Former owner reacts to Meadowcraft lawsuit
Casual Living Staff -- Casual Living, October 18, 2010
Meadowcraft's former owner, chairman of the board and CEO Sam Blount said he called the FBI and fired five top managers after discovering they had lied to banks and misused money from his company, which was then the world's leading wrought iron furniture manufacturer.
Blount responded to an Oct. 15 report in The Birmingham News that detailed a lawsuit filed last week on behalf of Wells Fargo Bank and other lenders. The lawsuit names Blount and five other former company officers including President and Chief Operating Officer Jerry Camp, Chief Financial Officer Larry Maynor, Controller Walter Markle, Financial Services Manager Brandon Moore and William Echols, whose Outdoor Experience firm's work with Meadowcraft was described in the complaint as a sham transaction.
About 2,000 people lost their jobs at the Meadowcraft plants in the Birmingham metro area. Company assets were auctioned last year after a bankruptcy filing. Lenders were owed about $64 million at the time.
Filed Oct. 12 in the Circuit Court of Jefferson County, Ala., the lawsuit seeks a jury trial as the banks attempt to recover tens of millions of dollars in damages. Banks allowed the company to borrow in excess of $20 million more than it could have if those top managers had not misstated its financial information, the complaint says. Banks were told Meadowcraft's operating cash flow for 2008 was $6.4 million, when it actually was negative $6.7 million, the lawsuit says.
The heart of the deception was falsification of the company's on-hand inventory and cash amounts expected to be collected from customers, the lawsuit says. The company's access to loans depended on those numbers, and loans were desperately needed when business dropped off badly in 2007.
In addition to falsifying records, Maynor and Camp put more than $110,000 of personal expenses on the company's corporate credit card, the lawsuit says. Those expenses included $4,200 for season ticket passes, a $2,000 tip for a meal at a steakhouse in Alabama, more than $2,000 for electronic equipment and more than $2,700 at an Apple store.
The lawsuit said Blount and his family, which owned about 90% of Meadowcraft's stock at the time, should have stayed informed about the company's true financial condition, supervised officers' activity better and ensured that Meadowcraft had enough internal accounting procedures to prevent bank fraud.
Blount said he learned of the discrepancies through an independent investigation by restructuring firm Getzler Henrich in February 2009. Evidence pointed to a few individuals, including the president, CFO and financial managers.
"As soon as I heard about it, I reported it to the bank because it was bank fraud," Blount said. He also reported it to the FBI, which he says it is still investigating. "I think they should be in jail," he said of the other men named in the suit.
Blount said The Birmingham News article misrepresented the Meadowcraft case because it "lumped me in with the bad guys." The problem involved only a few individuals, he said, but it destroyed the company he had built over the past 30 years along with "a lot of incredible long-time employees."
For Meadowcraft workers, the results were disastrous. The company closed plants in Birmingham, Wadley and Selma, eliminating nearly 2,000 jobs for workers who made much of the nation's wrought iron outdoor furniture and accessories, including specialty retail lines, commercial suppliers and brands such as Plantation Patterns sold at Home Depot, Target and Sam's Club.
According to the civil suit, "Had the senior officers and the board of directors honored their fiduciary obligations to Meadowcraft, the company could have been restructured and it would have been able to honor its obligations to its some 2,000 employees and hundreds of creditors. Instead, burdened with unsupportable debt, the company was forced into bankruptcy and liquidated, leaving thousands of workers unemployed and tens of millions of dollars in unpaid debts."
For more, visit http://al.com/businessnews/2010/10/meadowcraft_bosses_faked_earni.html
OW Lee Highlights their new showroom introductions