A U.S. bankruptcy trustee has asked a court to appoint an examiner to investigate transactions totaling $1.5 billion between EchoStar Corp. and its Hughes Satellite Systems unit, which filed for Chapter 11 protection last month.
The trustee and bondholders allege that EchoStar extracted more than $1.5 billion from Hughes over the past two years through related-party transactions that may have breached fiduciary duties. The allegations include a $1 billion dividend paid by Hughes to EchoStar in the first quarter of 2024 and a $196 million tax reimbursement to EchoStar that was 15 times higher than in prior years.
Hughes, a wholly owned subsidiary of EchoStar, disclosed liabilities ranging from $1 billion to $10 billion in its bankruptcy petition. The company admitted owing at least $774 million in fixed, liquidated, undisputed, and unsecured debt. Under U.S. bankruptcy law, the trustee argues that the appointment of an examiner is mandatory because Hughes’s unsecured debts exceed the $5 million threshold.
Creditors have also raised concerns over a non-competitive lease agreement for the Jupiter 3 satellite, executed with an EchoStar subsidiary in December 2023. The agreement is among the transactions under scrutiny as part of the broader probe.
Bankruptcy Judge Alfredo Perez is scheduled to review the trustee’s petition at a hearing in Houston on Wednesday. White & Case, which has represented EchoStar since 2004, continues to act for the parent company in non-bankruptcy matters but is not involved in the Hughes bankruptcy proceedings.
The Chapter 11 filing by Hughes on August 2 in Houston triggered the current legal scrutiny, with the trustee’s petition filed over the weekend ahead of Wednesday’s hearing.
