30236-6023
Tel.: 404-520-0171
Fax: 404-506-9149"

Friday, March 14, 2008

Geo’s and Gail’s report on the Silver State Helicopters, LLC 341(a) hearing on 3/10/08 at 3pm

Georgeann Nicol and Gail Higgins of the Law Offices of Michael Jay Berger represented all of our SSH clients at the 341a hearing of Sliver State Helicopters, LLC in Las Vegas, NV at 3pm on 3/10/08. Here is Geo and Gail’s report:

The hearing started out in the Bankruptcy court at 300 S. Las Vegas Blvd. but because over 300 people (mostly former SSH students) were in attendance, the meeting was moved across the street to a hearing room in the District Court building, (which was still filled to capacity).

Silver States was represented by its Attorney Jeanette McPherson, its Chief Accountant James Little, Stenning Schupert, a representative of EOS, and EOS’s attorney Mark First. Stenning Schueppert is the Corporate Secretary of both Silver State Services (hereinafter SSS) and Silver State Helicopters (hereinafter SSH). He is the person that signed the bankruptcy petition for SSS and the bankruptcy petition for SSH. We were there on behalf of approximately 300 students who attended the hearing and all our other clients who could not make the hearing. Local media was also in attendance.

Prior to the hearing, the atmosphere was one of excitement and hopefulness that some answers might be forth coming today. Side note: there were several clever t-shirts worn by the former SSH students reflecting their feelings about this situation.

The Trustee began the hearing by advising everyone of the rules of the hearing, i.e. no cell phones, no talking … unless asking questions, and about the time limit for questions of the Debtor’s representatives.

The Trustee announced one very important piece of information. In the future, there will be a web link to the Silver State information that will be accessible to everybody. (We noted that he recently filed a request with the Court to be allowed to Limit Notice - his mailings were costing $3,000 a pop, and would quickly eat up available funds.) The direct link is: This will save individuals from having to pay for PACER access to the Bankruptcy Court’s website.

The Trustee noted that there were actually two bankruptcy cases, SSH , the case that we are all familiar with, and SSS, the holding company for SSH. (Note: In a short discussion after the Hearing, the Trustee informed us that he is “Consolidating” these two cases. That means that all the Proofs of Claim that the Debtor’s attorney “mistakenly” filed in the wrong case will be automatically applied to the proper case. This is a good thing.)

The Trustee had a few simple questions for the representative of SSS and the Trustee’s counsel had a couple of follow up questions and then the Trustee concluded that hearing.

The Trustee then began the 341(a) hearing for the case we are all interested in, SSH. He asked the usual questions, who are you , how are you the person most knowledgeable for SSH, and so on. It should be noted that Mr. Schueppert explained essentially that the EOS contingent decided to file the Bankruptcy and that Jerry Airola refused to sign the paperwork, so Schueppert signed the paperwork on orders from the Board of Directors of SSS. Consequently, most of Schueppert’s answers to questions were “To the Best of My knowledge.”

This Q&A period went on for approximately 10 minutes. We learned that the person ‘most knowledgeable’ for SSH was: new to the entire operations because he: “had no knowledge of any real substantive SSH information prior to August of 2007.” He testified that EOS purchased 60% of SSH for $30,000,000.00 in November of 2007. When asked by the Trustee what precipitated this chapter 7 filing, he said the following three things:
1 - No more school loans were going to be funded by Citibank and Citibank was the only remaining bank writing student loans for SSH;
2. Enrollment was down, hence the income would be limited; and
3. The 01/31 sale of the Commercial side of SSH had not gone through as planned - hence no commercial contracts.

He testified that the decision to file Bankruptcy was made on Feb 4, the day of filing.

He testified that prior to EOS purchasing the 60% of SSH, excuse me: “investing in SSH,” EOS looked into the following issues: the lawsuits, the commercial activities, and the student enrollment/ the cash flow of SSH. They made a plan with Airola for the Recapitalization of SSH .

Schueppert testified that EOS had never been involved in any type of aviation company and had never been involved with any school. Based on an outside audit which Shueppert claimed was done by an independent company, EOS concluded that this would be a good investment for EOS clients and they consummated the deal in November of 2007. Of the $30,000,000.00, EOS gave Jerry Airola and Steve Pickett $13,000,000.00 cash, $13,000,000.00 supposedly went into SSH operating funds and the balance of $4,000,000.00 was for fees for the transaction itself. (Comment: EOS probably took its profit right there). (It should be remembered that this was a transaction for Jerry’s stock and ownership of SSH - it supposedly did not affect SSH directly.)

Jerry Airola and Steve Pickett failed to attend the 341(a) hearing. ORIX, the secured lender on the birds, had previously scheduled a 2004 examination of Airola, which he also did not attend, despite a Court Order that he appear. A new 2004 exam for Airola has been ordered by the Court, - set for a date to be determined. Airola must attend this examination or be subject to a Bench Warrant for his arrest.

The Trustee’s counsel broke in from time to time and asked his own questions.

After the Trustee and Trustee’s counsel asked questions for about 15 minutes, the floor was thrown open to questions from various creditors and creditors’ reps. For the next 2.5 hours, SSH’s representative had to respond to questions pertaining to the following subjects: The relationship between AES, EOS and SSH. Why did EOS file bankruptcy so quickly after buying 60% of SSH? Did EOS know about helicopters that were still flying out of the Cheyenne airport in Vegas? What was the explanation for the $180,000.00 paid to various law firms and PR firms on the exact day of the filing? It was noted by the Trustee’s attorney that these funds were probably not all earned and some of these fees should likely come back into the estate. We agree.

There were also several student and their parents who expressed their general outrage at the representatives of EOS.

The Trustee allowed the expression of their feelings and did not ask them to tone it down, nor did he ask marshals to escort them from the room. (To our knowledge the only one excluded was a cell phone violator).

Conspicuously absent at the 341(a) meeting was James Harward and Dan Reed of Harward and Associates. Also absent was any representative from the law firm of Brown & Dean.

During his testimony, the representative for EOS revealed that the reason SSH was longer using AES was because AES was caught receiving kickbacks from student loan funding in another school and thus could no longer write this type of loan. This confirmed our research and we will be posting more on this later.

Mr. Schueppert testified that EOS did not attempt to push through more students and more student loans prior to filing the bankruptcy. This is in direct contradiction to information that we have from several sources.

Gail believes that EOS’s plan was to carve out the commercial aspects of SSH and sell them off, and then close down the school. EOS advertises that it handles companies in “ownership transition” and does “recapitalizations.” We will post information on EOS separately.

Our plan right now to: 1) try to get the loans declared null and void and to 2) try to get monies returned to those who have already paid in, is underway.

Monday, March 10, 2008

San Diego Union Tribune Writes About The Plight of the SSH Students

JACIE LANDEROS / Union-Tribune

Left in the lurch
Lenders expect students to repay private loans even if school goes bankrupt
By Bruce V. Bigelow
March 9, 2008
Hector Leon was a freshly divorced father with two small children when he
decided in 2006 to enroll in a helicopter flight school offered at El Cajon's
Gillespie Field by Nevada-based Silver State Helicopters.
The flight school required all students to pay the full amount of their
$69,900 tuition up front. Leon said Silver State made it easier by arranging
a private student loan for the full amount, with payments deferred until six
months after graduation.
“When I heard their ads, which said you could make upwards of $150,000 to
$180,000 a year, I thought it was the way to get a better income and provide
a better life for my two kids,” the San Diego resident said.
But Leon's helicopter dreams began to spin out of control when he learned
on Super Bowl Sunday that Silver State had ceased operations and was filing
for bankruptcy liquidation in Las Vegas.
The privately held company has refused to comment since itsFeb. 4 Chapter
7 filing, when it issued a brief statement that blamed its abrupt liquidation
on “a rapid, unprecedented downturn in the U.S. credit markets.”
The credit squeeze “severely curtailed the availability of student loans” Silver
State said, “and resulted in a sharp and sudden downturn in new student
By some accounts, Silver State's bankruptcy was triggered after a major lender informed the company it would no
longer make loans to its students.
Now Leon and some 2,500 other Silver State students nationwide
are facing a double bind not of their making: fighting for scraps of
their paid tuition in Silver State's bankruptcy while battling
lenders who insist the students are still on the hook for repaying
the loans. “My first reaction was a sick feeling,” said Leon, 36. > News > Business -- Left in the lurch 3/9/08 1:35 PM…m%2Fnews%2Fbusiness%2F20080309-9999-lz1b9lenders.html&partnerID=621 Page 2 of 4
CHARLIE NEUMAN / Union-Tribune
A bankruptcy notice was taped to the door at Silver
State Helicopters, which required students to pay
tuition upfront.
CHARLIE NEUMAN / Union-Tribune
Local Silver State students are among
those battling lenders who insist that the
students are on the hook for repaying
their loans.
To consumer rights advocates, the situation is reminiscent of a
wave in trade school scams and student loan abuses in the 1980s
and early 1990s. They suggest Silver State may be an early
casualty as credit woes squeeze lenders and pose problems that
may be especially painful for students at postsecondary vocational
schools and private, for-profit educational institutes.
“The new twist this time around is that most of them have these
private student loans,” said Deanne Loonin, a staff attorney at the
National Consumer Law Center in Boston. Students today “don't
have the same protections and remedies” available 20 years ago, when most education loans were federally
backed, Loonin said.
For one thing, the federal Bankruptcy Act of 2005 made it far more difficult for individuals to discharge a student
loan in personal bankruptcy.
A California law established to protect students at private postsecondary and vocational schools expired June 30,
2007. Gov. Arnold Schwarzenegger vetoed legislation to renew the program, calling the existing statutes
“fundamentally flawed.”
At the time the law expired, California had about 2,400 postsecondary
schools, including technical-training institutes, cosmetology, culinary and
truck-driving schools, as well as educational chains operated by Corinthian
Colleges, Career Education Corp. and others.
Since then, there has been little if any state oversight.
The company at the center of the latest controversy was founded in 1999 in
Henderson, Nev., by Jerry Airola, who rapidly expanded Silver State's
business to at least 33 flight schools nationwide. In addition to its school in
El Cajon, the company operated in six other California cities: Long Beach,
Camarillo, Chino, Los Banos, Oakland and Sacramento.
Many, if not most, of Silver State's students received private student loans to
cover all or part of their $70,000 enrollment. But because Silver State did
not participate in federal education aid programs, its students were
ineligible for federally guaranteed student loans.
After Silver State's bankruptcy, many students learned that private student
loans usually cannot be discharged if their school goes out of business –
unlike federally guaranteed education loans.
Shortly after the bankruptcy, San Diego-based Student Loan Xpress, which
worked closely with Silver State's California flight schools, indicated it had
no plans to write off its loans to Silver State borrowers.
In a statement, Student Loan Xpress urged students to contact Silver State's bankruptcy attorney to file individual
claims for a refund on the “unearned” portion of their paid tuition.
“We also encourage those students whose tuition was financed by SLX to contact us to implement mutually
satisfactory repayment plans,” the lender said.
Students may have little recourse, but Elena Ackel of the Legal Aid Foundation of Los Angeles offered one sliver
of hope, known as “the FTC rule.” > News > Business -- Left in the lurch 3/9/08 1:35 PM…m%2Fnews%2Fbusiness%2F20080309-9999-lz1b9lenders.html&partnerID=621 Page 3 of 4
The rule, based on a Federal Trade Commission regulation, gives consumers the right to legally raise a financial
claim against a lender in cases where a seller and lender have a business arrangement, Ackel said. It applies to
private, for-profit schools and educational lenders.
To Loonin, Silver State exemplifies the sort of hidden risks the credit crunch has forced into the open as the cost
of education has skyrocketed in the United States.
She views private student loans as one of the biggest hazards because they aren't subject to the rate caps that fix
the interest rates on most federally backed loans at 6.8 percent.
In a recent study of 28 representative loans, Loonin found the average initial rate was 11.5 percent, and the
highest was nearly 19 percent. Most had origination charges that added, on average, 4.5 percent to the loan
Private loans, which were once used chiefly by graduate students, have grown dramatically, from about 5 percent
of all student loans a decade to nearly 25 percent today, Loonin said.
In 2005-06, students took out $17.3 billion in private loans, compared with $1.3 billion a decade earlier,
according to the College Board.
The dramatic growth in private student loans is due chiefly to the enormous profitability of the lightly regulated
industry, Loonin said.
As in the subprime mortgage market, one of the biggest factors driving profitability has involved packaging
student loans and selling them to hedge funds, mutual funds and other investors as “asset-based securities.”
Selling “securitized” student loans has been a key source of revenue for many lending companies, especially those
not affiliated with banks.
In a recent report issued by the National Consumer Law Center, Loonin and co-author Julia Devanthery found
the market for such securitized student loans jumped from $9.4 billion in 2005 to $16.6 billion in 2006 – a 76
percent increase.
But Wall Street lost its appetite for such deals as investors' bets on securitized subprime mortgages began turning
into disastrous losses last year. The resulting credit squeeze has prompted many lenders to make drastic cutbacks
and sever their ties with financially troubled schools, which apparently is what happened at Silver State.
Some lenders also have raised their loan requirements, left less-profitable loan programs and, of course,
increased their interest rates and fees.
“It all helps unmask the larger problem, which is that students are having trouble affording the cost of education,”
Loonin said. “We've masked that problem by throwing all these predatory loans at them.”
She contends that many postsecondary schools mislead students through aggressive marketing that makes
exaggerated promises about high-paying careers without disclosing the exorbitant costs of their classes or the
burdensome nature of private student loans.
Like a receding tide, the industry's cutbacks have exposed some hazards that students face. But nowhere has this
reef been exposed more clearly than in Silver State's bankruptcy.
In the hierarchy of bankruptcy law, students rank as unsecured creditors who stand near the end of the line of
people who hope to get their money back. Silver State has said in its filings that it does not expect any proceeds
will be left over from its liquidation to reimburse such creditors.
Still, Michael Berger, a Beverly Hills bankruptcy lawyer who is intervening on behalf of hundreds of students in > News > Business -- Left in the lurch 3/9/08 1:35 PM…m%2Fnews%2Fbusiness%2F20080309-9999-lz1b9lenders.html&partnerID=621 Page 4 of 4
California and elsewhere, said there are fraudulent aspects of the case he intends to challenge.
“We have students who got their loans funded the day before the bankruptcy, the day of the bankruptcy and the
day after the bankruptcy,” Berger said.
He also asserted that federal investigators and attorneys general in several states, including California, have
launched inquiries into Silver State's operations.
Meanwhile, Leon and other students say they are learning details about their loans – such as higher interest rates
– that they knew nothing about before now.
Leon said the interest rate on the $69,900 loan he signed in 2006 was supposed to be 10 percent. But after
looking over his paperwork, Leon discovered that his rate had jumped to 14 percent and that another lender,
American Education Services, was servicing his loan.
Another Silver State student, Tony Vaca of Long Beach, said as many as 70 Silver State students in California also
have discovered to their surprise that someone had co-signed their student loans, presumably to help them
qualify. But the co-signer's name was not familiar to any of them – and they all had the same co-signer.
Vaca and Leon said they plan to attend a key creditors meeting in Silver State's bankruptcy case that is set for
tomorrow afternoon in Las Vegas, and they plan to fight however they can.
“A lot of students are just sort of throwing up their hands ... not knowing that those $70,000 student loans are
going to be following them around for the rest of their lives,” Vaca said.
Bruce Bigelow: (619) 293-1314;
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