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What Is Happening In The SSH Bankruptcy

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

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

The Proofs of Claim

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

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

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

My Conversations With Tony Z

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

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

Confidential Settlement Negotiations

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

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

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MICHAEL JAY BERGER

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