Citing overwhelming losses in the Silver State Helicopters bankruptcy, U.S. Bankruptcy Court Judge Mike Nakagawa approved the payment of $101,000 in disputed legal expenses.
Silver State, which liquidated in 2008, once operated a chain of flight schools with more than 200 aircraft and helicopters. Nakagawa wrote in his ruling Thursday that the company resembled “an airborne Ponzi scheme” that depended on using tuition payments to cover other bills rather than provide lessons.
Even if all of the $8.1 million in legal fees run up in the case were returned, paying off certain priority debts, such as employees who were never compensated for the time they worked, would leave only $2.7 million to cover $478.2 million in unsecured claims. The latter category is dominated by hundreds of students who paid for lessons they never received.
Nakagawa noted the students had become “unique victims,” not given any priority status under bankruptcy law, but legally prohibited from erasing student loans they took out for the lessons.
Case trustee James Lisowski Sr. had collected $45 million, mostly by selling the aircraft and other equipment, and paid out all but $71,000. Most of the money went to ORIX Finance Corp., which had taken all the hardware as collateral for loans. As a result, what is left will not cover the final expenses.
The Office of U.S. Trustee, the branch of the Justice Department that acts as a watchdog over the bankruptcy system, said Lisowski had “lined his pocket” through double billings and various excessive expense claims. However, Lisowski said he had provided all the records and had documented his entire bill.
Nakagawa left the U.S. Trustee the option of filing further litigation to force the return of the disputed money.
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