Full text
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
In re:
PANTHERA ENTERPRISES, LLC
Case No. 2:19-BK-787
Chapter 11
Debtor in Possession.
MOTION TO JOIN UNITED STATES TRUSTEE’S
MOTION TO DISMISS OR CONVERT
NOW COMES Panthera Training, LLC (“Panthera Training”), by counsel, and in support
of its motion to join into the United States Trustee’s Motion to Dismiss or Convert [Doc. 112]
pursuant to 11 U.S.C. §1112(b) states as follows:
FACTUAL BACKGROUND
1.
Panthera Training is a Virginia limited liability company that is not related
to the Debtor or the Debtor’s subsidiary, Panthera Training Center, LLC (“Center”). (See
“Affidavit of Robert Starer” (“Starer Aff.”) attached hereto as Exhibit 1).
2.
On June 1, 2018, Panthera Training leased the Debtor’s 750-acre military
and law enforcement personnel training facility located in Hardy County, West Virginia
(“Facility”).
3.
Prior to June 1, 2018 Center conducted training courses at the Facility for
both the Debtor and itself. See Starer Aff. at ¶3.
4.
Center stopped conducting training courses at the Facility effective June 1,
2018. Center then subcontracted with Panthera Training to assume Center’s two existing
government training contracts. Likewise, Debtor subcontracted with Panthera Training to
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 1 of
15
2
conduct training under its sole contract, which is with the Drug Enforcement Administration
("DEA"). Center does not have a contract with the DEA. See Starer Aff. at ¶¶4 and 18.
5.
Pursuant to its subcontract with the Debtor, in September, 2019, Panthera
Training conducted a DEA training course. The DEA paid $172,000 for the training, which was
received by the Debtor on October 21, 2019, and generated a payable to Panthera Training in like
amount. (See Doc. 63 (Debtor's October Operating Report), pages 7 (showing "Cash Receipts" of
$172,000 for DEA Training Contract) and 13 (showing $172,100 deposited in the Debtor's bank
account), and see Starer Aff at ¶ 19). The $172,000 payable to Panthera Training, to date, has
not been paid, and is the subject of a separate adversary proceeding.
6.
Also, in the October Operating Report, under "Disbursements," Debtor
showed $134,160 disbursed to Center. See Doc 63, p. 8. The notation reads "Paid in error, will
be refunded and shown on the November operating report." See also Doc 63, p. 18, showing
$172,000 deposited by the DEA and $134,160 paid to Center, which is notated as "PTC Payment
- Sept DEA Class." PTC is Panthera Training Center, i.e., Center. Center did not conduct the
September DEA training for the Debtor. See Starer Aff. at ¶18.
7.
At all times relevant, James V. Punelli (“Punelli”) acted as Center’s
manager and as the Debtor’s “responsible party”. As the Debtor’s responsible party, each time
Punelli signed the Debtor’s Operating Report he certified under oath that the Debtor’s Operating
Report was “true, accurate, and correct.”
8.
The $134,160 that the Debtor disbursed to Center in October was not
returned to the Debtor in November. Instead, the Debtor reported "there was a
miscommunication/oversight during the month of November and the October 21, 2019 $134,160
payment to Panthera Training Center was not refunded during the month of November as
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 2 of
15
3
planned, but has since been returned in December and will reflect the same on the next report."
See Doc 80, p. 6.
9.
Debtor's December Operating Report shows cash receipts of $100,000 (in
two entries) from Center to the Debtor, which are noted as "Moving funds back from Oct
Payment." See Doc 93, p. 7. On the same page, Debtor notes "the remaining $34,160.00 that
was paid to Panthera Training Center, LLC will be refunded and reflected on the January
operating report." Id.
10.
Page 13 of the December Operating Report also shows $50,000 deposited
on 12/6/2019 and 12/18/2019, noted as "DEA payment refund from PTC (Sept Class)." See Doc
93, p. 13. In addition, the same ledger shows $44,464.80 paid to PT (Panthera Training), which
is noted as "DEA payment to PT (Sept Class)." Id. However, this $44,464.80 disbursement was
not a payment for the DEA training; it was payment for training conducted by Training for
Center.
11.
As noted above, in September, 2019, Panthera Training conducted a
training course pursuant to its agreement with Center, generating an invoice payable by Center in
the amount of $44,464.80. See Starer Aff., Exhibit 1.
12.
Punelli represented that Center would pay the $44,464.80 invoice by wire
transfer. See Starer Aff. at ¶ 9.
13.
Panthera Training received $44,464.80 by wire transfer on December 6,
2019. See Starer Aff. at ¶ 10. However, the December Operating Report reflects that this
$44,464.80 disbursement was paid from the Debtor's account and not from Center. Debtor's
Account Statement found at page 15 of Debtor’s December Operating Report shows an outgoing
wire # 014226 on 12/6/2019 for $44,464.80. See Doc. 93, p. 11.
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 3 of
15
4
14.
Panthera Training performed additional work under its agreement with
Center in November, 2019, generating and sending an invoice payable by Center in the amount
of $30,200. Starer Aff., Exhibit B.
15.
Punelli represented that Center would pay this $30,200 invoice by wire
transfer. See Starer Aff. at ¶13.
16.
Panthera Training received $30,200 by wire transfer on January 2, 2020.
See Starer Aff. ¶ 14.
17.
Debtor's January Operating Report shows a disbursement to Panthera
Training for $30,200, which is noted as "Payment for Sept 19, 2019 DEA Train." Doc. 98, p. 7.
But again, this payment was not for the DEA training course; it was payment of a payable owed
to Panthera Training by Center. The Debtor's Account Statement confirms a wire # 017897 on
January 2, 2020 in the amount of $30,200 was sent from the Debtor's account. Id. at p. 11.
18.
Page 11 of the January Operating Report characterizes the $30,200
payment to Panthera Traing on January 2, 2020, as "DEA payment to PT (Sept Class)." Doc 98,
p. 11. Again, Debtor paid a payable that Center owed Panthera Training from the Debtor's
account and disguised it by calling it a payment for the Debtor’s DEA September Class.
19.
As seen in the Debtor’s January Operating Report, the remaining $34,160
of the $134,160 purportedly mistakenly paid to Center in October 2019 was not returned to the
Debtor in January 2020.
20.
Panthera Training performed further work under its agreement with
Center in January, 2020, generating a second invoice to Center in the amount of $30,200. Starer
Aff., Exhibit C.
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 4 of
15
5
21.
Panthera Training received $30,200 by wire transfer on February 19,
2020. See Starer Aff. ¶ 17.
22.
As with the other wire transfers received by Panthera Training to pay the
Center payable, the funds were paid from the Debtor's account. Debtor's February Operating
Report shows $30,200 wired to “PT” (Panthera Training) on February 12, 2020 (# 009207) and
February 19, 2020 (#003489). Doc 110, p. 11. Each is noted as "DEA payment to PT (Sept
Class)." Doc 110, p. 12. The $30,200 received by PantheraTraining on February 19, 2020 was
in payment for a course conducted by Panthera Training for Center. Panthera Training did not
receive the other $30,200 wire referenced in the Debtor’s February Operating Report. Starer
Aff.¶ 16
23.
In January, Debtor replaced the $34,160 of the $134,160 that was
transferred to Center in October 2019. Doc 110, p. 14.
THE DEBTOR FILED FALSE MONTHLY OPERATING REPORTS
24.
Each of Debtor's wire transfers initiated for payment of the Center
payable addressed above misappropriated the Debtor’s funds to pay Center’s debts. Debtor's
Operating Reports falsely represent that the Debtor was making payments on Debtor's
obligations (i.e., to Panthera Training for the September 2019 DEA Training) when in fact,
Debtor was paying its subsidiary’s debts. This activity is unnecessarily depleting funds available
to pay creditors.
25.
When $44,464.80 was wired to Panthera Training on December 6, 2019,
in payment of Center’s obligation to pay Panthera Training’s September, 2019 invoice, the
Debtor withdrew the funds from the Debtor’s account and falsely reported the transaction in the
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 5 of
15
6
Debtor’s December, 2019 Operating Report as payment on Debtor’s obligation to Panthera
Training for the Debtor’s DEA contract work. Doc 93, page 13.
26.
In a similar manner, when $30,200 was wired to Panthera Training on
January 1, 2020, in payment of Center’s obligation to pay Panthera Training’s November, 2019
$30,200 invoice, the funds again were withdrawn from the Debtor’s account and again the
transaction was falsely reported in the Debtor’s January, 2020 Operating Report as payment on
Debtor’s obligation to Panthera Training for the DEA contract work. Doc 98, p.7.
27.
Later, when another $30,200 was wired to Panthera Training on February
19, 2020 in payment of Center’s obligation to pay Panthera Training’s December 2019 $30,200
invoice, Debtor withdrew additional funds from the Debtor’s account and once again falsely
reported the transaction in the Debtor’s February, 2020 Operating Report as another payment on
Debtor’s obligation to Panthera Training for the DEA contract work. Doc 110, p. 8.
28.
In each instance, Center had received payment from the government for
the training work performed by Panthera Training, (Starer Aff. ¶18), but rather than cause Center
to use those funds to pay its obligations, Debtor elected to deplete the Debtor’s dwindling cash
and misrepresent to the Court that it was properly applying the Debtor’s funds in payment of the
Debtor’s obligations. Moreover, the operating reports do not reflect that the Debtor received
funds from Center, other than funds that were due and owing to Panthera Training.
29.
The result of the Debtor’s false operating reports is that the Debtor has
misled the Court and the Debtor’s creditors into believing the Debtor disbursed $104,864.80 in
payment of the Debtor’s obligations. The false reports conceal the fact that the Debtor has paid
Center’s obligations with the Debtor's funds, leaving the $104,864.80 that the government paid
to Center -- which should have been paid to Panthera Training -- in Center's account.
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 6 of
15
7
GROUNDS TO CONVERT TO CHAPTER 7
30.
The Debtor's repeated filing of false operating reports in order to conceal
the misappropriation of the Debtor’s funds in payment of its subsidiary’s debts constitutes
“cause” as referenced in 11 U.S.C. §1112(b)(4) such as to support a motion to dismiss or
convert. Or, at the very minimum, a chapter 11 trustee should be appointed to administer the
bankruptcy estate. See In re 1243 20th Street, Inc. 6 B.R. 683, (Bankr. D.D.C. 1980) (finding
that a transfer of $60,000 to an affiliate by an insolvent debtor warranted appointment of an
examiner under section 1104 of the Bankruptcy Code); See also In re Sharon Steel Corp., 86
B.R. 455 (Bankr. W.D. Pa 1988) (finding that appointment of chapter 11 trustee was necessary to
maintain viability of Debtor’s business where Debtor transferred significant assets to other
companies under common control); and In re Tucker, 411 B.R. 530 (Bankr. S.D. Ga.) (finding
that conversion to chapter 7 was proper where Debtor’s monthly reports were incomplete,
misleading, and materially false.
DEBTOR’S BURDEN TO AVOID CONVERSION
31.
This Motion establishes cause to convert this case under 11 U.S.C
§1112(b)(2). The Debtor may avoid conversion only by establishing all of the following
conjunctive conditions:
(a)
Unusual conditions such that conversion is not in the best interest of
creditors. [11 U.S.C. §1112(b)(2)];
(b)
A reasonable likelihood that a plan will be confirmed within a reasonable
period of time; [11 U.S.C. §1112(b)(2)(A)]; and
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 7 of
15
8
(c)
Most importantly in the matter at hand, a reasonable justification for the
acts and omissions of the Debtor, and that they will be cured within a reasonable time fixed by
the Court [11 U.S.C. §1112(b)(2)(B)].
32.
Panthera Training submits that there are no unusual circumstances that
would prevent conversion of this case, and that it is beyond peradventure that the Debtor’s acts
cannot be reasonably justified.
WHEREFORE, Panthera Training requests that the Court convert this case to one
under Chapter 7, and grant such further relief as this cause merits.
PANTHERA TRAINING, LLC
By Counsel
/s/ Douglas E. Kahle, Esq.
Douglas E. Kahle (VA BAR No. 15964)
BASNIGHT, KINSER, LEFTWICH & NUCKOLLS, P.C.
308 Cedar Lakes Drive, 2nd Floor
Chesapeake, Virginia 23322
Telephone: (757) 547-9191
Facsimile: (757) 547-9135
E-mail: DKahle@basnightkinser.com
-and-
/s/ Zachary J. Rosencrance
Julia A. Chincheck (WV Bar No. 718)
Michael R. Proctor (WV Bar No. 9122)
Zachary J. Rosencrance (WV Bar No. 13040)
BOWLES RICE LLP
600 Quarrier Street
Post Office Box 1386
Charleston, West Virginia 25325-1386
Telephone: (304) 347-1100
Facsimile: (304) 343-3058
E-mail: jchincheck@bowlesrice.com
E-mail: mproctor@bowlesrice.com
E-mail: zrosencrance@bowlesrice.com
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 8 of
15
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 9 of
15
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 10 of
15
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 11 of
15
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 12 of
15
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 13 of
15
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 14 of
15
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
In re:
PANTHERA ENTERPRISES, LLC,
Case No. 2:19-787
Chapter 11
Debtor-in-possession.
CERTIFICATE OF SERVICE
I, Zachary J. Rosencrance, do hereby certify that a true and correct copy of
Panthera Training, LLC’s Motion to Join United States Trustee’s Motion to Dismiss or
Convert has been served on all parties registered to receive notices by the Court’s ECF System
in this case, on this the 23rd day of April, 2020.
/s/ Zachary J. Rosencrance
Zachary J. Rosencrance (WVSB # 13040)
11832649.1
No. 2:19-bk-00787 Doc 119 Filed 04/23/20 Entered 04/23/20 13:41:39 Page 15 of
15