A NATION CANNOT BE A DEMOCRACY IF THERE IS NO RULE OF LAW!
Staying with the topic of US corporate operations that already look as though TPP were the law of the land, I would like to look at what unregulated, free market corporations look like these few decades because of neo-liberals Clinton and Obama and how they are operating today as if TPP were already in place.
Last time I showed how consolidation of the energy industry these few years under Obama and the FED's free money frenzy create global behemoths of all of our public assets such as utilities, ports, transportation. Today I want to look at how completely unregulated all corporate activity is and how Obama...running as a progressive that was going to hold corporations accountable has super-sized Bush's deregulation and suspended Rule of Law to make the US look as though TPP has already happened. Mind you, I never suspected when I voted for Obama that this policy of global corporate rule was anything other than Bush policy as I did not pay attention to news .......WHICH IS WHY I HAVE THIS WEBSITE TODAY. We now know we do not have elections in the US as Obama is simply a continuation of Bush.
When the Gulf Oil Spill happened everyone said....Obama could not have prevented it as he just came into office. That is why the regulatory agencies charged with oversight of these oil operations were in bed with these corporations, not regulating them.....just as with the SEC/FED and financial industry. Then came one industrial accident after another......TAR SAND OIL SPILL......Natural gas pipeline gas leak, exploding natural gas lines in California......coal sludge creating a tsunami into a small town near mountain-top mining......the WVA coal mine disaster......the West coast mining disaster filling a salmon run river killing everything.....and now this WVA accident with hazardous chemicals that should not even been used causing havoc in a region for weeks. What follows is a complete lack of people being held accountable....fines too small to mean anything.....tons of taxpayer money spent as corporations are allowed to just go bankrupt to avoid cost. Meanwhile Federal agencies charged with protecting the public know nothing about the effects of what happened, data is missing for accountability, and the public is told all is safe when everyone knows it isn't.
THIS IS TPP. THIS IS WHAT NEO-LIBERALISM DOES. IT IS COMPLETE NAKED CAPITALISM WHERE ALL CORPORATIONS OPERATE AS IF THEY WERE IN A THIRD WORLD COUNTRY CREATING ALL KINDS OF CATASTROPHE ALL IN THE NAME OF MAXIMIZING PROFIT.
ALL OF MARYLAND'S POLS ARE NEO-LIBERALS!!!!!! RUN AND VOTE FOR LABOR AND JUSTICE IN ALL PRIMARIES TO GET RID OF NEO-LIBERALS!
I think everyone knows how like the banks, the corporations responsible for the Gulf Oil Spill have paid hardly nothing -----marine animals dying en masse are said to be mysterous deaths. Seafood from the Gulf was sent to market only a few months after the event and much was problably dumped on foreign markets just as will happen to the US when this same thing happens overseas. Japan and radio-active contamination of seafood hitting the world market-----YOU BETCHA.
THAT'S TPP AND NAKED CAPITALISM....NO LAWS, NO RULES AND REGULATIONS, AND NO CONSEQUENCES.
Let's look at the latest disaster to see how neo-liberals intend to make things work in the US with TPP:
Think Bains Capital raiding of corporations with hostile takeovers taking all the corporation's assets and leaving a shell of a company that limps into bankruptcy-----LIKE HOSTESS CORPORATION just recently------where all the creditors and labor contracts are shed and the corporation is simply sold off to the same people owning all the corporations in the US and made profitable again while you and I......labor and creditors lose our shirts. These were the Reagan/Clinton years and is why private pensions and benefits now sit in a Federal agency for shed labor contracts now at $300 billion worth of labor's wealth.
Freedom Industry obviously was on the way out as its infrastructure was failing and to make the most of this, a buy/raiding of assets/and off to bankruptcy needed to happen. Raise your hand if you understand that poor Forrest of Chemstream just happened to buy this corporation in January when a few weeks later an environmental leak was announced throwing this corporation into bankruptcy shedding all the old infrastructure to the taxpayer for cleanup......while all the good assets have been moved to other accounts.
None of this is legal. It does not take a rocket scientist to see the conspiracy to defraud the citizens.....equal protection under law, Rule of Law, and the politician as public servant accountable to those voting for him/her does not allow for this continuous fleecing of the taxpayer and labor and justice. Simply reinstating Rule of Law will reverse all this damage and brings tens of trillions back to government coffers and people's pockets!
Freedom Industries files for bankruptcy after West Virginia chemical spill 01.31.2014 |
Freedom Industries, the chemical maker whose leaky storage tank polluted the Elk River in early January and shut down water service in West Virginia’s biggest city, filed for bankruptcy to cope with lawsuits.
By ERIK LARSONBloomberg
Freedom Industries, the chemical maker whose leaky storage tank polluted the Elk River in early January and shut down water service in West Virginia’s biggest city, filed for bankruptcy to cope with the subsequent lawsuits.
Freedom Industries listed assets and debt of $1 million to $10 million each in a Chapter 11 petition filed in US Bankruptcy Court in Charleston, West Virginia. The company said the lawsuits and more stringent payment demands from vendors since the incident compelled it to seek court protection.
“They are woefully underestimating their liabilities,” said Aaron Harrah, a lawyer representing the owner of a Charleston bar and restaurant in a lawsuit against Freedom. Harrah said in a phone interview that he’s hopeful his client will still get a payout from Freedom Industries.
A bankruptcy filing halts most litigation, forcing plaintiffs to vie with other creditors for a share of a company’s assets. More than two dozen lawsuits have been filed since the accident, which led President Barack Obama to declare a state of emergency for the affected counties. The state attorney general is investigating the spill.
On Jan. 9, West Virginia officials discovered a leak from a 35,000-gallon (133,000-liter) tank of 4-methylcyclohexane methanol, a chemical used in coal processing. About 7,500 gallons escaped from a one-inch hole, compromising water for about 300,000 people and sending more than 100 to the hospital.
Freedom Industries said the current hypothesis for the accident is that a local water line broke next to its plant, causing the land underneath the tank to freeze “in the extraordinary frigid temperatures in the days immediately preceding the incident,” according to bankruptcy papers.
A woman who answered the phone at Freedom Industries’ headquarters and declined to give her name said no one at the company was commenting to the media.
“The petition and related pleadings speak for themselves,” Mark Freedlander, the company’s bankruptcy lawyer, said in a statement, declining to comment further.
Companies facing legal costs and damages following accidents may use U.S. bankruptcy law to protect assets. In August, Montreal, Maine & Atlantic Railway Ltd., the operator of the runaway oil train that exploded and killed 47 people in a Quebec town, said it was forced to file for bankruptcy because of potential liability from the crash.
Charleston-based Freedom Industries was formed in 1986 and supplies specialty chemicals to the steel, cement and coal- mining industries. The closely held company completed a four-way merger nine days before the leak was discovered.
The four companies had total revenue of about $25.7 million in fiscal 2012 and $30.7 million in 2013, according to court filings. Freedom Industries’ equity is 100% owned by Chemstream Holdings, according to court filings.
Freedom Industries is seeking permission to borrow as much as $5 million to continue operations during the bankruptcy. It said that without the extra liquidity, it will “have no choice but to liquidate.”
Among its 20 biggest unsecured creditors are Archer Daniels Midland, owed about $429,000, and Eastman Chemical, owed more than $127,000, according to court papers.Hydrocarbi
Freedom Industries and Eastman, the maker of the chemical that fouled the river, were sued Jan. 13 by local businesses and residents for creating a nuisance and concealing cancer-causing compounds, among other allegations.
Another case names the West Virginia-American Water Co. alongside Freedom Industries. The utility failed to deal promptly with the emergency and had no procedures in place to prevent chemicals from getting into the water system, according to a complaint filed Jan. 10 in Kanawha County Circuit Court in Charleston.
Harrah said he and his colleagues are still investigating Freedom and other companies that may have contributed to the spill.
“The meter continues to run,” he said. “Even though there are businesses with their water back, there are other businesses serving bottled water, trucking in ice. You can imagine people are pretty skittish about drinking this water.”
Below we see that a corporation was created in 2012 to buy Freedom Industries ....Chemstream held all responsibility for the $20 million purchase. We see as well that Freedom Industries had 4 way merger with companies just before the crisis. He has a judge OK a loan to keep Freedom Industries operating while in bankruptcy from Chemstream and as we see below, that loan looks to give Forrest first rights to assets from Freedom Industries in bankruptcy.
Now, think about how to get rid of an aging chemical plant where all the assets of this company will end up with Forrest while the bankruptcy cuts the ability to sue and/or creditors to collect making the public pay for cleanup. Forrest will gut Freedom Industries of all its assets while leaving the shell of the corporation in bankruptcy and the public paying to close the environmental time bomb.
So, environmental disasters used to maximize a Bains Capital deal?????? THINK NAKED CAPITALISTS WOULD NOT DO THAT FOR PROFIT???? The point is that these kinds of deals are happening all the time and they all involve environmental messes shed to the taxpayer while all assets go to the corporate raider who gets no charge for massive social costs.
Sun Jan 19, 2014 at 04:20 PM PST
WV Spill: Multi-Millionaire Tied to GOP Dark Money Fronts Freedom Bankruptcy Cash
Clearly, Forrest intends to shepherd the assets of Freedom Industries through bankruptcy. The Charleston Gazette, which has been doing top-notch journalistic coverage, has reported that Forrest set up a Pennsylvania holding company called Chemstream Holdings, Inc. specifically to purchase Freedom Industries. Notably, however, Chemstream was incorporated in 2012. Chemstream is listed as the sole owner of Freedom Industries on its bankruptcy filing. Freedom's proposed lender in bankruptcy is WV Funding LLC. A DIP Agreement (debtor in possession) filed with the bankruptcy court shows a signature line that reads "WV Funding LLC by Mountaineer Funding LLC." According to the Gazette, "Mountaineer Funding was incorporated with the West Virginia secretary of state on Friday. Its one listed member is J. Clifford Forrest, Freedom Industries' owner." This would make Forrest both the owner of bankrupt Freedom and its lender who will bail it out. In bankruptcy, the lender enjoys priority to the assets because it incurs the risk of lending to the bankrupt entity. It will be interesting to see how the judge handles this situation, since Forrest could end up with the assets regardless of how the case unfolds.
There is every indication that Freedom's assets are integral to Rosebud's future operations in Ohio. Shortly, the Ohio Department of Natural Resources will decide on a permit application by Rosebud to mine 9,000 acres in Carroll County, Ohio.
This isn't conspiracy theory.....it is WIN AT ALL COST NEO-LIBERALISM. In Maryland we had Sparrow's Mill Steel Mill given a Federal grant along with local subsidies to open a Steel Mill as a manufacturing jobs scheme. So, a corporation comes in, gets all kinds of tax breaks and is allowed to try to start production without ANY upgrades to a mill that all knew would not be able to compete and succeed without those upgrades. So, this mill project was never meant to be successful. It was in bankruptcy 2 years later with all its assets gone and labor losing all contracts as life-long steel workers. The CEO of the corporation getting all the public stimulus money made out like a bandit with parting bonuses and a Chicago based corporation with ties to Obama comes in to salvage leaving a shell and taking the rest of the assets. THIS WAS A BAINS CAPITAL GUTTING OF A CORPORATION LEAVING LABOR AND THE PUBLIC WITH THE COSTS OF CLEANUP. Baltimore County could have taken over that property and dismantled all of it with revenue for the county and labor contracts upheld.
That is what happened with Freedom Industries but unlike Baltimore area citizens who simply were fleeced of tax revenue and any say on what is done with the property......these WVA people have huge health risks with essential fresh water resources.
One week after W. Va. toxic spill, new owner of Freedom Industries puts firm in bankruptcy
By Steven Mufson, Published: January 17
It took just one week for Pennsylvania coal mining executive Cliff Forrest, the new owner of Freedom Industries, to discover that one of the six-decade-old storage tanks he had acquired Dec. 31 was leaking a toxic chemical into the Elk River that supplies water to about 300,000 West Virginians.
And it took just one more week for Freedom Industries, facing about 20 lawsuits and a Justice Department investigation, to declare bankruptcy. On Friday, the besieged company filed for protection under Chapter 11 in the U.S. Bankruptcy Court in Charleston, W. Va.
Experts say last week's chemical spill in West Virginia's Elk River affecting more than 300,000 people is a powerful reminder about the vulnerability of U.S. waterways to toxic spills.
Overnight after the spill, an obscure corner of the chemical and coal business became headline news.
It’s not a sexy business. The chemical that leaked is used in a process called “froth flotation.” Basically, it creates bubbles that attract fine coal particles. Add a quart of the chemical to a 1,000-gallon-a-minute slurry of coal in the cleansing separation process, and coal mining companies can skim off the particles, dry them and sell them as fuel.
It’s been a pretty good business niche. Freedom Industries has bought and stored chemicals from the likes of Eastman Chemical, an international $12 billion business, and Georgia Pacific Chemicals, a unit of the Koch brothers’ Georgia Pacific, a global paper product giants. Then Freedom Industries sells to companies such as Alpha Natural Resources, one of the country’s biggest coal producers. More than 100 plants in West Virginia use froth flotation.
Forrest, through another firm he owns, paid roughly $20 million to acquire Freedom Industries and orchestrate its Dec. 31 merger with four tiny distribution, blending and storage firms that act as middle men between big chemical and big coal companies, according to a person close to the company but not authorized to speak for it. He added that Forrest just “had the misfortune of buying a plant just before all hell broke loose.”
Ever since, Freedom Industries has battened down the hatches. It issued a statement on Jan. 10, the day after the spill was discovered, and nothing since. Chief executive Gary Southern, suffering from pneumonia, made one brief and awkward appearance sipping from a water bottle before TV cameras. Two days later, Charles Ryan, the crisis public relations firm Freedom Industries hired, dropped the company. Its Web site made no mention of the accident, and later said nothing of the firm’s bankruptcy either. Newspapers scoured state records to learn about the company but found slim pickings apart from the criminal record of a long-departed executive.
Crisis management experts say the public reaction of Freedom Industries is not a model.
“Mostly what organizations do in these kinds of moments is duck,” says Davia Temin, a New York-based crisis manager. “They do not come forward. They do not put their CEO forward. And they do not work out of the playbook of good crisis management, probably because they don’t have anything good to say.”
Temin said such companies “go underground, though unfortunately in this case their underground is toxic.” And if they’re truly avoiding the spotlight, then “tomorrow you will no longer be Freedom Industries, it will be Liberty Industries or Apple Pie Industries.”
In Charleston, critics say that Freedom Industries may have new owners, but it has old problems that needed fixing. The facility, perched on a steep bank of the Elk River, has 13 tanks built in the 1940s and 1950s, said Daniel Horowitz, a spokesman for the federal Chemical Safety Board. The site was formerly used by Pennzoil/Quaker State as a gasoline and diesel terminal. The 35,000-gallon tank that leaked is about 20 feet high and sits on a concrete pad surrounded by dirt. Encircling that tank and some others is a cinder block containment wall with visible cracks in it, Horowitz added.
A state Department of Environmental Protection official said the agency found that a clear liquid, thicker than water but not as thick as syrup, had pooled in a roughly 40-foot square and was flowing through a crack in the base of the cinder block wall.
The person close to Freedom Industries, which has hired two contractors to help with the cleanup, said the company has emptied the tank and looked inside. He said the bottom of the tank had been pushed inward, suggesting damage from water underneath that froze in the unusually harsh cold earlier that week. He added, however, “there are many, many additional pieces of information needed before anyone knows why the tank failed.”
That’s not stopping the plaintiffs’ attorneys, who have already filed lawsuits against Freedom Industries for negligence. They have also named Eastman Chemical, the manufacturer of the licorice-smelling chemical that leaked, and the West Virginia American Water Corp., which kept its intake pipe open and which earlier failed to heed recommendations from the state to move a water intake pipe located about a mile and a half downstream from the chemical storage tank site.
“It’s got broader implications than West Virginia,” said Kevin Thompson, a lawyer who filed a class-
action suit in federal court against the three companies on Monday. “There are so many chemicals out there that are not properly characterized. It’s only after they dump it in our water and it smells like licorice that we know about it. If it didn’t smell like licorice, we wouldn’t even know.”
Untangling the corporate who’s who is complicated.
Freedom Industries, which was created in 1986, sells a variety of chemicals. On its Web site, it says it maintains “bulk inventory” of six raw materials for coal flotation “to insure [sic] that custom blends for each customer can be produced 365 days per year.” It also sells chemicals for controlling dust, treating water and combatting freezing conditions.
The company had a colorful executive in the past. One of the company’s founders, Carl L. Kennedy II, was charged with failing to pay more than $200,000 in income taxes, according to news reports at the time. In 1987, he pleaded guilty to selling between 10 and 12 ounces of cocaine, according to the Charleston Gazette. A person familiar with Freedom Industries said Kennedy left the company long ago.
The current president, Gary Southern, comes from Britain but has worked in the U.S. chemical sales business for more than two decades, according to a person familiar with the company. West Virginia secretary of state records show that Southern was president of a chemical sales company called HVC , which in 1998 did an estimated $72.5 million in business.
The companies that are now part of Freedom Industries together had revenue of about $30.7 million in fiscal year 2013, according to the bankruptcy filing. It has been slow to pay some bills; the Internal Revenue Service filed liens to collect more than $2.4 million in recent years.
In December, Freedom Industries was acquired by a Stoystown, Pa.-based company called Chemstream, which also blends and sells chemicals to industrial customers, according to the person familiar with the company. The company’s Web site says it began as a distributor of chemicals for the mining industry.
Chemstream is owned by Forrest, according to the person. Forrest is president of Rosebud Mining, a Kittanning, Pa.-based company he founded in 1979 and which is now the third-largest underground coal producer in Pennsylvania with 1,400 employees in Pennsylvania and Ohio.
On Dec. 31, Freedom Industries merged with local companies Poca Blending, Crete Technologies and Etowah River Terminal. The toxic chemical concoction that leaked into the river was stored in three of the tanks at the former Etowah terminal, the state Department of Environmental Protection said.
The person close to Freedom Industries said that Chemstream had hired two firms to do due diligence before its acquisition and had plans to “bring maintenance items up to speed.” He described the Freedom Industries owner and executives as “upstanding guys.”
Eastman Chemical sold Freedom Industries this particular batch of chemical, called 4-methylcyclohexane methanol, or, more simply, crude MCHM. Eastman spokeswoman Maranda Demuth said Eastman’s safety sheet for customers warns that “this product should not be released into a drain, sewer or stream.” She said it is the responsibility of the customer and local, state and federal agencies to ensure operations are safe and comply with regulations.
Demuth also disputed assertions by critics and regulators that the company had not supplied much information about 4-MCHM. She said Eastman had filed a “Premanufacture Notification” with the Environmental Protection Agency in 1997 for a component of crude MCHM for use in coal processing. “EPA reviewed the notification and did not request any additional testing,” Demuth wrote in an e-mail. She said the tests were done at “reputable laboratories where rigorous internal review processes were performed.”
But Horowitz of the Chemical Safety Board said that the safety data sheet for the chemical “has a great many fields which say ‘no data available.’ ” Under the section titled “most important symptoms and effects, both acute and delayed,” Eastman’s forms says “no data available.” Under toxicological effects of inhalation, “no data available.” It was the same for whether it causes cancer, affects reproduction or affects specific organs.
“There is very little available testing data on its toxicity,” Horowitz said.
On Thursday evening, the House Energy and Commerce Committee’s ranking Democrats, Henry A. Waxman (Calif.) and Paul D. Tonko (N.Y.), wrote to Eastman’s chief executive, Mark J. Costa, asking that he immediately provide unredacted copies of all studies the company did on the health and environmental effects of MCHM.
Freedom Industries said in its bankruptcy filing Friday that MCHM “is not a regulated substance, and accordingly, there are no published standards regarding acceptable concentrations of MCHM in water.”
Trouble in the water
American Water played a key role in the fiasco, too. Its water plant was built in 1972, and company spokeswoman Laura Jordan says that the Elk River was a perfect spot for an intake pipe, much better than the nearby Kanawha River, which she said was home to several chemical and industrial plants.
But in retrospect, the intake pipe was very close to the Etowah Terminal now part of Freedom Industries.
Jordan says that Freedom Industries told American Water about the spill just before noon Jan. 9. The person close to Freedom Industries said cellphone records show that the water company was notified about an hour earlier. In any case, American Water kept its intake pipe open figuring that it could handle the contamination with its own treatment facilities. American Water engineers were told to keep watch and add more carbon to the company’s carbon filters, Jordan said.
She said that Freedom Industries initially mischaracterized the chemical that was leaked, saying it was a coagulant that would sink rather than a foaming agent that would float. By midafternoon the water company learned of the error.
The water company could have drawn on reserves to avoid the crisis, according to the person close to Freedom Industries. But Jordan said the water reserves would last only a few hours and that it was better to keep the water treatment plant open so people would have sanitation water and water for fires if needed.
Freedom Industries is also looking at whether the water company had a leaking pipe on higher ground than the storage tanks. It is looking at whether the leaking water might have frozen under the tank and punctured it. The person close to Freedom Industries says that the water company contacted a contractor two years ago but only made repairs there this week.
It all has the makings of long-running, soap-opera-style litigation.
“I have a whole gang of people working on it,” says Thompson, the plaintiffs’ attorney. They include an environmental engineer, a toxicologist, an aquatic biologist and a physician. His clients include Carolyn Burdette, a beautician who lost $400 in business; the Vandalia Grill, which says it lost $10,000; Crystal Goode, a single mother of three who worried about exposure to the chemical; and the owner of Mousie’s Car Wash in Charleston, who seeks business damages and health monitoring.
When he filed the suit, Thompson says, “I had to put a number down so I asked for $100 million.”
Below you can see how the wheels are turning in making sure this bankruptcy ends well for Forrest as he sheds the bad assets of Freedom Industries and attaining the money from remaining assets. Courts are now ruling with these CEOs and disallowing much of the public's wealth claims in these cases.
The point I am trying to make with all of this.....ALL OF THESE DEALS SOAK THE CITIZENS AROUND THESE CORPORATE DEALS WHETHER WITH TOXIC CLEANUP OR ABANDONED INFRASTRUCTURE AND IT IS DELIBERATE.
When we had a social democracy government regulated and held these businesses accountable and to stay open they kept to regulations. These accidents rarely happened before Clinton and the deregulation/free trade ended all oversight. If we want our first world democracy back......WE MUST HAVE RULE OF LAW AND ENFORCEMENT!
Expert explains Freedom Industries bankruptcy case
January 30, 2014
By Andrea Lannom, Charleston Daily Mail, W.Va.McClatchy-Tribune Information ServicesJan. 30--CHARLESTON, W.VA.--
Although the Freedom Industries case has put bankruptcy court in the spotlight, some may not know what is involved in the process.
Like civil and criminal processes, bankruptcy court has its own set of intricacies. Two bankruptcy attorneys explained the different types of bankruptcies and what is involved in Freedom's case.
See more coverage of WV chemical spill
Scott Stapleton, with the Huntington-based Stapleton Law Offices, said the three most common types of bankruptcies are Chapters 7, 13 and 11.
Freedom Industries filed for Chapter 11 bankruptcy Jan. 17, following the Jan. 9 leak of crude MCHM into the Elk River.
Stapleton said Chapter 11 cases generally are used for two purposes. A business either can reorganize in an attempt to save itself or as a way to orderly liquidate to prevent a "cannibalization by creditors," the people or companies to which it owes money.
"Chapter 11 prevents a creditor feeding frenzy and the idea is you don't want it to be the (creditor) who is most aggressive," Stapleton said. "It's a logical systematic liquidation."
For the vast majority, Stapleton said, the goal is to reorganize.
"Chapter 11 is well-suited for businesses that have had a one-time, non-recurring big problem," Stapleton explained. "If they can get a problem fixed, they can return to profitability. This is not for businesses that are unprofitable and always will be unprofitable. Those end up converting to Chapter 7."
Chapter 7 is "straight liquidation," and Chapter 13 is not available to limited liability corporations, said Andy Nason, an attorney with the Charleston firm Pepper & Nason.
What are the chances of reorganization?
Nason said there have been success stories where Chapter 11 businesses have completely turned everything around. Sometimes, however, businesses convert to Chapter 7.
"Freedom's got a real uphill problem even without the lawsuits, but I don't know," Nason said. "They haven't even filed their schedules yet. ... Apparently, they were a successful business before this problem arose. They may be able to reorganize. They may not. It's too early to tell."
Typically, it takes about 240 days after filing the original bankruptcy petition to file a plan of reorganizations, Nason said.
When a business files its reorganization plan, it has to say what happens with the debts and assets, Stapleton said.
"They can't just file and say, 'I don't feel like paying debts.' It has to say, 'here are the assets, debts, income, overhead operating expenses," Stapleton said.
After the company submits a reorganization plan in writing, the creditors are given a chance to object. The court then plans a hearing on the plan and also any objections filed in the case.
If the plan is approved, the court monitors it to make sure the company fulfills its terms and conditions.
Businesses also must list basic information in a disclosure statement such as real property, personal property, secured/unsecured creditors and tax claims, Nason explained. Freedom must file the schedules along with a statement of financial affairs by the end of the month.
Nason said representatives from the debtor and the U.S. Trustee's office will get together in a phone conference to go over the basic information to make sure the company has insurance in place for the property.
Also in Chapter 11 cases, debtors shut down the pre-petition bank account and open a new one referred to as "debtor in possession," Nason explained.
"They want to make sure the debtor in possession is out of the bank account so someone looks at and checks to see what's pre-petition and what's post-petition," Nason said.
Besides a Feb. 11 final hearing on Freedom's financial motion, one of the next big steps is a creditor meeting. The hearing usually takes place 30-45 days after the petition is filed.
Stapleton said in this meeting creditors ask questions of a company's representative under oath. Generally, the representative is the president of the company.
When a Chapter 11 petition is filed, a bankruptcy stay goes into effect, preventing lawsuits from going forward unless the bankruptcy judge says otherwise.
The bankruptcy judge determines to what extent the stay is lifted. Most of the time, Nason said, litigation proceeds against the insurance companies.
Stapleton said the reason for this stay stems back to preventing the "feeding frenzy."
"You want to deal with debts according to law," Stapleton said. "If you have 42 lawsuits continuing right on to devour, you do not have a chance to reorganize. That's the whole idea behind the bankruptcy stay. All creditors freeze, hold their positions until (the judge) can hear the facts and decide what's fair."
Attorneys also may file lawsuits in the context of the bankruptcy, called adversary proceedings.
"That would be something where you say you believe the type of the debt owed to us in non-dischargeable," Stapleton said.
Since these types of lawsuits are within the bankruptcy, they are not subject to the bankruptcy stay. The bankruptcy judge determines if the case should be in this proceeding.
In Freedom's case, there was an adversary proceeding filed Jan. 20. However, this proceeding was dismissed the day after filing without prejudice, which means it can be re-filed once the bankruptcy judge gives the green light for all lawsuits to move forward.
So far, no other adversary proceedings have been filed in this case.
Another facet to Freedom's case deals with the lending of the money to the company.
Under the financial agreement, Freedom gets a $3 million cash infusion from Mountaineer Funding with the potential for an extra $1 million later. Attorneys called this type of loan, "insider lending" and said it was rather common in bankruptcy proceedings.
Mountaineer Funding is owned by J. Clifford Forrest, who also owns Chemstream Holdings, Freedom's parent company. Mountaineer Funding was incorporated Friday, the same day Freedom filed for Chapter 11 bankruptcy protection.
The water company argued the terms of Freedom's original financing proposal would give the lending company a lien on Freedom's assets, a "super priority" claim and the ability to foreclose selectively on assets, taking away the most valuable assets from Freedom's estate, "leaving behind only the toxic facilities and huge damage claims caused by the Freedom spill."
However, attorneys said this had been resolved in the resolution reached in a hearing last Tuesday.
"Now, I think the crux of the opposition to this loan may have been not that the loan was made by an insider but that the insider may have received, by virtue of the relationship, special treatment, that a loan made at arms-length transaction, the debtor may not have given up the same things they may have been given up to the insider," Nason explained.
Nason said to put insider lending in perspective, think about borrowing from a bank compared to borrowing from a family member.
"If you went to the bank and wanted to borrow $5,000, you might not be willing to put a just-paid-off car for collateral as a loan," Nason said. "You go to your mom or dad and say you need $5,000, and give a lien against your car. If you don't pay, then they can have your car. You're more willing to do that."