LOUISVILLE, Ky. (AP) — Kentucky is not seeking to collect a $20 million judgment the state won in court from a now-bankrupt oil company found to have bilked its customers in a drilling scam.
Instead, funds from a court-ordered auction of Young Oil's assets will go to an Ohio-based bank and other creditors holding collateral as the Kentucky firm seeks to end its long-running bankruptcy.
A federal bankruptcy judge on Thursday approved the sale of Young Oil's remaining leases and assets with the funds to pay secured creditors, including FirstMerit Bank, an Akron, Ohio-based company, which holds a $1.7 million claim and is at the head of the line to collect.
Under the settlement, FirstMerit Bank shall take 75 percent of all the proceeds of the auction, with 25 percent going to the company's bankruptcy trustee, Thomas Duddy. Duddy already has $351,000 from a garnishment placed on Young and the sale of an automobile.
Because the state's claim is unsecured, Kentucky would only collect after all the secured debts are paid off, meaning it would likely receive little, if any, money.
"We're not going to pursue any claim that would interfere with the investors," said Jennifer Doom, a spokeswoman for the Kentucky Department of Financial Institutions. "We're not contesting anything or objecting to anything."
Anthony L. Young of Knob Lick ran Young Oil Corp. as it collapsed into bankruptcy in 2009, two months before Franklin Circuit Court Judge Thomas Wingate concluded that the CEO and his company committed fraud and violated the Kentucky Securities Act. The Kentucky Department of Financial Institutions sued Young Oil and froze its assets in 2008 after receiving investor complaints. Young Oil raised nearly $20 million from investors through the sale of 57 partnerships from 1997 through 2008 in Kentucky and Tennessee.
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