The legal woes that compelled former professional sports team owner Joseph O’Hara to scuttle his school financial consulting firm have driven its successor to also seek a bankruptcy court’s protection.
With millions in debt, O’Hara’s 8-month-old Educational Services & Products in Albany filed Wednesday for Chapter 11 reorganization in U.S. Bankruptcy Court in Albany. The filing came three weeks after his Strategic Government Solutions filed for Chapter 7 liquidation.
O’Hara used to own the Albany Firebirds arena football team and the Albany Patroons basketball team. He said in a court statement that ESP is seeking bankruptcy protection because litigation had tied up certain accounts receivable.
ESP cited in its Chapter 11 petition $31.6 million in assets and $13.6 million in liabilities. But O’Hara said ESP’s debts are $3.2 million minus the litigation from a Michigan rival.
Mounting burdens from a nearly 30-month federal lawsuit in Nebraska compelled O’Hara last July to shuffle SGS’ assets to ESP. Both firms help schools maximize their federal reimbursements.
In 1986, O’Hara initially founded SGS as the Institute for Health and Human Services. Although O’Hara wholly owned SGS, he has only a 50 percent stake in ESP.
ESP assumed SGS’ work force, which now stands around 25 employees and up to eight consultants. But court documents show ESP owes most of those workers wages for March and April plus reimbursement going as far back as July.
ESP’s cash flow problems partly stem from $607,000 it has not been able to receive from the Nebraska Association of School Boards. SGS rival MeccaTech in Lansing, Mich., has a claim on the money. In 2005, it sued both SGS and its client, the NASB, according to court documents.
MeccaTech for six years helped Nebraska school districts recover Medicaid funds. After MeccaTech lost the NASB contract, some of its employees started working for SGS. MeccaTech accused SGS of wrongly interfering with its business.
Unsure of who to pay the $607,000 to, the NASB has deposited that money with a federal court in Lincoln, Neb., until the claim issue is resolved, according to court documents.
Meanwhile, MeccaTech is asking an Albany bankruptcy court judge to lift a stay from SGS’s Chapter 7 filing so its Nebraska lawsuit can proceed. ESP attorney Richard Weisz and MeccaTech attorney Marcia Washkuhn did not immediately return calls Thursday seeking comment.