Major Oil Rig, Signal International, Files for Bankruptcy Due to Labor Trafficking Accusations

Signal International LLC, one of the largest marine and fabrication companies on the Gulf Coast, filed for Chapter 11 bankruptcy protection on Sunday, apparently to deal with a $14 million settlement as part of a lawsuit accusing Signal of labor trafficking.

Signal International declares bankruptcy

Signal International announced that it had filed for Chapter 11 bankruptcy protection due to declining oil and gas revenues. However, company executives also claimed that the bankruptcy was filed due to mounting legal fees from 11 lawsuits related to labor trafficking allegations. Signal executives claimed that the Chapter 11 filing was to avoid wasting time and legal costs that would have been incurred from long standing litigation proceedings.

Although the company’s goal is to maintain operations by resolving litigation through the bankruptcy process, Signal International is seeking approval from the bankruptcy court for an agreement with their pre-bankruptcy secured lender for $20 million in additional financing. The company also intends to sell off assets through an auction to the highest bidder under the oversight of the bankruptcy court. The firm has reached an agreement with its pre-bankruptcy secured lender to serve as the stalking horse bidder during the auction. Signal International has retained SSG Capital Advisors LLC to oversee the open market sale auction, which is expected to be completed within a 100-day period.

The Lawsuits

Signal International was charged in lawsuits with the labor trafficking of Indian citizens who were recruited to work for the company in the U.S. following Hurricane Katrina. The initial lawsuit involved five Indian citizens paid between $10,000 to $20,000 for shipyard jobs who claimed that Signal had promised them permanent residency in the U.S. as part of the U.S. government’s H-2B guest worker program. The suit also claimed that Signal forced the workers to pay over $1,000 per month to live in unsanitary conditions at heavily guarded facilities akin to labor camps. As a result, a federal court awarded $14 million in damages to the plaintiffs.

The company also reported that there are 11 additional lawsuits involving 227 more citizens recruited from India under similarly illegal conditions. These lawsuits include a $20 million settlement to be shared among the workers involved in the case.

In a statement regarding the case, Signal International representatives reported that the claims were “meritless” and that the federal court rulings adversely affected the company’s defense. Currently though, the company has reached settlements with several of the plaintiffs and issued a formal apology to the workers involved for forcing them to live and work under adverse conditions.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.