MTE Holdings: U.S. Trustee asks court to appoint trustee or examiner

By Caroline Salls

Pittsburgh, Jan. 3 – The U.S. Trustee overseeing MTE Holdings LLC’s bankruptcy case is asking the U.S. Bankruptcy Court for the District of Delaware to appoint a Chapter 11 trustee or examiner, according to a motion filed Friday.

Region 3 U.S. Trustee Andrew R. Vara said in the motion that a trustee should be appointed because the MTE debtors’ chief executive officer and management “have shown that they cannot be trusted to carry out the fiduciary duties imposed on management of a Chapter 11 debtor in possession.”

Specifically, Vara said MTE diverted millions of dollars to non-debtor affiliates and/or insiders before it filed bankruptcy and “apparently do not have, or have not provided, basic financial data that should be readily available.”

In addition, Vara said the company terminated its original chief restructuring officer, “and there are allegations that [the debtors] have not abided by the reporting requirements of this court’s orders.”

As previously reported, MTE’s two secured lenders and an informal group of secured lienholders have also requested appointment of a trustee. Vara said this indicates a lack of transparency from the company and a mistrust of management.

Vara also said MTE chief executive officer Mark Siffin controls both the debtors and the non-debtor affiliates to whom potentially avoidable, fraudulent payments were made, and may be the ultimate recipient of such payments.

“Creditors require an independent, conflict-free and experienced fiduciary to take control of the debtors’ estates and investigate and unravel their financial affairs, including engaging in appropriate litigation and reorganization activities,” the motion said.

If a Chapter 11 trustee is not appointed, Vara said an examiner should be appointed to conduct investigations into any allegations of fraud, mismanagement or irregularity in the management of MTE’s affairs.

A hearing will be held on Jan. 17, Jan. 21 and Jan. 22.

MTE is a Midland, Tex.-based holding company. The company filed bankruptcy Oct. 22 under Chapter 11 case number 19-12269.

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