Headquarters of Birdsall Services Group in Eatontown. Despite vigorous opposition from the state Attorney General’s Office, a federal judge upheld Birdsall Services Group’s (BSG) bankruptcy filing on Monday, saying the dissolution of the company could negatively impact towns trying to rebuild after superstorm Sandy.
Following an April 8 hearing at U.S. Bankruptcy Court in Trenton, Judge Michael Kaplan ruled that the continued operation of the Eatontown-based engineering firm would “give some comfort to communities across this state” and ensure that reconstruction efforts are not “unnecessarily delayed more than they have to be.”
“There is a lot of serious work that has to be done, both related to Sandy and not related to Sandy,” Kaplan said. “At this juncture, this court doesn’t view it appropriate to shutter this business.”
Kaplan also approved the release of more than $1 million in interim funding to help BSG finance its payroll, insurance and operational expenses while the federal government selects an independent trustee to oversee the company’s finances going forward.
In addition to paying its more than 300 employees for this week and next, the company will repay 10 senior managers for four weeks of unpaid work at a cost of nearly $125,000, BSG bankruptcy attorney Mark Conlan said.
None of the senior managers currently with the company have been charged with any crimes, Conlan and his partner, Karen Giannelli, of Gibbons P.C., said.
BSG filed for Chapter 11 bankruptcy on March 29, days after seven executives and major shareholders were indicted by the Attorney General’s Office on charges of allegedly making hundreds of thousands of dollars in illegal campaign contributions to local and county officials.
Following the indictments, the state seized $41.6 million in BSG assets, including nearly $5.5 million in cash, claiming they were the proceeds of “criminal activity.” According to company spokesman Joseph Orlando, every employee currently under indictment has either resigned or been terminated by BSG.
Ralph Orlando, former executive vice president, is president and chief executive officer (CEO) of the company. Former CEO Howard Birdsall, who is under indictment, retired in October after state investigators raided the Birdsall offices and served multiple counties and municipalities with subpoenas as part of its investigation.
Other high-ranking employees remain with BSG after assuming their duties under the previous regime — a fact that Kaplan said necessitated the appoint- ment of an independent trustee.
“ There are valid concerns as to the conduct of those who may remain,” he said. “I’m not casting aspersions, but many people were involved in wrongdoing in this company. … There remains the threat or prospect of continued wrongdoing.”
The company’s trustee must be a “disinterested” party, selected from a number of potential candidates by the Office of the U.S. Trustee, and approved by the U.S. Bankruptcy Court. Kaplan requested that a trustee be selected as soon as possible.
Following Kaplan’s ruling, Deputy Attorney General Anthony Picione said the appointment of a trustee is especially vital, as two current BSG board members were named as participants in the alleged “payto play” scheme by a “cooperative informant” during the office’s investigation.
According to court filings in the case, the state’s investigation began after BSG Marketing Director Philip Angarone was recorded admitting to receiving illegal reimbursements from the company for campaign contributions. Angarone pleaded guilty to tampering with public records last November.
In a sworn statement to state police detectives late last year, Angarone said 10 senior executives regularly made personal political contributions on behalf of BSG, according to the filing. Two of those executives are still on the company’s board, Joseph Orlando confirmed.
He said after the April 8 hearing that the employees have not been involved in the state’s criminal investigation.
“They are only mentioned in a report,” he said. “They have not been charged with any crimes.”
Six other executives named by Angarone have not been charged by the state.
In regard to the bankruptcy filing, Orlando said it will enable the company to continue its ongoing work and Sandy-related repair efforts for towns such as Holmdel, Belmar and Manasquan for the foreseeable future.
“I don’t doubt that there will have to be changes,” he said. “But the entire point of undertaking this filing was preserving the long-term viability of the company.
“There are certainly clients who have terminated their relationships [with BSG]. But the company still does have clients that are staying.”
At a recent Holmdel Township Committee meeting, Mayor Patrick Impreveduto said the town planned to continue its existing $700,000 sewer maintenance contract with BSG.
“For now, we see no real problems,” he said on April 2. “If it changes, if they are no longer able to provide those services, then we’ll have to look into other options. But at this point, there is no reason to change.”
Impreveduto added that because BSG was the lowest bidder on the project, changing to another contractor would likely increase costs to the township.
Andrew Sherman, special counsel to the Attorney General’s Office, said after Monday’s hearing that the state plans to appeal Kaplan’s decision with the U.S. Court of Appeals, 3rd District.
The court’s decision, he said, could set a precedent that in the future provides enterprises accused of illegal activity with an “endgame,” a way to avoid more serious consequences.
“It’s more than 300 jobs,” Sherman said. “Let’s say there’s 10 other Birdsalls out there. I can’t fathom that this was the only entity [allegedly] engaged in pay-to-play in the state of New Jersey … Part of the whole state’s police power is to deter that [alleged] conduct in the future.”
Kaplan agreed with Sherman that other firms in New Jersey have been engaging in so-called “pay-to-play.”
“That’s a fair assumption,” he said.
The next hearing in the case will take place on April 22.