Former CEO opposes U.S. Energy's attempt to stop special shareholders meeting

By Rebecca Melvin

New York, Jan. 25 - Asher E. Fogel, former chairman, chief executive and president of U.S. Energy Systems Inc., opposes the company's request to quash a special shareholders meeting, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Fogel also opposed the company's request to find him in contempt of court, arguing that shareholders' rights are still in force despite U.S. Energy's bankruptcy filing earlier this month.

On Dec. 13, the Chancery Court of the State of Delaware ordered U.S. Energy to hold a special shareholders' meeting on Jan. 29, and that meeting is duly listed on U.S. Energy's web site as taking place at noon on that day at the Hartford Marriott Farmingham Hotel.

But the company is simultaneously seeking to have the bankruptcy court halt the meeting as well as lawsuits being brought by Fogel and Nakash Energy LLP, a large shareholder supporting Fogel.

"The company can't ask this court to act as an appellate court to 'overturn' the chancery court's ruling. Thus the motion represents a waste of USE assets for a purpose that does nothing to advance the interests of USE stockholders of this solvent company who want, and are entitled to, their say in how the corporation is governed," Fogel states in the filing.

Furthermore, he claimed as background information that following the Delaware court ruling, U.S. Energy took action to expedite the sale of the company's most valuable asset, knowing that accelerating the sale would reduce the company to an empty shell before the stockholders could meet.

Fogel could not be reached for comment, and no one answered repeated calls Friday to U.S. Energy Systems.

Fogel, who was fired from the company last June, says that before he actually was terminated, he called for a shareholders' meeting, and that meeting has been wrongfully denied.

For its part, U.S. Energy says Fogel and Nakash are attempting a corporate takeover. In a bankruptcy court filing Thursday, it said it had received "a number of substantial proposals" for the restructuring or sale of its subsidiaries, but since the Delaware court order, the interested parties have backed off. It argues that Fogel can't proceed with his lawsuit after the company's bankruptcy filing.

Fogel said U.S. Energy is attempting "to get a second bite at the apple to continue its efforts to thwart its stockholders' rights to govern their corporation...."

He said that the second circuit has long recognized that the filing of a petition in bankruptcy does not stay or interfere with the stockholders' rights to govern their corporation under state law.

"The law accords great deference to the stockholders' corporate governance rights, permits them to pursue those rights during bankruptcy and permits those rights to be curtained through an injunction only in the extraordinary circumstances that a litigant can demonstrate that those rights are being exercised for the purpose of 'clear abuse.'"

Taking his shots from different angles, he also pointed out alleged inconsistencies from U.S. Energy. Specifically, in its bankruptcy petition Jan. 9, the company states that it had a net equity value of $82.9 million. But on Jan. 15, counsel for the company advised the Chancery Court that it was insolvent. Thereafter, in connection with its motion at the bankruptcy court, U.S. Energy filed a declaration in which counsel states that the company is "on the bubble of insolvency."

The company, which listed assets of $258.2 million and debts of $175.3 million, says though he knew the bankruptcy filing imposed an automatic stay on the proceeding, he's trying to persuade the court "to issue rulings that would interfere with the debtors' reorganization efforts and provide more bargaining leverage" against the company.

A hearing on the matter is scheduled at the bankruptcy court Jan. 28.

U.S. Energy Systems is a New York-based owner of green power and clean energy and resources. Its Chapter 11 case number is 08-10054.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.