Geo’s and Gail’s report on the Silver State Helicopters, LLC 341(a) hearing on 3/10/08 at 3pm
Georgeann Nicol and Gail Higgins of the Law Offices of Michael Jay Berger represented all of our SSH clients at the 341a hearing of Sliver State Helicopters, LLC in Las Vegas, NV at 3pm on 3/10/08. Here is Geo and Gail’s report:
The hearing started out in the Bankruptcy court at 300 S. Las Vegas Blvd. but because over 300 people (mostly former SSH students) were in attendance, the meeting was moved across the street to a hearing room in the District Court building, (which was still filled to capacity).
Silver States was represented by its Attorney Jeanette McPherson, its Chief Accountant James Little, Stenning Schupert, a representative of EOS, and EOS’s attorney Mark First. Stenning Schueppert is the Corporate Secretary of both Silver State Services (hereinafter SSS) and Silver State Helicopters (hereinafter SSH). He is the person that signed the bankruptcy petition for SSS and the bankruptcy petition for SSH. We were there on behalf of approximately 300 students who attended the hearing and all our other clients who could not make the hearing. Local media was also in attendance.
Prior to the hearing, the atmosphere was one of excitement and hopefulness that some answers might be forth coming today. Side note: there were several clever t-shirts worn by the former SSH students reflecting their feelings about this situation.
The Trustee began the hearing by advising everyone of the rules of the hearing, i.e. no cell phones, no talking … unless asking questions, and about the time limit for questions of the Debtor’s representatives.
The Trustee announced one very important piece of information. In the future, there will be a web link to the Silver State information that will be accessible to everybody. (We noted that he recently filed a request with the Court to be allowed to Limit Notice – his mailings were costing $3,000 a pop, and would quickly eat up available funds.) The direct link is: www.silverstatehelicoptersbankruptcy.com. This will save individuals from having to pay for PACER access to the Bankruptcy Court’s website.
The Trustee noted that there were actually two bankruptcy cases, SSH , the case that we are all familiar with, and SSS, the holding company for SSH. (Note: In a short discussion after the Hearing, the Trustee informed us that he is “Consolidating” these two cases. That means that all the Proofs of Claim that the Debtor’s attorney “mistakenly” filed in the wrong case will be automatically applied to the proper case. This is a good thing.)
The Trustee had a few simple questions for the representative of SSS and the Trustee’s counsel had a couple of follow up questions and then the Trustee concluded that hearing.
The Trustee then began the 341(a) hearing for the case we are all interested in, SSH. He asked the usual questions, who are you , how are you the person most knowledgeable for SSH, and so on. It should be noted that Mr. Schueppert explained essentially that the EOS contingent decided to file the Bankruptcy and that Jerry Airola refused to sign the paperwork, so Schueppert signed the paperwork on orders from the Board of Directors of SSS. Consequently, most of Schueppert’s answers to questions were “To the Best of My knowledge.”
This Q&A period went on for approximately 10 minutes. We learned that the person ‘most knowledgeable’ for SSH was: new to the entire operations because he: “had no knowledge of any real substantive SSH information prior to August of 2007.” He testified that EOS purchased 60% of SSH for $30,000,000.00 in November of 2007. When asked by the Trustee what precipitated this chapter 7 filing, he said the following three things:
1 – No more school loans were going to be funded by Citibank and Citibank was the only remaining bank writing student loans for SSH;
2. Enrollment was down, hence the income would be limited; and
3. The 01/31 sale of the Commercial side of SSH had not gone through as planned – hence no commercial contracts.
He testified that the decision to file Bankruptcy was made on Feb 4, the day of filing.
He testified that prior to EOS purchasing the 60% of SSH, excuse me: “investing in SSH,” EOS looked into the following issues: the lawsuits, the commercial activities, and the student enrollment/ the cash flow of SSH. They made a plan with Airola for the Recapitalization of SSH .
Schueppert testified that EOS had never been involved in any type of aviation company and had never been involved with any school. Based on an outside audit which Shueppert claimed was done by an independent company, EOS concluded that this would be a good investment for EOS clients and they consummated the deal in November of 2007. Of the $30,000,000.00, EOS gave Jerry Airola and Steve Pickett $13,000,000.00 cash, $13,000,000.00 supposedly went into SSH operating funds and the balance of $4,000,000.00 was for fees for the transaction itself. (Comment: EOS probably took its profit right there). (It should be remembered that this was a transaction for Jerry’s stock and ownership of SSH – it supposedly did not affect SSH directly.)
Jerry Airola and Steve Pickett failed to attend the 341(a) hearing. ORIX, the secured lender on the birds, had previously scheduled a 2004 examination of Airola, which he also did not attend, despite a Court Order that he appear. A new 2004 exam for Airola has been ordered by the Court, – set for a date to be determined. Airola must attend this examination or be subject to a Bench Warrant for his arrest.
The Trustee’s counsel broke in from time to time and asked his own questions.
After the Trustee and Trustee’s counsel asked questions for about 15 minutes, the floor was thrown open to questions from various creditors and creditors’ reps. For the next 2.5 hours, SSH’s representative had to respond to questions pertaining to the following subjects: The relationship between AES, EOS and SSH. Why did EOS file bankruptcy so quickly after buying 60% of SSH? Did EOS know about helicopters that were still flying out of the Cheyenne airport in Vegas? What was the explanation for the $180,000.00 paid to various law firms and PR firms on the exact day of the filing? It was noted by the Trustee’s attorney that these funds were probably not all earned and some of these fees should likely come back into the estate. We agree.
There were also several student and their parents who expressed their general outrage at the representatives of EOS.
The Trustee allowed the expression of their feelings and did not ask them to tone it down, nor did he ask marshals to escort them from the room. (To our knowledge the only one excluded was a cell phone violator).
Conspicuously absent at the 341(a) meeting was James Harward and Dan Reed of Harward and Associates. Also absent was any representative from the law firm of Brown & Dean.
During his testimony, the representative for EOS revealed that the reason SSH was longer using AES was because AES was caught receiving kickbacks from student loan funding in another school and thus could no longer write this type of loan. This confirmed our research and we will be posting more on this later.
Mr. Schueppert testified that EOS did not attempt to push through more students and more student loans prior to filing the bankruptcy. This is in direct contradiction to information that we have from several sources.
Gail believes that EOS’s plan was to carve out the commercial aspects of SSH and sell them off, and then close down the school. EOS advertises that it handles companies in “ownership transition” and does “recapitalizations.” We will post information on EOS separately.
Our plan right now to: 1) try to get the loans declared null and void and to 2) try to get monies returned to those who have already paid in, is underway.