Tonawanda Coke doesn’t want to pay $1.49 M state labor claim: Company asks bankruptcy court to expunge the state Department of Labor’s claim for failing to notify workers of plant closure in 2018

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TONAWANDA, N.Y. (WIVB) — Tonawanda Coke executives want to expunge from its bankruptcy case a $1.49 million claim from the state Department of Labor for failing to give employees 90 days of advance written notification that the plant would be closing.

State officials said Tonawanda Coke suddenly decided to close the plant in October 2018 without notifying its 100 workers, which is required under the Worker Adjustment and Retraining Notification Act.
Tonawanda Coke executives argued in a motion that it was a faltering company facing unforeseeable business circumstances that prevented it from providing employees with the standard notifications.

Therefore, Tonawanda Coke should qualify for one of the several exclusions to the WARN Act rules of disclosure, the company argued in court papers recently.

But Seth Kupferberg, an assistant attorney general, said the issues raised by Tonawanda Coke are to be adjudicated at a March 24 administrative hearing on the WARN Act claim, not by the bankruptcy court. In addition, he said Tonawanda Coke’s own conclusion is based on numerous false assertions.

“The Motion’s claims that Tonawanda Coke’s WARN Act obligations should be excused based on the ‘faltering company’ and ‘unforeseeable business circumstances’ exceptions are unsupported and appear baseless,” Kupferberg said in court papers.

Tonawanda Coke has a long history of environmental violations.
In March 2014, Tonawanda Coke was convicted of violating various environmental laws, including the Clean Air Act. A judge ordered Tonawanda Coke to pay a $12.5 million criminal fine and $12.2 million in restitution to fund studies on the effects of its coke oven emissions on the local community.

Tonawanda Coke was also sentenced to five years of probation that required it to follow all federal, state and local laws.

In May 2018, the collapse of a heat tunnel at the facility resulted in its smokestacks emitting trails of dark, black smoke that some believed was poisoning the nearby communities.

As a result, the NYSDEC filed numerous notices of violation against Tonawanda Coke for the black smoke.

By July 2018, the NYSDEC threatened to revoke Tonawanda Coke’s air permits if it continued to violate environmental laws. At that time, DEC officials said that the modifications made by Tonawanda Coke to address the violations only “served to exacerbate” the problems with its emissions.
On Aug. 24, 2018, the Department of Justice alleged that Tonawanda Coke was in violation of its 2014 criminal judgment due to the increase in emissions from its heat stacks.

After a one-day trial on Sept. 21, 2018, Judge William Skretny found that the government had failed to present enough evidence to show that the violations of which Tonawanda Coke were accused rose to the level that would require an immediate order to shut down.

At the same time, the judge gave Tonawanda Coke 35 additional days to come up with the final community payment and ordered Tonawanda Coke make several repairs to address the excess smoke.

Attempts to resolve the situation between Tonawanda Coke, the DEC, DOJ and federal Environmental Protect Agency had failed. At one of these meetings in October 2018, Tonawanda Coke told an EPA investigator that it was in such bad financial straits that it had payroll only for one week, according to court records.

News 4 was first to report on Oct 12, 2018, that Tonawanda Coke informed the court that it was beginning the process to close the plant for good, a decision that the company tried to keep confidential but Judge Skretny refused to close the courtroom.

Why was Tonawanda Coke able to secure loans from Honeywell to pay off the community payments in the past, but not this time?

Tonawanda Coke claimed in court records that it lost access to credit, even from non-traditional lenders, because of the government’s 2009 seizure for the criminal investigation. In addition, the company said the at least one potential party that showed interest in lending money in the past had changed their minds because of the continuing litigation.

Honeywell, which owned the property until 1978, had loaned Tonawanda Coke more than $8 million in mortgage notes to cover the community payments. In exchange, Tonawanda Coke put up the contaminated property on River Road as security for the notes.

Michael K. Durkin, president of Tonawanda Coke Corporation, said in court documents that the company was actively seeking funding from Honeywell and at least one other business to remain open and pay its final $2 million community service payment.

Durkin said the company believed that providing public notice of a potential plant closure would further hurt their chances at securing a loan. He believed he had enough assurances from Honeywell that they’d cover a fourth loan, but Honeywell has denied that it ever gave company executives such assurances.

“After our conversation, I felt satisfied that Honeywell’s position had not changed and that it still intended to finance the Final Installment Payment,” Durkin said in court records.

Durkin revealed that Tonawanda Coke believed it had a strong case against the government’s efforts to shut them down and had planned to fight back.

Tonawanda Coke’s position drastically changed on Oct. 5, 2018, when Honeywell notified the company that it would not be providing any additional loans or financing until all the concerns with the DEC enforcement actions are resolved.

As a result, Tonawanda Coke made a last-ditch effort to secure funding by renegotiating a Sept. 11, 2018, agreement with Robindale and affiliate Powers Coal and Coke LLC. The agreement gave Powers Coal and Coke exclusive rights to Tonawanda Coke’s existing coal inventory used to make coke for steel making for $5 million, including $3 million in cash.

The night of Oct. 12, 2018, Powers and Robindale informed Tonawanda Coke that it would not be renegotiating the deal.

“Without financing from Honeywell, Powers or Robindale, TCC would not have been able to make its Final Installment Payment under the Criminal Sentence, and such failure to pay would have resulted in a violation of its probation and would have provoked an immediate court-ordered shutdown,” Durkin wrote in court records.

Those turn of events are what led Tonawanda Coke to finally give up and work toward shutting down the plant with no notice, which the company completed in late October 2018.

At the same time, Tonawanda Coke filed for bankruptcy.

Kupferberg, the state assistant attorney general, said in court records that Tonawanda Coke’s position on the WARN Act notifications is “spurious.”

He argued that Tonawanda Coke should have known that Honeywell was unlikely to loan more money to the firm until it resolved the concerns of environmental regulators. And even if Honeywell did loan the money to cover the final community payment of $2 million, Tonawanda Coke should have known that this single loan would not have been enough to stave off plant closure because the judge also ordered a series of expedited repairs that a penniless Tonawanda Coke had to complete to keep the doors open.

“Honeywell already knew about Tonawanda Coke’s predicament; that is why it refused to fund the last restitutionary payment,” Kupferberg said in court papers.

“Powers and Robindale obviously had to be told in any discussion of the Debtor’s plea for more funding of the additional monetary obligations for immediate repairs which Judge Skretny had just imposed on top of the restitutionary payment which Tonawanda Coke already had no means to make. Nor were Tonawanda Coke’s straits a secret from the public.”

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