How Government Creditors Prevailed in a $90 million Chapter 11 Plan 

How Government Creditors Collaborated to Reorganize King Mountain Tobacco Company, Inc., a Native American Cigarette Company that was Denied Certiorari Under Theories of Sovereignty Under the Yakima Treaty of 1855

Presenters:
Seth R. Freeman, CIRA, CTP, Managing Director, B. Riley Advisory Services-GlassRatner
Patricia Molteni, Counsel, Center for Tobacco and Public Health, 
National Association of Attorneys General
Karen Cordry, Bankruptcy Counsel, National Association of Attorneys General

After its claim of sovereignty under the Yakima Treaty of 1855 failed and its writ of certiorari was denied and the government began enforcement, King Mountain Tobacco Company, Inc., a private, Native American owned company, incorporated under the laws of the Yakima Nation, filed chapter 11 on September 20, 2020 in the Eastern District of Washington. King Mountain owed government creditors over $85 million of Alcohol and Tobacco Tax and Trade Bureau (TTB), State Master Settlement Agreement, FDA and USDA taxes.

A highly contested 16-month Plan Confirmation process (including a motion to appoint trustee, 2004 exams, failed mediations and a motion to dismiss) ultimately resulted in a consensual Plan with a 100% recovery to creditors and the owner retaining 100% of equity. With no committee appointed, it was the work of the government creditors, led by attorneys for the National Association of Attorneys General, DOJ and B. Riley as Financial Advisor that uncovered and stopped millions of dollars of pre and post-petition fraudulent transfers and insider transactions (like the expenses for 2,000 head of cattle personally owned by the shareholder paid by the debtor’s funds) that resulted in financially turning around the company. As a result of changes imposed by government creditors, cash on hand from operations increased from $1.2 million at commencement in September 2020 to over $9 million at confirmation in September, 2022. Over 50 full-time jobs on the Yakima Indian Reservation were preserved.

This entertaining and insightful presentation will cover aspects of claims of sovereign immunity of privately owned Native American businesses operating within a Tribal reservation, how government creditors collaborated in performing the investigative role of an unsecured creditors committee; negotiating interest rates; and the role of a financial advisor in a complex multi-agency process to negotiate the resolution of $90 million of state and federal tax claims.

Wednesday, May 3, 2023
Noon - 1:00 PM PST

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The Bay Area Bankruptcy Forum certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of one hour of general credit.                                    PROVIDER NUMBER 1287