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Lawyer: IPI can’t pay $6.8M civil judgment

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IMPERIAL Pacific International is unable to pay its former contractor $6.8 million as ordered by the court, and will likely close permanently if the judgment is enforced, IPI attorney Michael W. Dotts told the federal court.

In his motion to stay execution of judgement pending appeal, he said the Covid-19 pandemic has caused IPI to close its business, adding that the casino investor barely has the resources to cover payroll, taxes, and utilities. Moreover, IPI does not have the resources to post a bond, or to pay the judgment, Dotts said.

“However,” he added, “IPI has leasehold interests in real property it can post to secure payment.”

He said IPI is willing to place about $9 million worth of property under mortgage in favor of Pacific Rim.

“This will guarantee that if IPI does not prevail on appeal Pacific Rim will be able to collect on judgement,” Dotts said. “IPI is in the process of obtaining title reports to confirm clear title.”

“The value of the properties is based on the prices IPI paid,” he added. “The grant of the stay can be conditioned on clear title and the recording of mortgages satisfactory to the plaintiff or the court.”

IPI is appealing the recent decision and order of District Court for the NMI Chief Judge Ramona V. Manglona who found IPI in breach of promissory note with its former contractor, Pacific Rim.

The court then entered a civil judgment in the amount of $5.6 million against IPI plus judgement interest, attorney’s fees, and costs.

IPI declarations

Francis Mafnas, director of treasury, and Redie Dela Cruz, human resources director, both of IPI, each filed a declaration submitted to the court to support the motion of stay proceedings of the casino operator.

Mafnas stated that as a result of Covid-19, IPI had to close. “Because we have no income, we have furlough[ed] hundreds of employees. We are now completely dependent on financial assistance from the parent company to meet our expenses,” he said.

“Making payroll has been a serious problem. We are still employing about 1,066 employees, mostly in construction. From Payroll 9 (April 24), we were having funding issues. We were able to come up with funds to release payroll to those earning $10.50 per hour or less on time on April 24, 2020. Then, we partially released Payroll 9 on May 8, 2020. We fully released Payroll 9 today on May 22, 2020.

“From Payroll 10 (May 8) we also experienced funding issues. We released checks below $10.50 per hour on time on May 8, 2020. Checks for above $10.50 [were] released today on May 22, 2020. From Payroll 11 (May 22), all the payroll checks were released today. We are just now getting back to normal with payroll, but we did furlough over 500 employees.”

Mafnas said IPI has not been able to pay vendors because it has prioritized payroll and taxes.

“On May 15, 2020, CUC shut off power because we could not make a payment on this day as promised. We were not able to release payment on this day because we did not have the funding. We did not have sufficient funds to make the payment because we did not receive

funding from the parent company,” Mafnas said.

“On May 20, 2020, we were able to identify funds to make the payment to CUC this time, but we do not know if we will be able to keep the power on in the future.”

With regard to taxes, Mafnas said, “I was barely able to pay the BGR tax with the government for up to April 2019 today which was for $3,000,000.”

Based on the current situation of IPI, Mafnas said, “We will not be able to make any payment on taxes unless we get substantial assistance from the parent company. We also have a $250,000 public land lease payment due annually to [the Department of Public Lands]. The payment is due, and we are not able to make the payment. If we do not make the payment, DPL could cancel the land lease where the casino is.”

Mafnas said IPI also needs to pay $15 million in annual casino license fee and $3 million in casino commission fee, which will be both due by the end of the year.

As for the $6.8 million judgment owed to Pacific Rim, “IPI does not have the money to pay this judgement. IPI does not have the money to pay a bond guaranteeing payment of the judgement.”

Mafnas added, “We have 1,066 employees who have received paychecks that if Pacific Rim is allowed to remove money from our accounts, their paychecks will bounce. For this reason, it is important to have the stay in place at the earliest possible time.”

Slowdown

Dela Cruz stated that on Feb. 10, 2020, IPI reduced nonexempt work hours because flights were canceled and tourism started to slow down by January due to Covid-19.

“This slowdown of flights started to affect our finances,” Dela Cruz said, adding that on March 17, the casino shut down to comply with the governor’s directive.

“On April 6, IPI implemented a furlough for six weeks of non-essential employees. Currently, we have extended furlough to June 12, 2020.”

If the $6.8 million civil judgment against IPI is enforced, Dela Cruz said: “I believe that this will mean IPI will not be able to make payroll for an extended period of time. I am concerned that if a stay is not entered very quickly, IPI and its employees could suffer serious harm”

Dotts added that IPI is experiencing difficulties paying its electricity bills.

Even after IPI paid its current bill, the Commonwealth Utilities Corp. threatened to shut off power without full payment, he said.

Dotts said IPI has had trouble meeting its payroll and, even when it later makes full payment, it falls behind again on later payments.  “The day of filing this motion, Pacific Rim may begin collecting on the $6.8 million judgment against IPI. If IPI has trouble making an electricity bill or meeting payroll, how can it pay a $6,800,000 judgment? Failing to stay proceedings will only exacerbate IPI’s current financial distress,” Dotts said.

 

 

 

 

November 2020 pssnewsletter

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