Birdsall Services Group, Inc., Eatontown, N.J., furloughed 300 employees on April 10 after a federal judge issued a temporary restraining order in favor of the State of New Jersey's efforts to block the embattled engineering firm's bankruptcy filing. Birdsall is also in talks with a potential buyer, according to court filings. Birdsall and seven of its former executives were indicted on corruption charges on March 26, and the firm filed for bankruptcy on March 29.
The temporary restraining order, issued by U.S. District Court Judge Michael Shipp, blocks Birdsall from using cash collateral for salaries and other expenses, says a Birdsall spokesman. Birdsall immediately appealed the decision but the judge declined to hear it, he says. However, the judge has set an April 15 hearing date, he says.
Due to the court's decision to freeze the company's assets, Birdsall was "forced to furlough all 300 existing employees to allow them to collect unemployment and not suffer any further financial hardship brought on by the state's actions," said Ralph Orlando in a statement following the judge's decision. "We will continue our efforts to resolve this matter in the hopes of putting our staff back to work, something that is critically important especially in light of the potential buyers who have expressed interest in our business."
Birdsall wants the court to release funds so that it can pay staff and is "exploring sales opportunities with a motivated buyer," the spokesman says. The firm has $41.6 million in frozen assets. He adds that Birdsall has attracted "multiple interested parties with some more interested than others" since its bankruptcy filing.
Despite the pay freeze, 150 employees still showed up for work as of April 12, the spokesman says. However, he adds, the legal battle puts in jeopardy numerous projects including many related to N.J.'s Superstorm Sandy recovery efforts.
The temporary restraining order follows U.S. Bankruptcy Judge Michael Kaplan's April 8 decision to allow Birdsall to use cash collateral to fund operations for two weeks and the court's appointment of a trustee.
On April 8, the bankruptcy court overruled the state attorney general office's objections and allowed Birdsall to use $1.7 million in seized cash for payroll and benefits, excluding payment to any of those indicted and to senior management, and excluding severance. The state appealed that ruling to the U.S. District Court, which issued the restraining order.
In late March, a state grand jury indicted Birdsall, its principal shareholder William Birdsall and six other shareholders and/or senior executives in connection with making political contributions in exchange for work. According to court filings, the indictment charges that Birdsall directed managers "to make unlawful political contributions and reimbursed those managers by so-called 'officer and director' bonuses." These alleged contributions were aimed at currying favor with government officials to obtain state and local contracts, according to court filings.