Tribe Wants Gulf Corp. Fire Sale Reorganization Plan Would Cut Medical Benefits For Pensioners; Alternative Proposed To Derail Liquidation Effort

Medical benefits for hundreds of Gulf USA Corp. pensioners would be cut under a bankruptcy reorganization plan unveiled Thursday.

But pensioners fare far better than any other creditors in the plan filed at a morning bankruptcy hearing. The plan has not been approved.

“Any reduction is going to hurt me,” said retiree Pete Piekarski of Pinehurst, Idaho. “But I’ve got confidence in my lawyers to get me the best deal possible.”

One of those lawyers, Steve Berzon of San Francisco, said the pensioners will get about as much as they could expect from Gulf’s bankruptcy reorganization, assuming the plan is approved.

“There will be a reduced benefit,” Berzon said. “It’ll be a serious cut, but one that we can live with.”

For more than a year, Inland Northwest pensioners have feared losing all or part of their medical coverage because of Gulf’s bankruptcy.

The reorganization plan was filed Thursday in an effort to derail a move by the Coeur d’Alene Tribe and Gulf bondholders to liquidate the company immediately. Gulf has no ongoing business; the company has assets of $50 million to $80 million but liabilities exceeding $1 billion.

A fire sale of Gulf’s assets - as opposed to a reorganization of debt - could be devastating for retirees, their lawyers say.

Gulf is the former operator of the Bunker Hill mine and smelter complex in Kellogg. The company owes millions to bondholders and pensioners and for environmental cleanup at Bunker Hill, now a massive Superfund site.

Ray Givens, the tribe’s attorney, said Gulf should be liquidated because it has not been able to reorganize its debts since landing in Bankruptcy Court 15 months ago. During the last year, Gulf’s top officer claimed that company insiders were scheming to defraud creditors and the public.

Although blessed by the Environmental Protection Agency and the Department of Justice, Gulf’s reorganization plan hints of insider dealing. It calls for a longtime client of Gulf Chairman Jay Miller to invest money in the company. This investor, Michael Karfunkel, also is a friend of Willi Stern’s, a Gulf shareholder and director accused of foiling the sale of Gulf property in France. The sale is needed to clean up the balance sheet of Gulf Resources Pacific Ltd., a New Zealand subsidiary whose stock holdings comprise nearly all of Gulf’s value. “It certainly creates the appearances of some insider dealing,” Givens said.

Gulf’s lawyers said that the Karfunkel deal is merely an opening bid for Gulf’s assets. The company’s New Zealand holdings will be marketed to other investors.

Pensioners aren’t the only residents in this region affected by the company’s bankruptcy reorganization. Under the plan filed Thursday, Gulf property in Kellogg - which includes valuable development land near Silver Mountain Ski Resort - will be handed over to the federal Environmental Protection Agency and the Coeur d’Alene Tribe.

Kellogg residents worry that Silver Mountain may be hurt if prime ski resort property is tied up by the government. That would keep the property from being developed.

It’s too early for Gulf retirees to know how much of their medical benefits they could lose. Costs for medical benefits fluctuate monthly. Retirees’ claims against the company exceed $50 million. Under the reorganization plan, they’d get a medical benefits package valued at $42 million.

If approved, the reorganization would be a victory for pensioners, Berzon said, because they’d be assured of at least $42 million in aggregate medical benefits. A better deal, he said, is still possible.

Also on Thursday, Gulf, the EPA and retirees asked the court to appoint a neutral party to market Gulf’s assets. Such an effort would make sure that offers other than Karfunkel’s are solicited.

Judge Alfred C. Hagan is expected to decide early next week whether to allow the tribe to pursue its bid to liquidate Gulf. Meanwhile, the company is trying to convince bondholders and the tribe to support its proposed reorganization plan.

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