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.