Gibson Brands – DHS, CBP and IRS Object to Plan, Citing Failure to Pay Tax and Interest on Administrative Expenses

September 28, 2018 – The U.S. Department of Homeland Security (“DHS”), the U.S. Customs and Border Protection (“CBP”) and the U.S. Internal Revenue Service (“IRS”), filed an objection [Docket No. 835] to the Debtors’ Fourth Amended Joint Chapter 11 Plan of Reorganization [Docket No. 726], citing (i) the Debtor’s failure to file its most recent tax return and (ii) multiple Plan shortcomings relating to the payment of tax and interest. The objection asserts, “IRS records indicate that Gibson Brands, Inc., the lead Debtor in these jointly administered cases, has not yet filed its federal tax return for the taxable year ended March 31, 2018.  If the Debtors and the United States cannot reach agreement on appropriate protective language, the United States objects to the confirmation of the Plan unless and until all federal tax returns are filed. The United States, on behalf of CBP, intends to file contingent, unliquidated claims against Gibson Brands, Inc., Gibson Innovations USA, Inc., and Gibson Pro Audio Corp. The United States objects to the third party non-debtor limitation of liability, injunction, exculpation and release provisions set forth in Article X of the Plan. The injunction provisions violate the Anti-Injunction Act, I.R.C. Section 7421(a)….The United States objects to the Plan to the extent it fails to preserve the setoff and recoupment rights of the United States. Confirmation of a plan does not extinguish setoff claims when they are timely asserted….The United States objects to Article II.A of the Plan to the extent the Plan fails to provide for the payment of interest on administrative expense claims of the United States….The United States objects to Article II.D of the Plan to the extent it fails to comport with 11 U.S.C. Section 1129(a)(9)(C) and it does not provide for the payment of an adequate rate of interest from the Effective Date on such claims. The United States objects to the discharge provisions in the Plan to the extent it discharges debts described in 11 U.S.C. Section 1141(d)(6). The United States objects to the provisions in Article X and throughout the Plan which purport to treat the claims and causes of action of the United States as having been settled pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure….The Debtors here are not settling their own claims but instead are attempting to settle the claims of creditors without providing adequate notice.  By virtue of the Plan process, the United States does not waive sovereign immunity and has not consented to the compromise or settlement of its claims and this provision is unfairly prejudicial to the rights of the United States.”