ITT Educational trustee seeks approval of government claim settlement

By Caroline Salls

Pittsburgh, June 25 – ITT Educational Services, Inc. Chapter 7 trustee Deborah J. Caruso requested court approval of a settlement reached with the United States of America on behalf of the Department of Education, the Centers for Medicare and Medicaid Services and the Department of Veteran Affairs, according to a motion filed Thursday with the U.S. Bankruptcy Court for the Southern District of Indiana.

Caruso said the United States filed a $230.52 million claim against the ITT debtors on March 13, 2017, plus another $1.55 million claim on behalf of the Education Department, as well as a $91,581 claim on behalf of the CMS for the unpaid balance of reinsurance contributions.

On March 14, 2017, the United States filed claims on behalf of the VA of $3.67 million each for education benefits paid to ITT for student beneficiaries, plus 17 additional claims in the total combined amount of $100,089.

Meanwhile, Caruso said the debtors’ bankruptcy estates have assets $215,938 in claims against the VA for cancelled checks, although the VA argues that the claim should instead be for $102,718.

In addition, the United States alleges that the $230.52 million claim originally filed on behalf of the Education Department now totals $440 million, including interest and other charges.

The ITT debtors claim that their bankruptcy estates are due a $6.96 million refund from the Internal Revenue Service for the 2015 tax year, of which the court approved $107,729 be offset, the motion said.

The trustee said in the motion that the United States is currently holding overpayments in the amount of the difference between the 2015 tax refund and the IRS’s allowed pre-bankruptcy claims, totaling $6.85 million.

Under the proposed settlement, the United States will pay $29 million to the trustee on behalf of the Education Department.

The trustee will pay $569,000 to the Department of Justice in connection with CMS and VA setoff fees.

The department will have a $283.78 million general unsecured claim against the debtors and a $1.54 million claim; the CMS will have a $79,917 general unsecured claim; and the VA will have a $2.95 million general unsecured claim and a $3.01 million general unsecured claim.

ITT Educational Services provided postsecondary degree programs and is based in Carmel, Ind. The company filed for bankruptcy on Sept. 16, 2016 under Chapter 7 case number 16-07207.

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