Tuesday, January 3, 2012

Judge Randall Dunn At it Again. How does a bankruptcy judge have this much power and no accountability?

"The Blue Heron Paper Company decided to declare bankruptcy Dec 2009 and 200 plus employees lost their jobs. It is now 2012 and the employees still have not been paid for their lost wages, severance pay, sick pay, retirement, ESOP, etc.

Judge Randall Dunn said he wanted the employees paid 'sooner than later'.

This is a letter sent to the judge Randal L. Dunn
U.S. Bankruptcy Court Judge

Dear Judge Dunn,

I am writing to express my concern at the decidedly slow pace at which this bankruptcy is being resolved. While it was shocking and disappointing that Blue Heron Paper Company declared final bankruptcy without proper notice, I was heartened by your comments during the hearings you conducted on March 1st and 22nd, when you pronounced that you expected to see the employees paid sooner rather than later. Your comments left me to believe that I would see my claim resolved within months. Your comments also left the larger community with the impression that justice had been done and that we had in fact been paid. Instead you told me during the May 24 hearing that these things take time, that soon would be spring of 2012 and that there was no guarantee that we would be paid at all.

Prior to my experience of this last year, I had believed that the bankruptcy court would be looking out for the best interests of all. Instead the court appointed a Trustee to complete the bankruptcy and distribute the remaining Blue Heron assets. The Trustee draws his very generous weekly salary for contracting virtually every activity of his task and many of his actions seem to incur greater than necessary expense or net less income than would be expected.

• Instead of retaining the in place payroll personnel to issue paychecks, the Trustee contracted a payroll company to produce paychecks at a significantly higher cost.

• His handling of the equipment auction cost the estate up to $1m when he failed to hold the Canadian buyer to the agreed 15% fee for items that they bid on during the auction, ‘without his knowledge or consent’. He compounded his miss handling by not allowing the auction to include stainless steel and electrical; he canceled the third day of the auction (this is not a new process; all too many paper mills have closed in this country and there is no indication that removal of these items following their sale has resulted in any liabilities to the liquidating estate). Proceeds from such sales would have produced significantly more commission to the auctioneer and subsequently to the estate.

• Given that the auction (net of the ghost bids of the Canadian buyer) appears to have brought in more than 80% of the agreed purchase price on much less than 80% of the offered goods (the buyer reserved several millions of dollars worth for later sale), it seems very likely that a more knowledgeable professional could have recovered a much higher value from the mill equipment. It seems odd that the former Blue Heron vice president, who had recent experience in liquidating a similar mill, was not retained to complete this liquidation (under the close supervision of the Trustee).

• While the former employees were repeatedly informed that they could leave funds in their company 401K retirement accounts, in October the Trustee directed T.Rowe Price to deduct more than $10,000 from the accounts of those who foolishly trusted the ‘system’. The Trustee assures us that this action was legal, and that the funds will be used to close the company 401K. Given that the company had paid all 401K fees from the outset and the many assurances that there would be no cost associated with leaving funds in these accounts, this ‘legal’ action is in direct conflict with what is right.

• Wells Fargo Bank, who received first priority payment, has been paid in full. While it appears that more than half of the debt to them accrued from penalties, fees and ‘high risk’ interest during the 14 months that the Blue Heron operated under bankruptcy ‘protection’, there is no indication that there was any attempt to negotiate a reduced payment.

• We have yet to receive clarification of a demand letter sent, by a contracted firm, to our union demanding under threat of legal action the return of $29,000 worth of ‘preferential payments’.

• After delaying the property auction to allow for greater exposure and improve the prospects for a reasonable bid, the auction resulted in no bids. From the information provided, potential bidders declined to commit funds because the available information left too many questions as to the condition of the property and what exactly was being offered. While sale of the property has been one of the primary tasks of the liquidation from the outset; almost 10 months ago, we’ve had estimates that it will require up to 6 additional months just to address questions that potential bidders have raised. When I asked the realty firm, the Trustee contracted to promote the property sale, what the commercial value of the property is, their representative advised that they had not been asked to do an appraisal and therefore did not know the value of the property they were offering. The representative was incredulous that the lagoon property might be worth up to $70-million based on the expressed interest of local water treatment officials and the value to them. {Given the current state of the market and unresolved issues regarding the conditions of sale, I would prefer to see a commercial appraisal done to establish the property’s value. I would rather see the property remain on the market until a sale can be made at a reasonable price than settle for any bid that reflects a stressed property sale. It seems that the expense of holding the property could be minimized by making proper arrangements and eliminating the cost of the Trustee while waiting for the sale. Failing a sale at the commercial value of the property, it appears that there will be little if any moneys available to pay the employee’s claims.}

• The 2 legal firms that the Trustee has retained have already cost more than $300,000.

• With the major creditor paid, and several million dollars in the bank, it seems that the Trustee is content to continue drawing his fee while pursuing issues that should have been addressed early on in his tenure. Specifically the selling condition of the property and the current issue of Sempra Energy promissory notes.

Given the delays and excessive expenses (the auction cost being the most flagrant) will there be any adjustment to the Trustee’s compensation? If the bankruptcy continues as the Trustee projects: into spring of 2013, his fee plus his legal expenses will far exceed the total of all employee claims.

How can the bankruptcy court over see such a process that ignores the workers, including the federally mandated WARN Act requiring satisfaction within 30-days of closure, in favor of large banks and the many 10’s of lawyers? It is long past ‘Sooner rather than later’. The total employee claims ask for a small fraction of the $40 million in concessions made, since the company came into being, in our efforts to support Blue Heron’s continued operation. I would have been satisfied with timely, efficient and balanced. Now I am just looking for some balance; with this letter, I am seeking your clarification as to how the remainder of Blue Heron’s liquidation will balance the interests of the many outside parties with the interests of the former employees.


Ron Milton
Former Blue Heron Employee"

Source of Judge Randall Dunn Post

Got a Tip on Judge Randall Dunn

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