Gulfport creditors say insider transfers ‘constructively fraudulent’

By Sarah Lizee

Olympia, Wash., March 11 – Gulfport Energy Corp.’s official committee of unsecured creditors is seeking authority to prosecute claims and causes of action against some of the company’s executive officers and management, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Texas.

“The estates have strong claims against the insiders. In the months leading up to the debtors’ bankruptcy filing, and within applicable preference periods, the defendants took some $16.2 million out of the company in the form of incentive and retention bonuses,” the committee said in its motion.

“This is, by some estimates, over one-half of the amount that the debtors now propose to pay to all of the general unsecured creditors at [Gulfport Energy] under their pending Chapter 11 plan.”

The committee claims that the pre-petition transfers were not just preferential, they were “constructively fraudulent.”

The group also alleges that evidence indicates the majority of the pre-petition bonus payments were made with the intent of avoiding scrutiny by creditors and the court, and are therefore subject to avoidance as intentional fraudulent transfers.

The committee said that despite the strength of the potential claims, the debtors have chosen not to bring them. The proposed plan would instead release those claims for no consideration.

“To be clear, the debtors are not settling the claims, as some Chapter 11 plans will do – they are simply giving them up,” the committee said.

“The reason is clear: the debtors have no interest in suing their own executives, particularly when the debtors’ current counsel had already been retained by the time the questionable pre-petition payments were made.

“Instead, the debtors and the defendants hope to proceed to confirmation, sweep aside objections, and obtain a free release.”

A hearing on confirmation of the plan is scheduled for April 7.

Gulfport is a natural gas and oil company based in Oklahoma City. The company filed Chapter 11 bankruptcy on Nov. 13 under case number 20-35562.

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