Newspaper article The Florida Times Union

Creditors Told: Pay Back Durango; Bankrupt Mill Has Law on Its Side in Demanding Refund on Bills It Paid

Newspaper article The Florida Times Union

Creditors Told: Pay Back Durango; Bankrupt Mill Has Law on Its Side in Demanding Refund on Bills It Paid

Article excerpt

Byline: Gordon Jackson, The Times-Union

ST. MARYS -- Creditors of Durango-Georgia Paper Co. haven't held much hope they will get back the money owed them from what was once Camden County's largest employer before it closed nearly two years ago.

Now, the business owners have learned their predictions are even worse than they believed.

Lawyers representing Durango have sent letters to as many as 350 businesses who did business with the paper mill, demanding repayment of all money they were paid for goods or services 90 days prior to when the company was forced into involuntary bankruptcy by creditors on Oct. 29, 2002.

According to the letter sent to business owners refusing to repay the money demanded, the liquidating trustee managing Durango's assets in bankruptcy court "has been authorized to file a complaint with the bankruptcy court to recover the amount sought, plus prejudgment interest, and to disallow any claim your company might file in the bankruptcy court."

St. Marys attorney Jim Stein, who represents some of the creditors owed money, said he was "shocked" by the demands from Durango lawyers. Stein said it's unlikely anyone except the courts and defense attorneys will get any money once the case is resolved.

More than 900 employees who lost their jobs when the company shut its doors in November 2002 have never been paid severance or vacation pay owed to them. Some workers said they are still owed as much as $50,000.

"There's nothing on the books that indicate they [former employees or creditors] will receive one copper penny," Stein said. "Nobody's going to get anything. It's just a continuous rip-off of the community."

Anne Blitch, an attorney representing Durango, declined to comment.

The logic by defense attorneys, Stein said, is merchants doing business with Durango knew the company was going bankrupt and should have expected the money they were paid in the months before it closed might have to be returned -- even though those merchants were still owed money by the company.

Stein said many of the creditors knew Durango was struggling financially, but kept extending the mill credit to keep it operating.

Creditors were notified by the company in a letter on Sept. 13, the day the mill announced it was closing, that Durango would not file for bankruptcy.

"We would like to emphasize that we are not filing for Chapter 11," according to a letter written by Herb Baez, the company's vice president and corporate comptroller.

However, the company filed for Chapter 11 bankruptcy on Nov. 19, which Stein said allowed Durango to demand the return of all money paid to business owners within 90 days prior to the involuntary bankruptcy forced upon the mill by creditors.

"Once Durango filed for Chapter 11 bankruptcy, this opened the door for preferential treatment for Durango to make the claim the creditors should not have extended credit to the mill prior to the 90-day period," Stein said. …

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