THE amount of Imperial Pacific International LLC assets that need to be sold could exceed $10 million, IPI attorney Michael Dotts told the federal court on Wednesday.
Because IPI CNMI is facing multiple lawsuits, he said the court-ordered receivership “could also develop into the full liquidation of the company to satisfy other judgments or provide the framework for a liquidation process.”
According to an online business dictionary, “the term liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants.”
Dotts said the baseline amount that the receiver needs to raise to purge IPI, IPI Holdings Ltd., and IPI chairwoman Cui Li Jie of contempt is $1,982,793.
However, he said, a tax lien may have to be satisfied first and there are also monies owing to the employees of IPI CNMI in excess of the baseline amount.
District Court for the NMI Chief Judge Ramona V. Manglona has found IPI, IPI Holdings Ltd. and IPI chairwoman Cui Li Jie in contempt of court for violating the consent judgment with the U.S. Department of Labor, and for not paying their current employees.
The judge ordered IPI, IPI Holdings Limited and IPI chairwoman Cui Li Jie to pay the current employees’ remaining back wages, the balance of the consent judgment at $1,182,793, and to create an escrow account to cover the future payroll of employees in the amount of $800,000 by March 1.
IPI has said that it won’t be able to pay the consent judgment, prompting the USDOL to nominate Guam attorney Joyce Tang, the NMI Settlement Fund trustee, as receiver.
Dotts noted that consent judgment with the USDOL was entered on April 11, 2019.
“However, it is not recorded,” he said.
The CNMI government, for its part, “recorded a tax lien on August 20, 2020 in the amount of $9,416,887.09. The tax lien applies to all property of IPI CNMI, both real and [personal]. Even though the tax lien came later than the consent judgment, the tax lien takes priority over the consent judgment because the tax lien was recorded.”
Therefore, Dotts added, “before the receiver can reach the assets of IPI CNMI to sell to satisfy the baseline amount owed to purge the contempt, the interests of the CNMI under the tax lien must be addressed.”
In addition, Dotts also said, “there is money owed to employees of IPI CNMI in addition to the back wages under the consent judgment. IPI CNMI began to have serious financial problems [affecting] the payment of wages with Payroll #13 in about June 2020.”
Dotts said the estimated total of what is owed and unpaid to employees employed from June 1, 2020 to the present is $800,000.
“Most of this is related to what is called the '[three-fourths] guarantee’ under contracts approved for workers holding CW visas and paid time off for workers holding CW visas and H visas,” he said.
To the extent that payments of all amounts owing to the employees of IPI CNMI is required to purge the contempt, these amounts need to be paid, he added.
Dotts said the receiver may be required to sell assets totaling $11,199,680.09 to resolve the contempt ($1,982.793.00 base amount, plus $9,416,887.09 tax liability, plus $800,000 in other amounts owing to employees).
Consequently, the receivership that will start on Friday, March 5, may be a much more significant receivership than was originally contemplated, Dotts said.
“Given that IPI CNMI is subject to multiple lawsuits, many that are nearing final judgment, this receivership could also develop into the full liquidation of the company to satisfy other judgments or provide the framework for a liquidation process.”
As for Joyce Tang as receiver, Dotts said she should not use her own law firm as her counsel.
IPI does not object to her appointment, but it does object to the retention of Tang’s law firm, Civille & Tang PLLC, as counsel to the receiver, Dotts said.
“A receiver is an officer of the court and is a trustee with the highest kind of fiduciary obligation. She owes a duty of strict impartiality, of undivided loyalty to all persons interested in the receivership estate, and must not dilute that loyalty,” Dotts said.
“No one should be appointed who is in such circumstances or would by the appointment be placed in a dual position that there arise conflicts between her personal interest and her duty as receiver,” he added.
As Tang proposes to both act as the receiver and have the law firm that she holds an equity interest in act as the attorney for the receivership estate, she will have a dual role, Dotts said.
“She will in effect be both the client and the attorney.”
Dotts said, “To avoid the appearance of impropriety, a law firm other than Tang’s own law firm should be selected as her counsel.”
He also pointed out the relationship between IPI and the NMI Settlement Fund as presenting a potential conflict for the receiver.
In 2013, Tang was appointed by the federal court to serve as the trustee of the NMI Settlement Fund.
“At that time, the CNMI [government] owed about $73,000,000 to the NMI Retirement Fund. The CNMI was in dire need of revenue in large part because it had to comply with payments to the NMI Retirement Fund so the CNMI decided to license casino gaming on Saipan,” Dotts said.
Pursuant to Public Law 18-56 § 2307, $30 million of the initial annual casino license fees was to be deposited in the three senatorial districts to fund the NMI Retirement Fund, and $11 million in annual casino license fees after the first year were to be distributed to the Third Senatorial District to fund the NMI Retirement Fund.
IPI ended up acquiring the casino license and primarily with its contributions, the CNMI was able to fund the Retirement Fund, Dotts added.
He said Tang, as trustee of the NMI Settlement Fund, owes a fiduciary duty of loyalty to guarantee the retirees’ interest.
“With IPI being the main contributor to the Retirement Fund and with Tang’s upmost duty to the retirees as the trustee of that fund, she cannot at the same time maintain the duty of strict impartiality required of a receiver over the assets of the defendants here,” Dotts said.
He said although IPI does not object to Tang serving as the receiver for IPI, she should not continue as the trustee of the NMI Settlement Fund while serving as the IPI receiver.