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Chinese Drywall Trust to Be Part of WCI Communities Bankruptcy Plan

Jul 20, 2009 | Parker Waichman LLP

WCI Communities will establish a trust account for claims against insurers or suppliers regarding Chinese drywall.   According to a report in the South Florida Business Journal, the trust account is part of WCI Communities' revised bankruptcy plan.

As we’ve been reporting for months now, homeowners living with Chinese drywall have reported that it fills homes with a putrid, “rotten-eggs” odor and causes metals to corrode According to the latest status report from the Consumer Products Safety Commission (CPSC), it has received a total of 608 complaints about Chinese drywall, with most coming from Florida, Louisiana and Virginia. But that number is probably well below the actual number of homes affected, as at least 12 class action suits involving Chinese drywall have been filed in 33 states against builders, suppliers and manufacturers since late last year.

According to tests conducted by the Environmental Protection Agency (EPA), ) Chinese drywall samples were found to contain sulfur and two organic compounds associated with acrylic paint in that were not present in the American wallboard. Recently, new concerns were raised that some Chinese drywall could also be radioactive. According to an LA Times investigation, some Chinese drywall manufacturers use phosphogypsum – a radioactive phosphorous substance – to make wallboard. At least four firms told the Times that drywall made with phosphogypsum was shipped to the U.S. in 2006.

WCI Communities is one of several Florida builders whose homes have been the subject of Chinese drywall complaints. As we reported previously, WCI – which had filed Chapter 11 bankruptcy last August – acknowledged using Chinese drywall in some of its homes in February.  The month prior,  WCI said  it was setting aside $11 million for homes that needed air conditioning coil replacement.

According to the South Florida Business Journal, the trust included in the bankruptcy plan will be able to file lawsuits, the proceeds of which would fund remediation and pay for the damages inflicted on homeowners with Chinese drywall. The WCI trust would include $900,000 to pursue claims, the Business Journal said.

The South Florida Business Journal is reporting that U.S. Bankruptcy Judge Kevin Carey approved  a Disclosure Statement for the revisions to WCI's proposed bankruptcy plan on Friday.


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