A month after reincorporating in the state of Delaware, Samanta Roy Institute of Science and Technology, Inc. and several of its subsidiaries have filed for bankruptcy protection in an effort to reorganize, according to court records filed this week. The filing forestalled a scheduled foreclosure sale today of three gas station properties.
SIST and its subsidiaries are in the midst of several court cases over alleged unpaid debts of more than $4 million.
Three gas stations owned by Midwest Oil of Wisconsin - at 1206 E. Green Bay St., 1381 E. Green Bay St., and 716 S. Main St. - were scheduled to go on the block at 9 a.m. today as a result of a judgment awarded in one of those cases. The sale was canceled Tuesday morning.
Petitions for Chapter 11 bankruptcy were filed Monday by SIST and six subsidiaries including Midwest Oil of Shawano, LLC; Midwest Oil of Wisconsin, LLC; Midwest Oil of Minnesota, LLC; Midwest Properties of Shawano, LLC; Midwest Hotels and Motels of Shawano, LLC; and U.S. Acquisitions and Oil, Inc.
Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership, according to the U.S. Bankruptcy Court web site.
"In most cases, the filing of the bankruptcy case automatically stays certain collection and other actions against the debtor and the debtor's property," according to a notice of the filing posted by the bankruptcy court.
The bankruptcy petitions filed by SIST and its subsidiaries blame "intentional business interference, organized negative publicity, and the general economic downturn in the United States" as reasons for the financial situations.
However, the filings go on to cite an alleged scam the motion claims was perpetrated by a Canadian businessman, who allegedly offered to lend $10 million in exchange for "a significant advance fee." The motion states the fee for the loan was paid on Oct. 28, 2008.
"Unfortunately, it turned out to be worse than a scam and the Debtors lost the advance fee," the motion states. "This incident started possibly the worst publicity imaginable which has obviously affected our business and our loan relationships."
The motion does not name the businessman, but law enforcement authorities were subsequently contacted by a Canadian businessman about an alleged payment related to a so-called hit list targeting 60 Shawano area residents.
Shawano Police said the businessman was contacted by someone affiliated with SIST and the matter has been the subject of an FBI investigation since November. FBI Agent Patrick Lynch Tuesday said he could not comment on the investigation.
A person who answered the phone at the office of the Canadian businessman said he had left for the day.
The motion seeks the use of cash collateral to maintain operating expenses for businesses owned by SIST subsidiaries.
"The Debtors face a dire and immediate cash crunch, which if not alleviated in the most rapid manner possible, will cause it to cease operations," the motion states.
SIST and its subsidiaries own a number of Shawano area businesses, including the three gas stations, the AmericInn and Kiryat hotels, Spirit of the Northwoods, Midwest Gift and Fudge Shop, and USA International Raceway.
They also own a number of commercial properties in the city, some of which are leased to other businesses.
SIST representatives in the past have said the businesses were intended to fund the operation of an international boarding school, which they once proposed building in the town of Wescott.
According to the motion filed seeking the use of cash collateral, SIST and its subsidiaries had, until the recent difficulties, been financially successful operations.
"Due to Debtor's dynamic approach to business and Debtor's diverse business holdings, in the early years Debtor's businesses boomed and flourished," the motion states.
According to documents included in the filings, the Boards of Directors of both SIST and U.S. Acquisitions and Oil approved hiring an attorney and moving forward with Chapter 11 bankruptcy proceedings on March 8.
One of the documents filed requests that all of the bankruptcy filings be consolidated under the filing for U.S. Acquisitions and Oil.
A message left Tuesday for Eric Monzo - a Delaware attorney representing SIST and its subsidiaries in the bankruptcy proceedings - was not returned.
Attorney Alan Eisenberg, who is representing SIST in some of the other pending legal matters, said the bankruptcy was strictly a business reorganization matter. He also said the action puts any judgments awarded in those cases on hold.
"They're all stayed by federal order," he said.
Eisenberg said future court dates scheduled in those cases would be changed.
"Everything goes into suspended animation," he said.
SIST CEO Naomi Isaacson could not be reached Tuesday afternoon at a phone number for her included in the bankruptcy filing. Eisenberg said Isaacson would not comment on SIST's business affairs.
Terrence Byrne, the attorney representing the Integrity First Bank, Wausau, in the foreclosure action against the three gas stations, said he had no comment on Tuesday's developments.
According to the civil suit filed by Integrity, Midwest Oil secured a total of $1.3 million in financing from the bank in August and September 2006 by mortgaging the three properties. According to the suit, $1.2 million is remaining on the debt.
Meanwhile, a civil suit was filed in December requesting a receiver be appointed to Midwest Amusement Park's USA International Raceway over a defaulted $2.2 million mortgage. The suit was filed Dec. 8 by Southwest Guaranty, Ltd., of Houston.
Later this month, SIST and subsidiary U.S. Acquisitions and Oil, Inc. were due to be in U.S. District Court in Green Bay for a civil claim alleging fraudulent transfer of the racetrack property. The claim stems from a $190,000 judgment against SIST subsidiary Midwest Amusement Park last September that is still being appealed.
SIST was also scheduled to be in court next month on a civil suit filed by Zien Service, Inc. of Milwaukee, alleging payments due on mechanical, plumbing and heating work done at several SIST properties. Another civil suit filed by Zien seeking a money judgment is scheduled for trial later in the year.
Also pending are two civil suits filed by Draeger Oil Co. - one claiming more than $206,000 in payments due on fuel products provided to the three gas stations and the other a foreclosure action on three residential properties, which the suit contends were mortgaged to Draeger for $225,000.
Meanwhile, SIST and its subsidiaries owe the city of Shawano a total of more than $319,000, including personal and property taxes, room taxes and interest on the unpaid debt through February, according to the city clerk's office.
As of March 1, according to city records SIST owed the city $54,590; Midwest Hotels and Motels of Shawano owed $175,260; Midwest Oil of Wisconsin owed $18,045; and Midwest Properties of Shawano owed $71,222.
Shawano Mayor Lorna Marquardt declined to comment and city attorney Tim Schmid said he had not yet seen the bankruptcy filings and could not offer a comment.
