Monday, November 02, 2009
Student Loan Xpress' Parent Corporation CIT Group Files Chapter 11 Bankruptcy
CIT Group, the owner of Student Loan Xpress, filed a Chapter 11 bankruptcy Sunday night, November 1, 2009. CIT's bankruptcy filing will be the fifth largest in U.S. history. The 101 year old lender received a $2.33 billion taxpayer-financed bailout in December 2008. This taxpayer money will most likely be lost. The effect of CIT Group's bankruptcy filing on the pending class action settlement in the Student Loan Xpress matter and on all former Silver State Helicopters students who obtained loans from SLX is not yet known. Student Loan Xpress' website states that "Student Loan Xpress is a member company of CIT Group Inc." Because Student Loan Xpress itself did not file bankruptcy, there is no automatic stay preventing litigation against Student Loan Xpress from going forward.
Tuesday, October 27, 2009
Today
2 BIG Developments today in the Silver State Helicopters matter. First, papers were filed in Federal Court in Tampa, Florida confirming that class counsel reached a proposed settlement with SLX whereby the loans of students enrolled at SSH when it ceased operations will be significantly reduced depending on the number of Federal Aviation certifications or ratings that student achieved at SSH before its bankruptcy and closure. The settlement benefits include debt forgiveness, lower interest rates, notification to credit reporting bureaus, and a refund for early repayment. Second, the attorney general task force that has been working on the SSH matter entered into a consent decree with Student Loan Xpress that will provide 112.7 million in debt relief to former students of SSH.
Here is the press release issued by the California State Attorney General:
Brown and 11 States Force Loan Provider to Forgive $112.7 million in Debts of Helicopter Flight School Students
"El Cajon-Attorney General Edmund G. Brown Jr. and 11 other state Attorneys General today forced Student Loan Xpress, Inc. to provide $112.7 million in debt relief to students facing a "mountain of debt" for helicopter flight instruction they never received.
Of the $112.7 million, approximately $25.5 million in debt relief will go to California residents who did not receive the training they paid for.
"These students did not obtain the helicopter instruction they were promised, yet Student Loan Xpress insisted that they pay off the full cost of their tuition," Brown said. "Without this agreement, Silver State flight school students would face a mountain of debt for training they never received."
Silver State Helicopters was founded near Las Vegas in 2002, and the company quickly grew. At its height, the school comprised 34 campuses in 17 states, and included 2,700 students who paid approximately $69,900 each. In California, Silver State Helicopters operated flight schools in Sacramento, Chino and El Cajon.
In August 2005, Student Loan Xpress became the preferred student loan provider for Silver State Helicopters, lending or servicing some $180 million in student loans.
Yet, even before it made its first loan, Student Loan Xpress had reason to believe that the school was in serious financial difficulty. Students complained of a shortage of instructors, flight simulators and helicopters. Only 10 percent of Silver State students graduated. Ultimately, the school filed for bankruptcy in February 2008.
Many students paid thousands of dollars of tuition, but did not receive the flight training they were promised in return. Regardless of the bankruptcy, Student Loan Express demanded that borrowers repay the full cost of the loans.
Consequently, several state Attorneys General launched an investigation, which determined that the two companies had a close business relationship, and that that Student Loan Xpress had failed to comply with the duty to provide required notices to borrowers. Under the settlement, Student Loan Xpress denied any wrongdoing.
After several months of negotiations, the attorneys general and Student Loan Xpress reached a settlement agreement. The settlement, in tandem with the resolution of a private class action, calls for Student Loan Xpress to restructure approximately $174 million of student debt, based on the number of Federal Aviation Administration (FAA) certifications each student obtained. The fewer certificates obtained, the larger the amount forgiven. The average debt relief for students under this settlement is $46,016.
The company also agreed to:
- Forgive an additional 2.5 percent of the student loan if the adjusted loan is repaid within five years;
- Refrain from providing negative information to credit reporting agencies with respect to any loan restructured; and
- Forgive interest between the dates Silver State Helicopters filed for bankruptcy and approximately the end of 2009.
Student Loan Xpress will also pay $125,000 in legal expenses to the states. The states joining California in today's settlement are: Florida, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, Oklahoma, Oregon, Utah, and Washington.
The $112.7 in debt forgiveness included in this settlement includes the total relief provided in both the states' settlement with Student Loan Xpress, and the proposed settlement in a private, nationwide class-action called Holman et al v. Student Loan Xpress, Inc. That class action was filed in federal court in Florida.
Student Loan Xpress borrowers with questions about the settlement are asked to contact the settlement administrator in this matter by e-mail, at settlementquestions@gmail.com." (Andrew August reports that the reference to the Gmail email address in the Attorney General's press release and in other media accounts is is wrong: "It is not an email address for the settlement administrator. Rather it is our private, secure email account through which we will be able to answer questions. Of course it will not be operational until the court grants preliminary approval of the settlement.")
To read the Assurance of Voluntary Compliance Agreement entered into by Student Loan Xpress and the Attorney Generals for 12 states, click on this link:
http://ag.ca.gov/cms_attachments/press/pdfs/n1827_studentloanxpress.pdf
Here is more information from the press release issued by Andrew August aaugust@pinnaclelawgroup.com and Chris Casper ccasper@jameshoyer.com , two of the leading class counsel lawyers that will directly respond to questions from class members once the proposed settlement has received preliminary approval from the court:
"The parties have requested that the federal court overseeing the action preliminarily approve the settlement and authorize notice of the terms of the proposed settlement to be disseminated to class members. The notice will contain detailed information about the terms of the settlement, class members' options, and ways to obtain additional information about the settlement. The court will then hold a hearing to decide whether to grant final approval of the settlement.
In additon to Class Counsel, numerous other attorneys who individually represented Silver State Students, including Daniel Reed from Utah (representing more than 300 students nationwide) and Michael Berger from California (representing more than one thousand students nationwide) have closely reviewed the settlement and uniformly and unconditionally support it. Moreover, Attorneys General from more than 10 states reviewed and enhanced the terms of the proposed settlement, while also reaching a separate agreement with SLX."
I will post additional information about the proposed class action settlement agreement in the days to come. Clients of mine who want individual, personal advice about the pros and cons of this proposed settlement agreement for them are urged to wait until the court gives its preliminary approval to the proposed class action settlement, approves a manner and form of notice, and establishes a proposed schedule for final approval of class action settlement. All class members will receive a notice in the mail and will have at least 45 days to consider the proposed settlement agreement. I will then happily answer any and all questions from my clients by e-mail and by telephone. Clients of mine who choose to opt out of the proposed class action settlement agreement or who are not covered by the proposed class action settlement agreement will still be represented by me and I will continue to use my best efforts on their behalf.
The proposed class action settlement only covers former students of Silver State Helicopters who obtained loans from Student Loan Xpress to attend SSH and who were still enrolled at SSH at the time that it filed its bankruptcy petition. If you got your loan from KeyBank or paid cash and/or if you were not enrolled at SSH at the time that it filed bankruptcy, you are not covered by the pending proposed class action settlement.
Here is the press release issued by the California State Attorney General:
Brown and 11 States Force Loan Provider to Forgive $112.7 million in Debts of Helicopter Flight School Students
"El Cajon-Attorney General Edmund G. Brown Jr. and 11 other state Attorneys General today forced Student Loan Xpress, Inc. to provide $112.7 million in debt relief to students facing a "mountain of debt" for helicopter flight instruction they never received.
Of the $112.7 million, approximately $25.5 million in debt relief will go to California residents who did not receive the training they paid for.
"These students did not obtain the helicopter instruction they were promised, yet Student Loan Xpress insisted that they pay off the full cost of their tuition," Brown said. "Without this agreement, Silver State flight school students would face a mountain of debt for training they never received."
Silver State Helicopters was founded near Las Vegas in 2002, and the company quickly grew. At its height, the school comprised 34 campuses in 17 states, and included 2,700 students who paid approximately $69,900 each. In California, Silver State Helicopters operated flight schools in Sacramento, Chino and El Cajon.
In August 2005, Student Loan Xpress became the preferred student loan provider for Silver State Helicopters, lending or servicing some $180 million in student loans.
Yet, even before it made its first loan, Student Loan Xpress had reason to believe that the school was in serious financial difficulty. Students complained of a shortage of instructors, flight simulators and helicopters. Only 10 percent of Silver State students graduated. Ultimately, the school filed for bankruptcy in February 2008.
Many students paid thousands of dollars of tuition, but did not receive the flight training they were promised in return. Regardless of the bankruptcy, Student Loan Express demanded that borrowers repay the full cost of the loans.
Consequently, several state Attorneys General launched an investigation, which determined that the two companies had a close business relationship, and that that Student Loan Xpress had failed to comply with the duty to provide required notices to borrowers. Under the settlement, Student Loan Xpress denied any wrongdoing.
After several months of negotiations, the attorneys general and Student Loan Xpress reached a settlement agreement. The settlement, in tandem with the resolution of a private class action, calls for Student Loan Xpress to restructure approximately $174 million of student debt, based on the number of Federal Aviation Administration (FAA) certifications each student obtained. The fewer certificates obtained, the larger the amount forgiven. The average debt relief for students under this settlement is $46,016.
The company also agreed to:
- Forgive an additional 2.5 percent of the student loan if the adjusted loan is repaid within five years;
- Refrain from providing negative information to credit reporting agencies with respect to any loan restructured; and
- Forgive interest between the dates Silver State Helicopters filed for bankruptcy and approximately the end of 2009.
Student Loan Xpress will also pay $125,000 in legal expenses to the states. The states joining California in today's settlement are: Florida, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, Oklahoma, Oregon, Utah, and Washington.
The $112.7 in debt forgiveness included in this settlement includes the total relief provided in both the states' settlement with Student Loan Xpress, and the proposed settlement in a private, nationwide class-action called Holman et al v. Student Loan Xpress, Inc. That class action was filed in federal court in Florida.
Student Loan Xpress borrowers with questions about the settlement are asked to contact the settlement administrator in this matter by e-mail, at settlementquestions@gmail.com." (Andrew August reports that the reference to the Gmail email address in the Attorney General's press release and in other media accounts is is wrong: "It is not an email address for the settlement administrator. Rather it is our private, secure email account through which we will be able to answer questions. Of course it will not be operational until the court grants preliminary approval of the settlement.")
To read the Assurance of Voluntary Compliance Agreement entered into by Student Loan Xpress and the Attorney Generals for 12 states, click on this link:
http://ag.ca.gov/cms_attachments/press/pdfs/n1827_studentloanxpress.pdf
Here is more information from the press release issued by Andrew August aaugust@pinnaclelawgroup.com and Chris Casper ccasper@jameshoyer.com , two of the leading class counsel lawyers that will directly respond to questions from class members once the proposed settlement has received preliminary approval from the court:
"The parties have requested that the federal court overseeing the action preliminarily approve the settlement and authorize notice of the terms of the proposed settlement to be disseminated to class members. The notice will contain detailed information about the terms of the settlement, class members' options, and ways to obtain additional information about the settlement. The court will then hold a hearing to decide whether to grant final approval of the settlement.
In additon to Class Counsel, numerous other attorneys who individually represented Silver State Students, including Daniel Reed from Utah (representing more than 300 students nationwide) and Michael Berger from California (representing more than one thousand students nationwide) have closely reviewed the settlement and uniformly and unconditionally support it. Moreover, Attorneys General from more than 10 states reviewed and enhanced the terms of the proposed settlement, while also reaching a separate agreement with SLX."
I will post additional information about the proposed class action settlement agreement in the days to come. Clients of mine who want individual, personal advice about the pros and cons of this proposed settlement agreement for them are urged to wait until the court gives its preliminary approval to the proposed class action settlement, approves a manner and form of notice, and establishes a proposed schedule for final approval of class action settlement. All class members will receive a notice in the mail and will have at least 45 days to consider the proposed settlement agreement. I will then happily answer any and all questions from my clients by e-mail and by telephone. Clients of mine who choose to opt out of the proposed class action settlement agreement or who are not covered by the proposed class action settlement agreement will still be represented by me and I will continue to use my best efforts on their behalf.
The proposed class action settlement only covers former students of Silver State Helicopters who obtained loans from Student Loan Xpress to attend SSH and who were still enrolled at SSH at the time that it filed its bankruptcy petition. If you got your loan from KeyBank or paid cash and/or if you were not enrolled at SSH at the time that it filed bankruptcy, you are not covered by the pending proposed class action settlement.
Wednesday, October 21, 2009
Tomorrow
The proposed class action settlement agreement with Student Loan Xpress will be submitted to the Court tomorrow or Friday for preliminary approval. I will post detailed information about the proposed settlement as soon as it is filed with the Court. If and when the proposed settlement agreement is approved by the Court, as I expect it will be, written notice will be sent out to all class members. This Notice will give you detailed information about the settlement agreement, and will provide ample time for you to evaluate the merits of the settlement for you.
For my clients with KeyBank loans and my clients who paid cash to attend SSH, I am continuing to work for you and will post further updates as soon as there are important developments that affect you.
For my clients with KeyBank loans and my clients who paid cash to attend SSH, I am continuing to work for you and will post further updates as soon as there are important developments that affect you.
Friday, October 09, 2009
SSH In The News (Las Vegas Sun, October 8, 2009)
Ex-sheriff candidate accused of fraud tied to bankruptcy
Trustee: Silver State Helicopters sought cash, students as finances worsened
Steve Marcus
Jerry Airola, president of Silver State Helicopters, poses on a MD500 jet helicopter in early 2008 piloted by Topper Nelson at the North Las Vegas Airport.
By Steve Green (contact)
Thursday, Oct. 8, 2009 | 5:32 p.m.
Jerry Airola
Related Document (.pdf)
See the complaint against Jerry Airola
Sun Coverage
Students rage about flighty helicopter school (2-15-08)
Airola powers down helicopter company (2-4-08)
Airola unable to capitalize on scandal (11-2-06)
Former Clark County sheriff's candidate Jerry Airola is under fire in his helicopter company's bankruptcy case, with a trustee suing Airola and others to recover millions of dollars the trustee says were fraudulently transferred prior to the bankruptcy.
Silver State Helicopters LLC shut down and filed for bankruptcy protection in February 2008, with Airola saying at the time the company was hurt by a lack of funding for student loans that the company needed to run its flight schools.
Reports at the time said the shutdown involved 30 locations around the country, put 750 employees out of work and left some 2,700 students stuck with student loan payments for instruction they would no longer receive.
A report in Inc. Magazine said that three years before the bankruptcy, Silver State had posted $40 million in revenue. An industry observer said the problem with Silver State was that it promoted training for helicopter pilots at a time when there wasn't a big demand for such pilots.
With operations in Southern Nevada including the Boulder City and North Las Vegas airports, Silver State filed for Chapter 7 liquidation in U.S. Bankruptcy Court for Nevada and attorney James Lisowski Sr. was appointed trustee in the case.
Lisowski, who has been working to sell assets to recover funds for creditors, last month filed an adversary lawsuit alleging the fraudulent transfers.
The suit was filed against Airola, former Silver State Chief Financial Officer Steve Pickett, First American Equity LLC (allegedly controlled by Airola and Pickett) and Stars & Stripes Heliplex LLC (allegedly controlled by Pickett and businessman Steve Trenk).
Pickett could not be located for comment on the accusations. But attorney Nile Leatham, who represents Airola, said Thursday that he was preparing to file a response disputing the allegations.
"I don't believe the complaint is meritorious," Leatham said.
The trustee's lawsuit, seeking to recover funds from the defendants for creditors, alleges that in 2007 Airola and Pickett made a deal to recapitalize the company that resulted in Airola being paid more than $10 million.
By entering into a $40 million revolving credit line with Orix Commercial Finance LLC in 2007, of which $31 million was due in February 2008, and continuing to seek helicopter students in 2007, Airola and Pickett left Silver State vulnerable to bankruptcy, the trustee charged.
In 2007 "Airola and Pickett caused (Silver State) to continue its course of offering training to student pilots; courses that (Silver State) did not have the resources to service and complete," the lawsuit charges.
The suit detailed these deals:
--The spring 2007 transfer of assets of an Airola company, Air Excel Inc., which had a lease with the Boulder City Airport, to Stars and Stripes Air Tours LLC for $2.4 million. The deal included Stars and Stripes paying off a mortgage at the Boulder City Airport, $1.2 million in cash and a $700,000 promissory note, the suit said.
--The August 2007 transfer by Silver State to First American of a heliport at the North Las Vegas Airport, $1.2 million in cash, the $700,000 Stars and Stripes note and all the issued and outstanding shares of Air Excel. First American paid nothing for these assets, the lawsuit charges.
--The June 2008 transfer of the heliport from First American to Stars & Stripes Heliplex.
"During the period from April 2007 through August 2007, Airola and Pickett caused (Silver State) to divest substantial assets," the lawsuit charges. "By this series of transactions, Airola, Pickett and First American stripped (Silver State) of assets, for their personal benefit, worth at least $7 million, in the 10 months immediately preceding the filing of the bankruptcy."
The trustee claims Silver State was insolvent when some of these deals were made, meaning Airola and Pickett allegedly received some assets that rightfully should go to creditors.
Silver State "made the transfer with the actual intent to hinder, delay or defraud" creditors, the lawsuit said of the deals in which the heliport, Air Excel shares, Stars and Stripes note and $1.2 million in cash were allegedly transferred by Silver State to Airola, Pickett and First American.
Silver State also "received less than a reasonably equivalent value" in the deal, the suit charges.
The suit also asserts claims of breach of fiduciary duty, unjust enrichment and conversion against Airola and Pickett.
The trustee seeks damages of $8.2 million against Airola, Pickett and First American, plus interest from August 2007.
His suit also seeks a judgment against the defendants for the fair market value of the heliport, the Stars and Stripes note and the Air Excel shares at the time they were transferred.
"This action by the trustee is a good thing for all legitimate creditors of SSH (Silver State Helicopters). It may help to bring money back into the SSH bankruptcy estate. Meanwhile, we are all still waiting to see if any governmental agency will bring criminal charges against Airola and Pickett," said California attorney Michael Jay Berger, who represents student creditors in the case.
In June 2008, In Business TV, a sister production of the Las Vegas Sun, reported FBI agents had interviewed Silver State students as potential crime victims.
Berger, too, said Thursday that he has thousands of student loan clients who have received questionnaires from the FBI. He said some 15 state attorneys general from around the country have been looking into the issue.
Students typically borrowed $70,000 at interest rates of as high as 15 percent, he said. Citibank has forgiven the loans of 68 of his clients, he's working with Key Bank in behalf of another 179 clients and is close to a settlement for 1,090 clients with the major lender Student Loan Xpress, Berger said.
But for students who paid cash, recovering their losses may be challenging because of a lack of assets in the case and the first-lien claim of Orix.
"The bad news is we're pretty far in the hole in this case," Berger said.
Leatham, in disputing the allegations in the trustee lawsuit, said he believes the key issue is whether the company was solvent when the transactions were made.
"It was a strong going-concern company at that time," Leatham said, arguing its demise was caused by the economic downturn and the drying up of student loan funding.
Trustee: Silver State Helicopters sought cash, students as finances worsened
Steve Marcus
Jerry Airola, president of Silver State Helicopters, poses on a MD500 jet helicopter in early 2008 piloted by Topper Nelson at the North Las Vegas Airport.
By Steve Green (contact)
Thursday, Oct. 8, 2009 | 5:32 p.m.
Jerry Airola
Related Document (.pdf)
See the complaint against Jerry Airola
Sun Coverage
Students rage about flighty helicopter school (2-15-08)
Airola powers down helicopter company (2-4-08)
Airola unable to capitalize on scandal (11-2-06)
Former Clark County sheriff's candidate Jerry Airola is under fire in his helicopter company's bankruptcy case, with a trustee suing Airola and others to recover millions of dollars the trustee says were fraudulently transferred prior to the bankruptcy.
Silver State Helicopters LLC shut down and filed for bankruptcy protection in February 2008, with Airola saying at the time the company was hurt by a lack of funding for student loans that the company needed to run its flight schools.
Reports at the time said the shutdown involved 30 locations around the country, put 750 employees out of work and left some 2,700 students stuck with student loan payments for instruction they would no longer receive.
A report in Inc. Magazine said that three years before the bankruptcy, Silver State had posted $40 million in revenue. An industry observer said the problem with Silver State was that it promoted training for helicopter pilots at a time when there wasn't a big demand for such pilots.
With operations in Southern Nevada including the Boulder City and North Las Vegas airports, Silver State filed for Chapter 7 liquidation in U.S. Bankruptcy Court for Nevada and attorney James Lisowski Sr. was appointed trustee in the case.
Lisowski, who has been working to sell assets to recover funds for creditors, last month filed an adversary lawsuit alleging the fraudulent transfers.
The suit was filed against Airola, former Silver State Chief Financial Officer Steve Pickett, First American Equity LLC (allegedly controlled by Airola and Pickett) and Stars & Stripes Heliplex LLC (allegedly controlled by Pickett and businessman Steve Trenk).
Pickett could not be located for comment on the accusations. But attorney Nile Leatham, who represents Airola, said Thursday that he was preparing to file a response disputing the allegations.
"I don't believe the complaint is meritorious," Leatham said.
The trustee's lawsuit, seeking to recover funds from the defendants for creditors, alleges that in 2007 Airola and Pickett made a deal to recapitalize the company that resulted in Airola being paid more than $10 million.
By entering into a $40 million revolving credit line with Orix Commercial Finance LLC in 2007, of which $31 million was due in February 2008, and continuing to seek helicopter students in 2007, Airola and Pickett left Silver State vulnerable to bankruptcy, the trustee charged.
In 2007 "Airola and Pickett caused (Silver State) to continue its course of offering training to student pilots; courses that (Silver State) did not have the resources to service and complete," the lawsuit charges.
The suit detailed these deals:
--The spring 2007 transfer of assets of an Airola company, Air Excel Inc., which had a lease with the Boulder City Airport, to Stars and Stripes Air Tours LLC for $2.4 million. The deal included Stars and Stripes paying off a mortgage at the Boulder City Airport, $1.2 million in cash and a $700,000 promissory note, the suit said.
--The August 2007 transfer by Silver State to First American of a heliport at the North Las Vegas Airport, $1.2 million in cash, the $700,000 Stars and Stripes note and all the issued and outstanding shares of Air Excel. First American paid nothing for these assets, the lawsuit charges.
--The June 2008 transfer of the heliport from First American to Stars & Stripes Heliplex.
"During the period from April 2007 through August 2007, Airola and Pickett caused (Silver State) to divest substantial assets," the lawsuit charges. "By this series of transactions, Airola, Pickett and First American stripped (Silver State) of assets, for their personal benefit, worth at least $7 million, in the 10 months immediately preceding the filing of the bankruptcy."
The trustee claims Silver State was insolvent when some of these deals were made, meaning Airola and Pickett allegedly received some assets that rightfully should go to creditors.
Silver State "made the transfer with the actual intent to hinder, delay or defraud" creditors, the lawsuit said of the deals in which the heliport, Air Excel shares, Stars and Stripes note and $1.2 million in cash were allegedly transferred by Silver State to Airola, Pickett and First American.
Silver State also "received less than a reasonably equivalent value" in the deal, the suit charges.
The suit also asserts claims of breach of fiduciary duty, unjust enrichment and conversion against Airola and Pickett.
The trustee seeks damages of $8.2 million against Airola, Pickett and First American, plus interest from August 2007.
His suit also seeks a judgment against the defendants for the fair market value of the heliport, the Stars and Stripes note and the Air Excel shares at the time they were transferred.
"This action by the trustee is a good thing for all legitimate creditors of SSH (Silver State Helicopters). It may help to bring money back into the SSH bankruptcy estate. Meanwhile, we are all still waiting to see if any governmental agency will bring criminal charges against Airola and Pickett," said California attorney Michael Jay Berger, who represents student creditors in the case.
In June 2008, In Business TV, a sister production of the Las Vegas Sun, reported FBI agents had interviewed Silver State students as potential crime victims.
Berger, too, said Thursday that he has thousands of student loan clients who have received questionnaires from the FBI. He said some 15 state attorneys general from around the country have been looking into the issue.
Students typically borrowed $70,000 at interest rates of as high as 15 percent, he said. Citibank has forgiven the loans of 68 of his clients, he's working with Key Bank in behalf of another 179 clients and is close to a settlement for 1,090 clients with the major lender Student Loan Xpress, Berger said.
But for students who paid cash, recovering their losses may be challenging because of a lack of assets in the case and the first-lien claim of Orix.
"The bad news is we're pretty far in the hole in this case," Berger said.
Leatham, in disputing the allegations in the trustee lawsuit, said he believes the key issue is whether the company was solvent when the transactions were made.
"It was a strong going-concern company at that time," Leatham said, arguing its demise was caused by the economic downturn and the drying up of student loan funding.
Thursday, October 08, 2009
Not Yet
Predicting exactly when a proposed class action settlement agreement will be submitted to the Court has proven to be difficult. This proposed agreement will cover most former SSH students who obtained loans from Student Loan Xpress to attend Silver State Helicopters and were still enrolled at SSH at the time that it filed bankruptcy. It now looks like the settlement papers will be filed with the Court somewhere between next Tuesday, October 13 and next Friday, October 16. All class members will have a chance to accept the settlement or "opt out" and reject the proposed settlement. Many of my clients have pressed me for the details of this proposed agreement, but until it is submitted to court, these details are still covered by a written confidentiality agreement.
Tuesday, September 29, 2009
Silver State Helicopters Trustee Sues Jerry Airola and Steve Pickett
On September 15, 2009, James F. Lisowski, Sr. Chapter 7 Trustee for Silver State Helicopters, LLC ("SSH") and Silver State Services Corporation, filed an Adversary Proceeding Complaint ("The Complaint) against Jerry Airola ("Airola"), Steve Pickett ("Pickett"), First American Equity, LLC ("First American") and Stars & Stripes Heliplex, LLC. The Complaint seeks the avoidance of preferential and fraudulent transfers of assets and the recovery of more than $8,200,000.00 in damages from the defendants based on Claims for Relief for Recovery of Preference, Avoidance of Fraudulent Tranfer, Breach of Fiduciary Duty, Unjustment Enrichment and Conversion.
Airola was the President and Founder of SSH. Pickett was the Chief Financial Officer of SSH. Airola and Pickett are the members of Defendant First American and Defendant Stars & Stripes Heliplex, LLC.
The Complaint alleges the fraudulent and preferential transfer of assets from SSH to First American, including the transfer of 1.2 million dollars in cash, a $700,000.00 promissory note, all issued and outstanding shares of Air Excel, a company owned by SSH, and real property located at 500 E. Cheyenne Avenue, North Las Vegas, Nevada, all for no consideration. The Cheyenne Avenue property is alleged to include a private airport, one of the few facilities approved as such in the greater Las Vegas area.
The Complaint further alleges that between April 2007 and August 2007, Airola was paid in excess of ten million dollars pursuant to a "Recapitalization Agreement." During the same period of time, Airola and Pickett caused SSH to enter into a revolving $40,000,000.00 credit line with Orix Commercial Finance LLC. Less than 6 months later, Silver State Helicopters, LLC filed its Chapter 7 bankruptcy.
This action by the Trustee is a good thing for all legitimate creditors of SSH. It may help to bring money back into the SSH bankruptcy estate. Meanwhile, we are all still waiting to see if any governmental agency will bring criminal charges against Airola and Pickett.
Airola was the President and Founder of SSH. Pickett was the Chief Financial Officer of SSH. Airola and Pickett are the members of Defendant First American and Defendant Stars & Stripes Heliplex, LLC.
The Complaint alleges the fraudulent and preferential transfer of assets from SSH to First American, including the transfer of 1.2 million dollars in cash, a $700,000.00 promissory note, all issued and outstanding shares of Air Excel, a company owned by SSH, and real property located at 500 E. Cheyenne Avenue, North Las Vegas, Nevada, all for no consideration. The Cheyenne Avenue property is alleged to include a private airport, one of the few facilities approved as such in the greater Las Vegas area.
The Complaint further alleges that between April 2007 and August 2007, Airola was paid in excess of ten million dollars pursuant to a "Recapitalization Agreement." During the same period of time, Airola and Pickett caused SSH to enter into a revolving $40,000,000.00 credit line with Orix Commercial Finance LLC. Less than 6 months later, Silver State Helicopters, LLC filed its Chapter 7 bankruptcy.
This action by the Trustee is a good thing for all legitimate creditors of SSH. It may help to bring money back into the SSH bankruptcy estate. Meanwhile, we are all still waiting to see if any governmental agency will bring criminal charges against Airola and Pickett.
One More Week
Final documents are being prepared now regarding the proposed class action settlement between Student Loan Xpress and many of the former Silver State Helicopters students who received loans from Student Loan Xpress to attend Silver State Helicopters schools throughout the country. My best estimate is that these documents will be submitted to the Court on or before October 5, 2009. I will post an update to my blog regarding the terms of the proposed settlement as soon as these documents are filed with the Court.
Monday, August 31, 2009
SLX Settlement Delayed Until September 28, 2009
A proposed Settlement Agreement covering the vast majority of my clients with loans from Student Loan Xpress, as well as most other former SSH students with loans from SLX, has been delayed until September 28, 2009. This delay was caused by the ongoing negotiations between SLX and the AG Task Force.
Thursday, August 06, 2009
Silver State Helicopters Students Near Settlement With Student Loan Xpress
A proposed Settlement Agreement covering the vast majority of my clients with loans from Student Loan Xpress, as well as most other former SSH students with loans from SLX, is scheduled to be filed in United States District Court on August 31, 2009. This proposed nationwide class action settlement is to be filed in United States District Court Middle District of Florida Tampa Division Case No. 8:080cv-00305-SDM-MAP. All leading counsel representing former students of SSH have joined together to negotiate and approve the best possible settlement for our former SSH student clients. These attorneys include myself, Andrew August and Kevin Rooney of the Pinnacle Law Group in San Francisco, and Chris Casper of Tampa, Florida. Certain state Attorney Generals, including the Florida Attorney General, who have undertaken a cooperative investigation of the business practices of SSH and the events leading to its closure in February of 2008 (The AG Task Force), are reviewing the proposed settlement and using their influence to get the best possible settlement terms for former SSH students. These settlement negotiations have been ongoing for more than one year, and include three mediation sessions before retired Judge William Cahill in August, September and December of 2008 in San Francisco, California. The parties have engaged in confirmatory discovery and exchanged multiple drafts of a more than sixty page settlement agreement. Plaintiff's counsel have conducted extensive independent investigation and analysis, including obtaining a copy of SSH's computer and hard copy records. 3 separate putative class actions are pending against SLX on behalf of Student borrowers of SSH, and all of these actions may be said to have helped facilitate the proposed settlement. Most of this formerly confidential information has been set forth in pleadings filed in the above referenced District Court Case and can now be shared with you. The terms of the proposed settlement must remain confidential until the proposed agreement is filed with the Court. I will post full details regarding the proposed settlement agreement on this blog at the earliest possible time. Each client of mine with loans from Student Loan Xpress will be contacted individually regarding this settlement proposal.
Thursday, April 23, 2009
Silver State Update
Patience is a virtue. Have you heard that one before? The Silver State Helicopters case is definitely one that has required both action and patience on my behalf and on behalf of all of my clients. For my Citibank clients, I have already achieved 100% success. For all others, the work continues.
Right on Citibank
When Citibank first offered to forgive 100% of my Citibank clients’ SSH student loan debt in all states except California in exchange for an assignment of the clients’ proofs of claim in the SSH bankruptcy, there were a few skeptics. Some suggested that there must be a catch. They said that perhaps Citibank would sell the loans to a third party that would then try to collect. They asked if the students would be sent a 1099 and incur debt settlement income. They wondered aloud if the client’s credit would be trashed. Here is the reality of what has happened:
1. The Citibank offer was expanded and extended to all former SSH students with took out student loans from Citibank to attend SSH, including all of my California clients with Citibank loans.
2. All of my clients with Citibank loans took my advice and accepted Citibank’s offer of 100% loan forgiveness.
3. Citibank did not resell the loans to any third party.
4. Citibank did not send 1099s to any of my clients.
5. Citibank kept its promise to completely remove all reference to the Citibank loans from its credit reporting to all credit reporting agencies.
6. Now, in an unprecedented development, Citibank has agreed to refund all of the money that one of my Citibank clients paid on his Citibank loan prior to receiving Citbank's 100% debt forgiveness offer.
I think it is fair to say that I was right on Citibank. In saying this, I acknowledge the role of Andrew August and Kevin Rooney of the Pinnacle Law Group in helping to achieve this result.
Still Waiting on SLX
On February 18, 2009 I wrote a post on this blog entitled "SLX is Next" in which I stated my belief that SLX would be the next lender to settle with my SSH clients and told my clients with SLX loans to "look for an announcement in the next 30 days." 64 days later, we are all still waiting for this settlement offer that I can recommend to my clients. As I have stated before on this blog, settlement negotiations with SLX are covered by a written confidentiality agreement. This prevents me from discussing the settlement negotiations and the proposed terms of the settlement offer. I will use my best efforts to resolve any remaining differences and to get each and every one of my SSH clients with SLX loans the best possible settlement offer. All Plaintiffs' counsel are cooperating on this matter. Counsel for SLX is the Los Angeles office of Sidley & Austin, with attorney Jennifer Landau acting as lead counsel for SLX. I will e-mail all of my SLX clients with the details of this settlement offer as soon as the offer is made public.
Come On, KeyBank
KeyBank is firmly in last place when it comes to settling with its clients that obtained student loans to attend SSH. Nixon Peabody LLP is counsel for KeyBank on the SSH matter, with Scott O'Connel of the Manchester, New Hampshire branch of the firm serving as lead counsel. Although there have been general discussions and an unsuccessful mediation, there has not been any reasonable settlement offer from KeyBank and its counsel. KeyBank seems to want to wait and see what happens with Citibank and SLX first. With Citibank resolved and SLX well on its way, I am hopeful that real progress will be made soon with KeyBank. On a more positive note, KeyBank continues to honor its no payment while this matter is in dispute offer and has not sued any of my clients. For that matter, I have not received any reports of any lawsuit by SLX against any of my clients either.
Still Out of the Money in the SSH Bankruptcy Case
On November 4, 2008, I wrote that "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." 1,620 separate pleading have been filed in the SSH bankruptcy since it was filed on February 5, 2008, but my analysis remains the same: There is no money to pay to unsecured creditors. There has been no indication of when, if ever, a distribution will be made to the unsecured creditors. This is true even for my clients who have made part of their claims priority claims that get paid ahead of general unsecured creditor claims. So far, the best thing that I have been able to do with my clients' proofs of claim against SSH is to trade them to the lenders in exchange for loan forgiveness, as we did with Citibank. Efforts continue on a daily basis to bring additional assets into the bankruptcy estate. If and when I believe that there will be a distribution to my clients from the bankruptcy estate, I will post further information on this subject.
Is Delay Good For You?
It's better than losing. It's better than being sued. It gives the FBI and the State Attorney Generals more time to investigate and develop a case. Public opinon and government pressure can help us. Banks that take government money may be held accountable to the government. In my opinion, delay is better than accepting anything less than the best offer that I can get for you.
Right on Citibank
When Citibank first offered to forgive 100% of my Citibank clients’ SSH student loan debt in all states except California in exchange for an assignment of the clients’ proofs of claim in the SSH bankruptcy, there were a few skeptics. Some suggested that there must be a catch. They said that perhaps Citibank would sell the loans to a third party that would then try to collect. They asked if the students would be sent a 1099 and incur debt settlement income. They wondered aloud if the client’s credit would be trashed. Here is the reality of what has happened:
1. The Citibank offer was expanded and extended to all former SSH students with took out student loans from Citibank to attend SSH, including all of my California clients with Citibank loans.
2. All of my clients with Citibank loans took my advice and accepted Citibank’s offer of 100% loan forgiveness.
3. Citibank did not resell the loans to any third party.
4. Citibank did not send 1099s to any of my clients.
5. Citibank kept its promise to completely remove all reference to the Citibank loans from its credit reporting to all credit reporting agencies.
6. Now, in an unprecedented development, Citibank has agreed to refund all of the money that one of my Citibank clients paid on his Citibank loan prior to receiving Citbank's 100% debt forgiveness offer.
I think it is fair to say that I was right on Citibank. In saying this, I acknowledge the role of Andrew August and Kevin Rooney of the Pinnacle Law Group in helping to achieve this result.
Still Waiting on SLX
On February 18, 2009 I wrote a post on this blog entitled "SLX is Next" in which I stated my belief that SLX would be the next lender to settle with my SSH clients and told my clients with SLX loans to "look for an announcement in the next 30 days." 64 days later, we are all still waiting for this settlement offer that I can recommend to my clients. As I have stated before on this blog, settlement negotiations with SLX are covered by a written confidentiality agreement. This prevents me from discussing the settlement negotiations and the proposed terms of the settlement offer. I will use my best efforts to resolve any remaining differences and to get each and every one of my SSH clients with SLX loans the best possible settlement offer. All Plaintiffs' counsel are cooperating on this matter. Counsel for SLX is the Los Angeles office of Sidley & Austin, with attorney Jennifer Landau acting as lead counsel for SLX. I will e-mail all of my SLX clients with the details of this settlement offer as soon as the offer is made public.
Come On, KeyBank
KeyBank is firmly in last place when it comes to settling with its clients that obtained student loans to attend SSH. Nixon Peabody LLP is counsel for KeyBank on the SSH matter, with Scott O'Connel of the Manchester, New Hampshire branch of the firm serving as lead counsel. Although there have been general discussions and an unsuccessful mediation, there has not been any reasonable settlement offer from KeyBank and its counsel. KeyBank seems to want to wait and see what happens with Citibank and SLX first. With Citibank resolved and SLX well on its way, I am hopeful that real progress will be made soon with KeyBank. On a more positive note, KeyBank continues to honor its no payment while this matter is in dispute offer and has not sued any of my clients. For that matter, I have not received any reports of any lawsuit by SLX against any of my clients either.
Still Out of the Money in the SSH Bankruptcy Case
On November 4, 2008, I wrote that "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." 1,620 separate pleading have been filed in the SSH bankruptcy since it was filed on February 5, 2008, but my analysis remains the same: There is no money to pay to unsecured creditors. There has been no indication of when, if ever, a distribution will be made to the unsecured creditors. This is true even for my clients who have made part of their claims priority claims that get paid ahead of general unsecured creditor claims. So far, the best thing that I have been able to do with my clients' proofs of claim against SSH is to trade them to the lenders in exchange for loan forgiveness, as we did with Citibank. Efforts continue on a daily basis to bring additional assets into the bankruptcy estate. If and when I believe that there will be a distribution to my clients from the bankruptcy estate, I will post further information on this subject.
Is Delay Good For You?
It's better than losing. It's better than being sued. It gives the FBI and the State Attorney Generals more time to investigate and develop a case. Public opinon and government pressure can help us. Banks that take government money may be held accountable to the government. In my opinion, delay is better than accepting anything less than the best offer that I can get for you.
Continuing Bankruptcy Legal Education
Every month of the year, I take classes, seminars and programs in bankruptcy law. Every week, I read bankruptcy journals and newsletters. I go far beyond the minimum requirements for continuing my status as a Specialist in Bankruptcy Law, Certified by the California Board of Legal Specialization of the State Bar of California. On March 13,2009 I participated in an all day program put on by the American Bankruptcy Institute in Beverly Hills, California entitled, “Bankruptcy Battleground West.” Subjects covered included emerging real estate issues in bankruptcy, selling assets in bankruptcy proceedings, and the economic forecast for 2009. Many prominent bankruptcy attorneys from across the Country attended, as did the United States Trustee for Region 16 and 5 of the bankruptcy judges from the Central District of California.
On Saturday, April 11, 2009 I attended the Central District Consumer Bankruptcy Attorney Association program on Tax Issues in Bankruptcy at Southwestern Law School.
On May 15-17, I will be attending the California Bankruptcy Forum Conference at the Loews Coronado Bay Resort in San Diego, California. Every bankruptcy judge in California is invited to attend this program free of charge for both the judge and a guest, including the cost of resort lodging, food and all programs. In return, the judges help to teach the attending bankruptcy attorneys about recent developments in bankruptcy law. Most of the Judges in the Central District of California where I practice accept this offer every year. Past year’s events that I attended in Napa and in Palm Desert allowed me not only to further my bankruptcy education, but also to get to know more of the judges on a personal level. This event is always both educational and fun.
On Saturday, April 11, 2009 I attended the Central District Consumer Bankruptcy Attorney Association program on Tax Issues in Bankruptcy at Southwestern Law School.
On May 15-17, I will be attending the California Bankruptcy Forum Conference at the Loews Coronado Bay Resort in San Diego, California. Every bankruptcy judge in California is invited to attend this program free of charge for both the judge and a guest, including the cost of resort lodging, food and all programs. In return, the judges help to teach the attending bankruptcy attorneys about recent developments in bankruptcy law. Most of the Judges in the Central District of California where I practice accept this offer every year. Past year’s events that I attended in Napa and in Palm Desert allowed me not only to further my bankruptcy education, but also to get to know more of the judges on a personal level. This event is always both educational and fun.
We Do Loan Modifications Too
Loan Modification is a hot topic now. Many firms throughout the country are offering loan modification services. Often, the attorney who solicits the business is a front for others or there is no attorney involved whatsoever. They take on any client who can pay their fee, with little or no regard for the likelihood of success. Many of the firms collect illegal up front fees, do little or no work, and leave a trail of consumer complaints in their wake.
At my law office, all loan modification work is done by me and by the Senior Associate Attorneys that work for me. We do not take cases that we think are unlikely to succeed. As with our bankruptcy work, we offer a free consultation to anyone and everyone who is interested in receiving our help.
Our fee structure is simple: $2,500.00 for the first loan on any property and $1,250.00 for any second or third loan on the same property. Unlike other loan modification firms, we offer a full range of bankruptcy services when needed. Sometimes the elimination of debts in a bankruptcy proceeding can increase the likelihood of a successful loan modification after the bankruptcy case is concluded. Other times, a successful loan modification can avoid the need for a bankruptcy altogether.
At my law office, all loan modification work is done by me and by the Senior Associate Attorneys that work for me. We do not take cases that we think are unlikely to succeed. As with our bankruptcy work, we offer a free consultation to anyone and everyone who is interested in receiving our help.
Our fee structure is simple: $2,500.00 for the first loan on any property and $1,250.00 for any second or third loan on the same property. Unlike other loan modification firms, we offer a full range of bankruptcy services when needed. Sometimes the elimination of debts in a bankruptcy proceeding can increase the likelihood of a successful loan modification after the bankruptcy case is concluded. Other times, a successful loan modification can avoid the need for a bankruptcy altogether.
Boston Marathon 2009
My running friends know that I am a regular participant in the Boston Marathon. On Monday, April 20, 2009, I completed my 6th Boston Marathon, finishing in a time of 3:39:36. In addition to competing as an individual, I was part of a Men’s Masters Team for Track Club Los Angeles (“TCLA”).
The race was exciting as always and the crowd support was fantastic. The woman’s race was decided by one second. I had the pleasure of meeting many of the top finishers in the race, including the female winner of this year’s Boston Marathon Salina Kosgei, and the 2 top finishing Americans, Kara Goucher and Ryan Hall (both finished third). Shown above are some photos of me and my new friends.
Tuesday, March 10, 2009
A "Key" Victory for Flight School Students
This article should be of interest to all of my SSH clients with loans from KeyBank. It is reprinted from the Higher Ed Watch Blog where it was posted earlier today:
"It appears that KeyBank's predatory private student loan practices are finally catching up with the company.
Late last month, the bank settled a lawsuit filed by 51 former students from TAB Express International, a defunct flight school in northern Florida, who had accused the lender of colluding with the school to defraud them. The settlement puts an end to the case, which was scheduled to go to trial before a jury this week in a state circuit court in Florida.
Meanwhile, according to a U.S Senator in Florida, the FBI and a group of state attorneys general are investigating the exclusive lending arrangements that KeyBank had with TAB Express and Silver State Helicopters, a Nevada-based chain that shut down suddenly on Super Bowl Sunday last year.
As we have reported previously, 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 "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 providers, securitized the loans, shifting these high-risk loans onto unsuspecting investors.
One of the most aggressive players in this arena has been KeyBank, which has formed exclusive arrangements with dozens of unlicensed trade schools -- particularly ones that focus on computer training and flight training. These schools have required their students to pay for the full cost of their programs up front, with tens of thousands of dollars of private loans from KeyBank. Unfortunately, many of these schools have shut down without warning, leaving their students in the lurch -- heavily indebted with expensive private loans and little to no practical training.
In case after case, KeyBank has fought vigorously (and often successfully) to force students to pay back these loans. In doing so, the lender has denied borrowers basic protections that are in federal law to protect borrowers from being scammed. For example, the bank has routinely omitted from the promissory notes for its private loans a required notice that asserts the borrowers' right to have their loans canceled if a school with which it has "a referring relationship" closes down, is not licensed, or engages in fraud. In addition, the bank has tried to prevent students whose schools have shut down from challenging their loan agreements in court.
A Big Victory for Students
In June 2005, TAB Express International shut its doors without notice after KeyBank ended its three-year relationship with the school. Prior to that, KeyBank and TAB had an exclusive arrangement in which the school required students to pay the full cost of attendance -- which was around $100,000 -- with private loans from the lender before classes even started. The bank sent the money directly to the school. According to the former students' lawsuit, the students were told that their loans would be forgiven after they completed the training and worked for TAB's airline for a period of time.
But after enrolling, students became suspicious. "The students became aware of a lack of available instructors, simulators, and aircraft at the flight school as the school continued to increase the number of enrollees," the lawsuit stated. Eventually, they realized that "TAB had no airline." The lawsuit said that the students repeatedly brought their concerns to KeyBank officials but were rebuffed, and the lender continued to help market the school to prospective students.
When the deal finally collapsed, the lawsuit said, KeyBank officials tried to convince the students to take advantage of a "train out option" that would have required them to take on additional private loan debt and to waive their right to pursue legal action. Most of the students were not persuaded.
Instead, they decided to pursue a lawsuit against KeyBank. They won a major victory last year when the Florida State Appeals Court rejected an effort by the lender to enforce a "venue restriction clause" included in the students' private student loan promissory notes. That clause would have required them to re-file their case in KeyBank's home state of Ohio, which has much weaker consumer protection laws than Florida.
With only weeks before the jury trial was to start, KeyBank decided to come to terms with the former students. Under the settlement, the bank agreed to discharge the borrowers' private loans, which were worth about $5 million, and to pay a portion of their legal fees. The company, however, did not admit to any wrongdoing.
Under Scrutiny
Whether or not KeyBank wittingly helped schools like TAB Express and Silver State Helicopters exploit students is sure to be the focus of an investigation that the FBI is conducting of the lender's activities. Sen. Bill Nelson (D-FL) revealed the existence of the FBI probe in a letter he sent to one of the former TAB Express students last fall that was obtained by Higher Ed Watch. The letter also noted that "the Florida Attorney General's Office is also conducting a formal investigation into the matter as part of a larger multistate group of Attorneys General."
At Higher Ed Watch, we are pleased that federal and state investigators are taking these cases seriously. While justice has been served for former students of TAB Express, there are many others who are being forced to repay tens of thousands of dollars in expensive private loan debt for training they never received. Hopefully, they won't have to wait for their day in court before their debt is forgiven."
"It appears that KeyBank's predatory private student loan practices are finally catching up with the company.
Late last month, the bank settled a lawsuit filed by 51 former students from TAB Express International, a defunct flight school in northern Florida, who had accused the lender of colluding with the school to defraud them. The settlement puts an end to the case, which was scheduled to go to trial before a jury this week in a state circuit court in Florida.
Meanwhile, according to a U.S Senator in Florida, the FBI and a group of state attorneys general are investigating the exclusive lending arrangements that KeyBank had with TAB Express and Silver State Helicopters, a Nevada-based chain that shut down suddenly on Super Bowl Sunday last year.
As we have reported previously, 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 "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 providers, securitized the loans, shifting these high-risk loans onto unsuspecting investors.
One of the most aggressive players in this arena has been KeyBank, which has formed exclusive arrangements with dozens of unlicensed trade schools -- particularly ones that focus on computer training and flight training. These schools have required their students to pay for the full cost of their programs up front, with tens of thousands of dollars of private loans from KeyBank. Unfortunately, many of these schools have shut down without warning, leaving their students in the lurch -- heavily indebted with expensive private loans and little to no practical training.
In case after case, KeyBank has fought vigorously (and often successfully) to force students to pay back these loans. In doing so, the lender has denied borrowers basic protections that are in federal law to protect borrowers from being scammed. For example, the bank has routinely omitted from the promissory notes for its private loans a required notice that asserts the borrowers' right to have their loans canceled if a school with which it has "a referring relationship" closes down, is not licensed, or engages in fraud. In addition, the bank has tried to prevent students whose schools have shut down from challenging their loan agreements in court.
A Big Victory for Students
In June 2005, TAB Express International shut its doors without notice after KeyBank ended its three-year relationship with the school. Prior to that, KeyBank and TAB had an exclusive arrangement in which the school required students to pay the full cost of attendance -- which was around $100,000 -- with private loans from the lender before classes even started. The bank sent the money directly to the school. According to the former students' lawsuit, the students were told that their loans would be forgiven after they completed the training and worked for TAB's airline for a period of time.
But after enrolling, students became suspicious. "The students became aware of a lack of available instructors, simulators, and aircraft at the flight school as the school continued to increase the number of enrollees," the lawsuit stated. Eventually, they realized that "TAB had no airline." The lawsuit said that the students repeatedly brought their concerns to KeyBank officials but were rebuffed, and the lender continued to help market the school to prospective students.
When the deal finally collapsed, the lawsuit said, KeyBank officials tried to convince the students to take advantage of a "train out option" that would have required them to take on additional private loan debt and to waive their right to pursue legal action. Most of the students were not persuaded.
Instead, they decided to pursue a lawsuit against KeyBank. They won a major victory last year when the Florida State Appeals Court rejected an effort by the lender to enforce a "venue restriction clause" included in the students' private student loan promissory notes. That clause would have required them to re-file their case in KeyBank's home state of Ohio, which has much weaker consumer protection laws than Florida.
With only weeks before the jury trial was to start, KeyBank decided to come to terms with the former students. Under the settlement, the bank agreed to discharge the borrowers' private loans, which were worth about $5 million, and to pay a portion of their legal fees. The company, however, did not admit to any wrongdoing.
Under Scrutiny
Whether or not KeyBank wittingly helped schools like TAB Express and Silver State Helicopters exploit students is sure to be the focus of an investigation that the FBI is conducting of the lender's activities. Sen. Bill Nelson (D-FL) revealed the existence of the FBI probe in a letter he sent to one of the former TAB Express students last fall that was obtained by Higher Ed Watch. The letter also noted that "the Florida Attorney General's Office is also conducting a formal investigation into the matter as part of a larger multistate group of Attorneys General."
At Higher Ed Watch, we are pleased that federal and state investigators are taking these cases seriously. While justice has been served for former students of TAB Express, there are many others who are being forced to repay tens of thousands of dollars in expensive private loan debt for training they never received. Hopefully, they won't have to wait for their day in court before their debt is forgiven."
Wednesday, February 18, 2009
Bogus Offer from KeyBank
Citibank was the first major lender to settle with the SSH students. Student Loan Xpress is likely to be next. That makes KeyBank most likely to be the last major lender to settle with the SSH students. KeyBank has not made any offer to Plaintiffs' counsel, though it has participated in discussions and agreed to participate in a mediation. Meanwhile, in January of 2009, KeyBank made individual offers to certain California SSH borrowers. In one such offer made to a Los Angeles, California client of mine, KeyBank offered to reduce my client's SSH KeyBank student loan balance by $8,763.36 from $66,763.16 to $58,000.00. This amounts to a 13% reduction for a client that received only his private pilot's license from SSH.
KeyBank wants an assignment of the student's proof of claim against SSH, a covenant not to sue, a confidentiality agreement, and a complete release. All it offers in return is a 13% discount. In my opinion, KeyBank's offer is not good enough. It is a bogus offer.
KeyBank mailed its offer directly to my client, with no copy to me. KeyBank did this despite the fact that I have previously advised KeyBank and its counsel of my representation of this client and of all the KeyBank clients that I represent. I urge all clients of mine who receive such a letter to forward said letter to me and to authorize me to reject KeyBank's offer. Together, we can do better.
KeyBank wants an assignment of the student's proof of claim against SSH, a covenant not to sue, a confidentiality agreement, and a complete release. All it offers in return is a 13% discount. In my opinion, KeyBank's offer is not good enough. It is a bogus offer.
KeyBank mailed its offer directly to my client, with no copy to me. KeyBank did this despite the fact that I have previously advised KeyBank and its counsel of my representation of this client and of all the KeyBank clients that I represent. I urge all clients of mine who receive such a letter to forward said letter to me and to authorize me to reject KeyBank's offer. Together, we can do better.
No Action Needed on SLX "Personal Information" Letter
Many of my SLX clients have contacted me about a letter that they received from SLX in late January or early February regarding the inadvertant disclosure of certain personal information and the subsequent destruction of said information. My opinion is that no action is needed on said letter. I have not had any reports of any identity theft or attempted identity theft as a result of SLX's actions. Here is what the letter says:
We recently became aware of an incident involving certain personal information related to some Student Loan Xpress, Inc. student loan data. The service provider for your loan(s), American Education Services (“AES”), inadvertently transmitted a report which contained your personal information to another student loan lender with which AES contracts. That lender has indicated that it destroyed all of the information it mistakenly received. We have no evidence that any of the information has been used in an unauthorized manner as a result of this incident. The information that AES inadvertently sent to the unauthorized recipient may have included names, addresses, Social Security numbers, dates of birth, and information specific to you student loan account. We are working with AES to take steps to help ensure that this type of incident does not happen in the future.
We regret that this incident may affect you. We take our obligation to safeguard personal information very seriously and, therefore, we are alerting you so you can take steps to protect yourself from possible identity theft. We encourage you to remain vigilant and regularly review and monitor your account statements and credit reports. The attached Reference Guide provides details on these and other steps you may wish to consider.
You are entitled under U.S. law to one free credit report annually from each of the three national credit bureaus. To order your free credit report, visit www.annualcreditreport.com or call toll free
(877) 322-8228.
To further assist you, we recommend that you register for credit monitoring, which we have arranged to provide at no charge to you. The attached Reference Guide provides information on how you can register for the credit monitoring and recommendations by the U.S. Federal Trade Commission on how to further protect yourself against identity fraud. You may also want to place a fraud alert or security freeze on your credit file.
We hope this information is useful to you. If you have questions regarding this incident, please call AES’s dedicated Customer Service staff at 1-800-2149320 between the hours of 8:00 am and 5:00 pm EST.
Again, we regret any inconvenience this may cause you.
David Harmon
Executive Vice President
Student Loan Xpress, Inc.
We recently became aware of an incident involving certain personal information related to some Student Loan Xpress, Inc. student loan data. The service provider for your loan(s), American Education Services (“AES”), inadvertently transmitted a report which contained your personal information to another student loan lender with which AES contracts. That lender has indicated that it destroyed all of the information it mistakenly received. We have no evidence that any of the information has been used in an unauthorized manner as a result of this incident. The information that AES inadvertently sent to the unauthorized recipient may have included names, addresses, Social Security numbers, dates of birth, and information specific to you student loan account. We are working with AES to take steps to help ensure that this type of incident does not happen in the future.
We regret that this incident may affect you. We take our obligation to safeguard personal information very seriously and, therefore, we are alerting you so you can take steps to protect yourself from possible identity theft. We encourage you to remain vigilant and regularly review and monitor your account statements and credit reports. The attached Reference Guide provides details on these and other steps you may wish to consider.
You are entitled under U.S. law to one free credit report annually from each of the three national credit bureaus. To order your free credit report, visit www.annualcreditreport.com or call toll free
(877) 322-8228.
To further assist you, we recommend that you register for credit monitoring, which we have arranged to provide at no charge to you. The attached Reference Guide provides information on how you can register for the credit monitoring and recommendations by the U.S. Federal Trade Commission on how to further protect yourself against identity fraud. You may also want to place a fraud alert or security freeze on your credit file.
We hope this information is useful to you. If you have questions regarding this incident, please call AES’s dedicated Customer Service staff at 1-800-2149320 between the hours of 8:00 am and 5:00 pm EST.
Again, we regret any inconvenience this may cause you.
David Harmon
Executive Vice President
Student Loan Xpress, Inc.
SLX is Next
Student Loan Xpress is the lender that wrote the most student loans for Silver State Helicopters. It is also the lender that I believe is going to be next to make an offer that I can enthusiastically recommend to all of my SLX clients. Settlement negotiations with SLX are covered by a written confidentiality agreement. These negotiations are, in my opinion, about to bear fruit. SLX has already quietly settled several SSH student loan claims with former SSH students in Georgia. Look for an announcement in the next 30 days. I will e-mail all of my SLX clients with the details of this settlement offer as soon as the offer is made public.
Citibank Settlements Are Complete
On November 10, 2008, I announced and highly recommended Citibank's 100% debt forgiveness offer to my former SSH students in every state except for California. Through my efforts and the efforts of others, this offer was subsequently extended to include my California SSH clients with Citibank loans and all former SSH students throughout the country with Citibank student loans. This offer by Citibank was met with skepticism by some who figured that there must be a catch. In December of 2008, A second settlement letter was issued clarifying the fact that in exchange for an assignment of the client's proof of claim, Citibank will cancel the debt and not assign its claims to any other company. In addition, Citibank agreed in writing to request that any reference to the Citibank SSH loans be deleted by all credit bureaus to whom the SSH Student Loans were reported. Since then, I have heard back from many of my Citibank clients confirming that the Citibank Student loan has been deleted from their credit reports. Earlier this month, I learned that Citibank has decided not to issue any 1099-C debt settlement income forms as a result of its cancellation of these disputed debts. This is a complete victory for all of my Citibank clients.
A copy of the revised Citibank Settlement letter is set forth herein:
Date
Student Borrower Name
Student Borrower Address
Re: Master Student Loan Promissory Note between you and Citibank, N.A.;
Account Number __________
Dear ________________:
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 earlier this year.
Citibank sent funds to Silver State for your flight training tuition. It is our position that you remain obligated to repay those amounts to Citibank under the promissory note you signed. In recognition of the disputed nature of your obligation, Citibank will agree to release you of such obligation and to cancel the debt if you comply with the conditions and 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 their present and former officers, directors and employees, Citibank will release you of the debt under the Student Loan. If such release occurs, then Citibank will not seek to transfer or assign the collection rights with respect to the debt of the Student Loan to any third party. The assignment by you of your claims with respect to the Silver State loan 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 this 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, as you will remain obligated for repayment of the Student Loan.
If you agree to assign your claims to Citibank in exchange for the cancellation of your Student Loan, you and any cosigner should review carefully, sign below and return this letter to Citibank at the following address by December 31, 2008:
Citibank South Dakota
Attention Executive Communications
701 E. 60th Street N.
Sioux Falls, SD 57104
If you assign your claims to Citibank, then Citibank will also request that the credit bureaus to whom your Student Loan was reported, if any, delete any reference to the transaction from your credit reporting, although Citibank cannot warrant or guarantee the timing with which such credit bureaus will comply with such request.
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 Student Loan for flight training and education at Silver State Helicopter School, whether against Silver State, Citibank, or their present and former officers, directors and employees. In exchange for this assignment, Citibank (including its predecessors and successors in interest, employees, agents, affiliates and assigns, agrees to release the undersigned borrowers from the Student Loan.
___________________________ ________________________________
Borrower Signature Date
___________________________ _________________________________
Cosigner Signature Date
In February of 2008, Citibank Filed Notices of Assignment of Claim and Pending Order Thereon in the Silver State Helicopters, LLC Bankruptcy Case for the claims that were assigned to it by way of settlement. These Notices read as follows, "YOU ARE HEREBY NOTIFIED an Assignment of Claim has been filed in this case by the Assignor named above. Pursuant to Federal Rule of Bankruptcy Procedure 3001(e), you are hereby notified that unless you file your objection within 20 days following the date of this notice, the following Order will become effective without further action by the Court. Any objection filed must be set for hearing and notice sent to the U.S. Trustee, Trustee, creditors and all parties in Interest.
IT IS ORDERED that Citibank South Dakota, N.A. The Student Loan, Assignee, is hereby substituted for ____________, Assignor, as a claimant against the estate herein, effective on the 21st day hereafter, absent the filing of a timely objection."
A copy of the revised Citibank Settlement letter is set forth herein:
Date
Student Borrower Name
Student Borrower Address
Re: Master Student Loan Promissory Note between you and Citibank, N.A.;
Account Number __________
Dear ________________:
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 earlier this year.
Citibank sent funds to Silver State for your flight training tuition. It is our position that you remain obligated to repay those amounts to Citibank under the promissory note you signed. In recognition of the disputed nature of your obligation, Citibank will agree to release you of such obligation and to cancel the debt if you comply with the conditions and 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 their present and former officers, directors and employees, Citibank will release you of the debt under the Student Loan. If such release occurs, then Citibank will not seek to transfer or assign the collection rights with respect to the debt of the Student Loan to any third party. The assignment by you of your claims with respect to the Silver State loan 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 this 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, as you will remain obligated for repayment of the Student Loan.
If you agree to assign your claims to Citibank in exchange for the cancellation of your Student Loan, you and any cosigner should review carefully, sign below and return this letter to Citibank at the following address by December 31, 2008:
Citibank South Dakota
Attention Executive Communications
701 E. 60th Street N.
Sioux Falls, SD 57104
If you assign your claims to Citibank, then Citibank will also request that the credit bureaus to whom your Student Loan was reported, if any, delete any reference to the transaction from your credit reporting, although Citibank cannot warrant or guarantee the timing with which such credit bureaus will comply with such request.
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 Student Loan for flight training and education at Silver State Helicopter School, whether against Silver State, Citibank, or their present and former officers, directors and employees. In exchange for this assignment, Citibank (including its predecessors and successors in interest, employees, agents, affiliates and assigns, agrees to release the undersigned borrowers from the Student Loan.
___________________________ ________________________________
Borrower Signature Date
___________________________ _________________________________
Cosigner Signature Date
In February of 2008, Citibank Filed Notices of Assignment of Claim and Pending Order Thereon in the Silver State Helicopters, LLC Bankruptcy Case for the claims that were assigned to it by way of settlement. These Notices read as follows, "YOU ARE HEREBY NOTIFIED an Assignment of Claim has been filed in this case by the Assignor named above. Pursuant to Federal Rule of Bankruptcy Procedure 3001(e), you are hereby notified that unless you file your objection within 20 days following the date of this notice, the following Order will become effective without further action by the Court. Any objection filed must be set for hearing and notice sent to the U.S. Trustee, Trustee, creditors and all parties in Interest.
IT IS ORDERED that Citibank South Dakota, N.A. The Student Loan, Assignee, is hereby substituted for ____________, Assignor, as a claimant against the estate herein, effective on the 21st day hereafter, absent the filing of a timely objection."
Wednesday, January 07, 2009
More Firepower
I am very happy to announce that we have added 2 new attorneys to our firm.
Attorney Mike Mahurin started with us today. Mike is a graduate of Pepperdine University School of Law and has 12 years of legal experience handling real estate, employment, estate planning and bankruptcy matters. Mike was previously an associate in the real estate department of Stroock & Stroock & Lavan and worked in the chambers of the Honorable Robert W. Alberts as a law student. Mike is a member of the board of directors of the Southern California Association of USA Track & Field in addition to being an accomplished runner and triathlete, having won the 2008 Tucson Marathon and competed in the 2003 Hawaii Ironman.
Attorney Donna Dishbak will be starting with us on Monday. Donna was admitted to the State Bar of California on December 4, 2008. Donna graduated from U.C. Berkeley with a major in Rhetoric and a minor in Business Administration. She then returned to her hometown of Los Angeles to attend Loyola Law School where she dedicated many hours to being trained in mediation and working at the on campus mediation clinic. Donna spends her free time painting, playing tennis, and volunteering for a local non-profit job resource center for the homeless.
Attorney Mike Mahurin started with us today. Mike is a graduate of Pepperdine University School of Law and has 12 years of legal experience handling real estate, employment, estate planning and bankruptcy matters. Mike was previously an associate in the real estate department of Stroock & Stroock & Lavan and worked in the chambers of the Honorable Robert W. Alberts as a law student. Mike is a member of the board of directors of the Southern California Association of USA Track & Field in addition to being an accomplished runner and triathlete, having won the 2008 Tucson Marathon and competed in the 2003 Hawaii Ironman.
Attorney Donna Dishbak will be starting with us on Monday. Donna was admitted to the State Bar of California on December 4, 2008. Donna graduated from U.C. Berkeley with a major in Rhetoric and a minor in Business Administration. She then returned to her hometown of Los Angeles to attend Loyola Law School where she dedicated many hours to being trained in mediation and working at the on campus mediation clinic. Donna spends her free time painting, playing tennis, and volunteering for a local non-profit job resource center for the homeless.
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.
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