CHARLESTON, W.Va. -- In the year before it filed for bankruptcy, Freedom Industries paid more than $6 million to its former owners and to companies affiliated with its current owners, court filings show.<\/p>\n
CHARLESTON, W.Va. -- In the year before it filed for bankruptcy, Freedom Industries paid more than $6 million to its former owners and to companies affiliated with its current owners, court filings show. <\/p>\n
These payments to what bankruptcy law calls \"insiders\" will be closely examined by Freedom's creditors and could be ordered returned to the company if they're deemed improper, bankruptcy lawyers said. <\/p>\n
\"It is a red flag,\" said Bob Simons, a bankruptcy lawyer with the Pittsburgh firm Reed Smith. \"Any transfer within a year, to even as much as four years before the bankruptcy, can be scrutinized to see if those transfers should be returned to the bankruptcy estate.\" <\/p>\n
Simons added that it is good that Freedom is being forthcoming and not trying to hide the payments. <\/p>\n
He said if the transfers were made when the company was insolvent, or they helped make the company insolvent, then they could be \"clawed back.\" <\/p>\n
\"The distinguishing feature of this case is that the spill arguably was unforeseen, so how do you plan for it?\" Simons said. \"You could argue that, if you transferred a lot of the money out of the company, you left it with unreasonably small capital. It would be tough to establish that, because this was an unforeseen liability, but I must say, not impossible under the right circumstances.\" <\/p>\n
Freedom, which contaminated thousands of West Virginians' water with a chemical leak into the Elk River on Jan. 9, filed for Chapter 11 bankruptcy on Jan. 17. Under the bankruptcy code, Chapter 11 permits a company to reorganize and continue operating. <\/p>\n
Three men identified as former owners of Freedom -- Dennis Farrell, Charles Herzing and William Tis -- all received at least $180,000 from Freedom in the year before the chemical leak. <\/p>\n
Farrell, who remains with Freedom but no longer is an owner, received more than $288,000 in 33 \"withdrawals or distributions\" from the company in the past year, according to bankruptcy filings. <\/p>\n
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Freedom payments a red flag<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" CHARLESTON, W.Va. -- In the year before it filed for bankruptcy, Freedom Industries paid more than $6 million to its former owners and to companies affiliated with its current owners, court filings show. CHARLESTON, W.Va. Continue reading