Sea Island’s Unsecured Creditors Get Checks
By David Slade, The Post and Courier, Charleston, S.C.
Dec. 28–After nearly two years under bankruptcy protection, a nonprofit Johns Island health care organization founded during the Civil Rights era is getting back on its feet, and employees who were not paid in full during the hard times are getting some of what they are owed.
Sea Island Comprehensive Health Care Corp. was able to emerge from bankruptcy by selling a 52-acre tract of undeveloped land near the intersection of Maybank Highway and Bohicket Road, a portion of which borders Charleston’s small Angel Oak Park. A development company paid $3.5 million for the land, and plans to build nearly 300 homes and a supermarket there.
J. Ronald Jones Jr., Sea Island’s bankruptcy lawyer, said checks were mailed Dec. 9 to employees and other unsecured creditors, representing about 40 percent of what they are owed. He said a second distribution is planned.
Under bankruptcy laws, secured creditors get paid first when there is money to distribute. Jones said all secured claims were paid, including about $1 million to the Internal Revenue Service.
Unsecured creditors divide up what’s left after secured claims are paid. Often, in bankruptcy cases, that amounts to very little.
‘A 40 percent distribution is very significant in a Chapter 11 bankruptcy,” Jones said. ‘The fact that we plan to have another distribution is gravy.’
Sea Island oversees a network of home health care workers, nutrition programs for the elderly on Johns, James, Edisto and Wadmalaw islands, and a day care center in Hollywood.
In its heyday, Sea Island had about 300 employees and operated a nursing home on Johns Island, a pharmacy and laboratory, medical centers on Johns Island and in Walterboro and Hollywood, and several day care centers. Today, Sea Island has a few dozen employees and rents the nursing home and medical center buildings to outside companies that operate them.
Sea Island’s spiral into bankruptcy began in 1999 when the state shut down the 132-bed Hermina Traeye Nursing Center because of repeated violations.
The closure of the nursing home cut off Sea Island’s main source of income and left it saddled with nursing home-related fines, IRS penalties and other debts.
In 1999, hundreds of thousands of dollars in employee wages, pension fund contributions and withholding taxes went unpaid. Sea Island’s chief operating officer, William Pinder, who oversaw the organization’s finances for 20 years, resigned the following year but not before claiming he was owed $322,000 for two decades of unused sick and vacation time.
Pinder, like other current and former employees with unsecured claims, is now being paid a portion of the debt.
Jones said there are still a few issues to resolve, which will determine how much more money is available for payouts. The largest question is whether a judge will throw out a roughly half-million dollar claim for penalties and interest from the IRS.
Jones has argued that penalties and interest on amounts owed to the government were intended to protect taxpayers and employees in bankruptcy cases, but in this case would take money directly out of employees pockets by shrinking the pool of money to distribute.
He said several large creditors, including Charleston County, the city of Charleston and the state Department of Health and Human Services, agreed to forgo penalties and interest on their debts, while the actual debts were paid in full.
Those waivers freed up about $188,000 for other claims, many of which involved low-wage employees owed several hundred or several thousand dollars.
Jones said he expects the remainder of the case to be wrapped up within 60 days.
—–
To see more of The Post and Courier, or to subscribe to the newspaper, go to http://www.charleston.net.
Copyright (c) 2005, The Post and Courier, Charleston, S.C.
Distributed by Knight Ridder/Tribune Business News.
For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.