After two decades of mining, polluting and, more recently, short-changing creditors, Gulf USA Corp. this week emerged from bankruptcy and left the Silver Valley for good.
A federal bankruptcy judge approved the reorganization of Gulf USA Corp., much to the relief of retirees, bondholders and government agencies vying for the leftovers.
The agreement signed by Judge Alfred C. Hagan on Thursday liquidated what was left of Gulf’s assets and established a new, much smaller Gulf to be run by a New York investor.
Gulf leaves behind one of the largest Superfund cleanup sites in the nation and about 3,000 Bunker Hill pensioners who once depended on the venerable “Uncle Bunker” for their livelihood.
The retirees fared better than other creditors in the plan. They’ll keep full medical benefits - worth about $42 million today - despite having higher deductibles and slightly less supplemental insurance coverage.
“Now we can plan for the rest of our lives,” said Pete Piekarski, a 78-year-old Bunker Hill pensioner living in Pinehurst. “The changes are going to hurt, but we’ll survive. We’re survivors here.”
Gulf bondholders who sank tens of millions into the company stand to get just $5 million. While that’s only pennies on each dollar invested back in the 1980s, it’s better than nothing, said Ford Elsaesser, Sandpoint bankruptcy attorney.
“Unlike other cases, this was more of a liquidation than a reorganization,” Elsaesser said.
The federal Environmental Protection Agency and the Coeur d’Alene Tribe get $17 million, much of which will go toward cleanup of lead-laced soils around Bunker Hill.
“We finally slew the dragon,” said Ray Givens, who represented the tribe.
The bondholders, the government and the tribe stand to receive more money depending on the outcome of lawsuits against former Gulf executives. The lawsuits charge former directors with negligence and fraud in the handling of Gulf’s money.
The bondholders also receive the East Ridge property near Silver Mountain Ski Resort.
Pensioners and Idaho taxpayers blame the federal government for failing to block Gulf’s overseas investments, which drained company coffers. The government and a few pensioners forced the company into bankruptcy in 1993, after most of its money already had been channeled overseas.
“The damage was done and the assets were stripped long before Gulf filed for bankruptcy,” Elsaesser said. “Had we not forced Gulf into bankruptcy, there would have been a lot less.”
A succession of Gulf executives are accused of wasting the company’s nearly $200 million in assets during the late 1980s and early 1990s. In some cases, former managers are accused of outright fraud.
Now, depressed New Zealand real estate remains as Gulf’s only asset.
“The worst thing we can see about the whole thing was that our government failed us by allowing the assets to get out of the country,” Piekarski said Friday. “If they had stopped Gulf from doing that we’d all be a lot better off.”
The bankruptcy case has languished in court since late 1993, complicated by divergent creditors vying for precious few dollars.
“I think it was a really wonderful result considering how extremely complex the case was,” said Stephen Berzon, a San Francisco attorney representing the retirees. “It was a result we believe addressed the priorities it ought to have, and that was to keep the medical plan.”
The price of settling the case may please lawyers as well. Attorneys will be paid about $7 million for their work. Berzon and Elsaesser point out that all lawyers accepted a 10 percent cut in their fees. An additional deferred payment of about $300,000 will be paid only if certain legal settlements come through.
The lawyers argue that the fees were far less than they could have been if traditional retainers were received.
“We didn’t have to accept the cuts,” Berzon said. “There’s nothing in the law that said we had to. The law said we are entitled to our full fee, but we decided to take the cut to make the deal happen.”
The EPA-led cleanup continues at Bunker Hill as it has for the past year. The settlement simply secures a small piece of the $100 million or more it will take to rid the area of mine wastes. Taxpayers will pick up most of the tab.
The lawyers and pensioners alike, seemed pleased to close the book on Gulf.
“At my age, we don’t need these crises to worry about,” Piekarski said. “When you look at a lot of people who have been affected by everything with Bunker, a lot of them are gone … gone before their time.”
, DataTimes MEMO: This sidebar appeared with the story: GULF REORGANIZATION A federal bankruptcy judge approved Gulf USA Corp’s reorganization. Creditors and the amount of money they receive include: Bunker Hill Co. retirees: Lifetime medical benefits worth an estimated $42 million. Retirees face higher deductibles and less insurance coverage after Medicaid coverage ends. Gulf bondholders: Receive only $5 million out of claims of nearly $80 million. Bondholders also get property near Silver Mountain Resort. Federal government and the Coeur d’Alene Tribe: Collectively receive about $17 million, primarily for Superfund cleanup. The Coeur d’Alene Tribe individually receives $500,000 cash. Lawyers: Receive about $7 million in fees.