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Student Loan Servicer Appeals Landmark $220,000 Bankruptcy Ruling

A student loan servicer is appealing a bankruptcy judge’s watershed decision to discharge all of a U.S. Navy veteran’s student debt, YahooFinance.com reported. Educational Credit Management Corporation (ECMC) — a nonprofit that guarantees and services student loans on behalf of the Department of Education (ED) — is challenging the January 7 decision made by Chief U.S. Bankruptcy Judge Cecelia G. Morris, who discharged $221,385.49 in student loan debt for Navy veteran and lawyer Kevin Rosenberg under chapter 7 bankruptcy. The decision belies the common notion that student debt is not dischargeable under chapter 7. Judge Morris had applied the Brunner test — a three-factor standard used to identify if the borrower is facing undue hardship and cannot make repayments — to evaluate whether Rosenberg was eligible for discharge. “This Court will not participate in perpetuating these myths,” Morris wrote her decision. “Rather, this Court will apply the Brunner test as it was originally intended.” ECMC’s main contention in their appeal is that Rosenberg was licensed to practice law but did not pursue job opportunities in the same field: “Instead of pursuing those opportunities available to him, and paying back his taxpayer-backed federal student loans, Plaintiff, for the past 10 years, has held various positions in the outdoor adventure industry, including starting up and running his own tour guide business.” The loan servicer also implied that Judge Morris’ interpretation of the Brunner test was lax.

PES Creditors Fight to Reject Refinery Sale to Hilco

Creditors of bankrupt Philadelphia Energy Solutions are opposing the sale of its oil refinery to Hilco Redevelopment Partners, saying another developer made a more lucrative bid for the site, Reuters reported. Industrial Realty Group submitted a bid of $265 million during an auction last week to sell the idled refinery site, $25 million more than Hilco’s bid, according to filings by law firm Brown Rudnick LLP in U.S. Bankruptcy Court for the District of Delaware. The refiner announced on Wednesday that it agreed to sell its 335,000 barrel-per-day refinery, the largest and oldest on the U.S. East Coast, to Chicago-based real estate developer Hilco, naming Industrial Realty Group as a back-up bidder. PES’s unsecured creditors, which include companies that had supplied contract work to PES, as well as workers’ unions employed by the refinery, have pushed for a buyer that would restart the complex. Hilco’s proposal for the more-than 1,300-acre (530-hectare) site would result in a permanent shutdown of the plant, Brown Rudnick said, leaving those contractors and union members out of work.

Papyrus Closing All Stores in the Next Four to Six Weeks, Files for Bankruptcy Protection

Greeting card and stationery chain Papyrus is closing its stores in another blow to the ailing industry, USA TODAY reported. Most of the 254 closings will take place over four to six weeks, said Dominique Schurman, CEO of Papyrus parent company Schurman Retail Group, in a statement Tuesday. Founded by Marcel and Margrit Schurman in 1950, Goodlettsville, Tenn.-based Schurman has about 1,400 employees at its stores. The retail group yesterday filed for chapter 11 bankruptcy protection. Court records show of the 254 stores, 178 are located in 27 states and Washington D.C. and the company has 1,000 U.S. employees. The other stores are in Canada. The Papyrus website advertised 20 percent to 40 percent off all items yesterday and said all sales were final. Earlier in the week, the discount was 20 percent off full-priced items.

Fairway Files For Chapter 11, Proposing Sale to Village Super Market

Fairway Market, the iconic New York City grocery chain, filed for bankruptcy protection with a proposal to sell its Manhattan stores to the Village Super Market Inc., a member of the Wakefern Food Corp. cooperative, WSJ Pro Bankruptcy reported. Village Super Market, which operates stores under the ShopRite and Gourmet Garage banners, is offering $70 million for Fairway’s five New York supermarkets and its distribution center, Fairway said yesterday. “If we are successful in our bid, we are committed to keeping Fairway, including its name, unique product selection and value, a part of this community,” said Robert Sumas, Chief Executive of Village Super Market. Fairway has struggled to stay afloat under heavy competition from other grocery stores at a time when brick-and-mortar retail is being squeezed by online shopping. In court filings, the company also blamed high labor and pension costs for some of its financial straits. The company’s cash dwindled to $1 million by the time it filed for bankruptcy this morning, according to court papers.

PG&E Makes Peace With Bondholders, Strife With Gov. Newsom Continues

PG&E Corp. has reached an accord with bondholders that smooths its path out of bankruptcy, but it has yet to win over California Gov. Gavin Newsom, who has threatened a state takeover of the embattled utility, WSJ Pro Bankruptcy reported. Hours before PG&E announced a settlement with investors owning most of its $17 billion bond debt, Newsom lashed out in a court filing that warned the utility it won’t get out of bankruptcy without major improvements to its turnaround plan. Years of deadly wildfires linked to its equipment drove PG&E into chapter 11 protection last year. Bankruptcy shielded PG&E from continued lawsuits seeking damages from the blazes, but the barrage of criticism from Mr. Newsom and others has continued. PG&E paid out billions of dollars in shareholder dividends while skimping on safety investments, critics say. Newsom, who is playing a key role in PG&E’s bankruptcy effort, wants the utility to agree to new leadership and has asked the company to incorporate a mechanism that will allow the state special powers if the utility starts slipping up on safety again.

In Opioid Trial, Pharmaceutical Executive John Kapoor Sentenced to 5.5 Years

Former billionaire and pharmaceutical executive John Kapoor was sentenced to five and a half years in prison yesterday, WGBH.org reported. His sentencing is the culmination of a months-long criminal trial in Boston’s Moakley Federal Court that resulted in the first successful prosecution of pharmaceutical executives tied to the opioid epidemic. The 76-year-old is the founder of Insys Therapeutics, which made and aggressively marketed a potent opioid painkiller. Kapoor and four other executives were found guilty of orchestrating a criminal conspiracy to bribe doctors to prescribe their medication, including to patients who did not need it, and then lying to insurance companies to make sure the costly medication was covered. Two other executives pleaded guilty and became cooperating witnesses. Kapoor’s 66-month prison term is substantially less than the 15-year sentence recommended by federal prosecutors, but it is more than the one year requested by Kapoor’s defense attorneys, who maintained his innocence and stressed his old age as reason for a short prison sentence. The other executives received between one year and 33 months, significantly less than many of the prison times recommended by the federal prosecutors. For the federal government, this was a landmark trial in which corporate executives were charged under the Racketeer Influenced and Corrupt Organizations Act (RICO).
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