February 11, 2022 – Semper Utilities, LLC (“Semper” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of New Jersey, case number 22-11128 (Judge Andrew B. Altenburg Jr.). The Debtor, a Philadelphia headquarted company "offering a wide variety of powerline services," is represented by Jeffrey Kurtzman of Kurtzman Steady LLC.
The Debtor's Chapter 11 petition notes between 1-49 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $10.0mn and $50.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Edison Power Constructors, Inc. ($5.6mn trade claim), (ii) Chyn IV Ventures, LLC (disputed $3.15mn claim) and (iii) TruConTra Power (disputed $890k claim).
In a complicated intra-company battle at what otherwise appeared to be a posterchild for minority-owned businesses (ie, ex-marine and son of Puerto Rican immigrants begins as janitor and builds a company over 30 years that had over $20.0mn of revenue in 2020), the Debtor has filed for bankruptcy protection to buy time to pursue civil and criminal remedies against those it argues are responsible for its preceipitous state; and to demand the return of property (eg utility trucks and equipment) that it claims have been stolen and which it otherwise needs in order to service its customer contracts.
In a motion requesting a court order for the turnover of estate property necessary to "restore its operations and customer relationships" (the "Turnover Motion"), the Debtor depicts a battle between CEO and company founder Mike Diaz and a former CFO (Gladys Salazar) aligned with prepetition creditors/lenders engaged in an effort to steal the company.
According to the Debtor, that effort, beginning with an involuntary Chapter 11 in December 2021 (dismissed in January 2022)…evolved into "wanton theft" and "acts of thuggery;" including the hacking of computer systems, the seizure of vehicles and equipment, the use of armed guards to intimidate staff, and the representation to staff, clients and suppliers by the allegedly not so faithful Ms. Salazar that she was "acting for the Debtor and had full and exclusive operational authority to do so."
The crux of the matter is the status of a Court-approved forbearance agreement with creditors/lenders owed $9.6mn (the three listed above) which was supposed to settle the involuntary 2021 bankruptcy filing. Just weeks later, those creditors/lenders now argue, however, that an event of default has occurred in respect of that agreement; with that default the grounds for the actions of Ms Salazar et al to effectively take control of the Debtor's business.
The Debtor argues that there was no default (which, absent a default, provides the Debtor with relief through June 15, 2022) and and that even if there was, it was not given its allotted time to cure. It further argues that in "retrospect…the Forbearance Agreement…was…a mechanism designed by the Lenders and their counsel to steal the Debtor's business and divest Mr. Diaz of ownership and operational control."
In setting out its goals for the Chapter 11 filing, the Debtor notes that it intends to "commence actions against each of those actors in due course" but in the interim asks that the Court "direct those parties having possession, custody and/or control of the Debtor's assets to turn over and deliver such assets to the Debtor immediately in order to permit the Debtor to reorganize consistent with the policy underlying Chapter 11."
The Turnover Motion provides: "This is the second Chapter 11 case involving the Debtor. On December 2, 2021, Chym IV Ventures, LLC ('Chym'), SZY Holdings, LLC ('SZY' and, collectively with Chym, the 'Lenders'), Edison Power Constructors, Inc. and TruConTra Power, LLC (collectively, with the Lenders, the 'Petitioning Creditors') filed an involuntary Chapter 11 petition against the Debtor in this Court (the 'Involuntary Case'). On January 12, 2022, this Court entered a consent order (the 'Consent Order') dismissing the Involuntary Case.
Among other things, the Consent Order approved a forbearance agreement (the 'Forbearance Agreement') between and among the Debtor and the Petitioning Creditors.
Pursuant to section 15, of the Forbearance Agreements, the Debtor was afforded seventy-two (72) hours, or three days, to cure alleged defaults.
On February 1, 2022, the Petitioning Creditors, through their counsel, issued a letter purporting to notice the occurrence of defaults by the Debtor under the Forbearance Agreement. The Debtor disputes that events of default had occurred or were continuing as of the date of the letter. However, by operation of section 15 of the Forbearance Agreement, the earliest date on which the Petitioning Creditors could have exercised their rights and remedies under the Forbearance Agreement was February 4, 2022, which was three days after the purported default notice.
On February 7, 2022, Michele M. Dudas, an attorney representing an entity known as CTPC Holdings Inc. ('CTPC') wrote to the undersigned counsel for the Debtor, stating, in relevant part, that CTPC was the "nominee and assignee of Chym" and that the Semper Interest had been assigned to CTPC on February 2, 2022, which she defined as the "Assignment Date". A copy of Ms. Dudas' letter is annexed hereto and made a part hereof as Exhibit 'C'.
That letter attached a document entitled Assignment and Transfer of Membership Interest dated February 2, 2022 (the 'Assignment") and is signed by Gladys Salazar ('Salazar') on behalf of CTPC, Chad Friedman, Esquire ('Friedman'), purportedly on behalf of Mr. Diaz, and a representative of SZY. Notably, Mr. Diaz did not execute the Assignment in his own right.
In determining this motion, this Court will benefit from an understanding of the relationships among the parties to the Assignment. Salazar is the Debtor's former chief financial officer. The Debtor submits that Salazar engaged in the theft or embezzlement of substantial assets of the Debtor during and after her employment with the Debtor. Moreover, upon information and belief, Salazar is a business partner with Friedman in CTPC or other business ventures and has been working in concert with Friedman to appropriate the Debtor's business and assets. Friedman is an attorney who is also the principal of Chym and who has actively (but unsuccessfully) solicited Mr. Diaz, both before and after the commencement of the Involuntary Case, to acquire the Debtor's business.
Viewed in retrospect, it is now clear that the Forbearance Agreement, rather than constituting a good faith vehicle for allowing the Debtor to restore its operations and customer relationships in the aftermath of the Involuntary Case, was instead a mechanism designed by the Lenders and their counsel to steal the Debtor's business and divest Mr. Diaz of ownership and operational control.
As such, the conduct of the Lenders and those who have abetted them in their efforts is unconscionable. In addition, and as set forth more particularly below, it is also illegal.
In the days following the Assignment, Salazar and CTPC sought to enter the Debtor's office facility, hacked the Debtor's computer systems, took possession of the Debtor's vehicle fleet, and contacted the Debtor's accounting firm, critical vendors, customers and prospective lenders. Salazar used armed security personnel in an effort to intimidate the Debtor's officers and employees in what can only be described as acts of thuggery. Salazar's message in all instances was that she was now acting for the Debtor and had full and exclusive operational authority to do so. While Salazar's efforts to invade the Debtor's office facility were thwarted by local police, she did in fact seize and remove critical vehicles and tools used by the Debtor in its operations. Upon information and belief, such assets are now in the possession of CTPC and/or Salazar.
The foregoing conduct by Salazar, Friedman and their various counsel rises to the level of wanton theft. While the Debtor intends to commence actions against each of those actors in due course, this Court should direct those parties having possession, custody and/or control of the Debtor's assets to turn over and deliver such assets to the Debtor immediately in order to permit the Debtor to reorganize consistent with the policy underlying Chapter 11."
About the Debtor
According to the Debtor: “Semper Utilities is a minority and veteran owned company. Along with the guidance of our CEO, we are a team of highly trained and experienced individuals who have a strong set of morals and ethics to help provide the highest level of safety, professionalism, and quality to our employees, partners, and customers.
The CEO, Mike Diaz, has over 30 years of experience in the utility industry with work in distribution, transmission, and underground services. He started Semper Utilities because he saw a need in the industry to provide professional, safe, and cost-effective utility construction services. Mike prides himself in having a team of highly experienced staff with a keen understanding of industry regulations and safety controls. Mike and his team encourage the utilization of modern technology to help support their clients in order to expand visual capabilities, while providing real-time status updates of current projects. They strongly believe in keeping project communication open to all networks within the company."
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