Led by Wells Fargo & Co., the suit complainants allege that Samuel Blount, Larry Maynor, Jerry Camp, Brandon Moore, Walter Markle and William Echols — almost all top executives with Meadowcraft — have played some role in defrauding the company, forcing the creditors to put Meadowcraft in Chapter 11 bankruptcy.
Moreover, the October suit claims that while the fraud went on, the company’s chief financial officer and president charged $110,000 to the company expense account.
Meadowcraft, at the time one of the country’s largest manufacturers of wrought iron outdoor furniture, was $63.7 million in debt when it was forced into bankruptcy, the lawsuit reports.
The creditors are asking for a jury trial and are seeking a minimum of $20 million in damages.
The company was set for a big year in 2009, said Blount, the company’s chief executive officer. Outdoor furniture sales are seasonal, peaking between March and June. Shutting down the company at the beginning of the selling season caused canceled orders and deliveries of raw materials.
It would’ve made more than enough, Blount said, to pay back the multi-million-dollar debt.
“It just killed the business,” said Blount, who received the suit Wednesday. “I really don’t understand (the timing of the forced bankruptcy) ... we were operating extremely well; we had extremely good demand from customers.”
Financial hole
A 2007 agreement between Meadowcraft and four lenders allowed it to borrow up to $68 million based on the company’s available inventory and accounts receivable — money owed to Meadowcraft by other companies for products bought on credit.
“Inadequate planning and incompetent execution” during the 2007 consolidation of the company’s Birmingham and Wadley plants first put Meadowcraft in a financial hole, the suit alleges. It also had a plant in Selma.
Restructuring the business could’ve saved the company, according to the suit. But in 2008, Maynor, Camp, Moore and Markle began working to inflate Meadowcraft’s finances so it wouldn’t violate the credit agreement terms, hoping to borrow enough money to run the company until its business recovered and before the fraud was discovered, the suit alleges.
The suit alleges that Maynor had Moore and others download financial statements off the company’s computer system.
Then he changed the inventory size and altered inventory codes to make materials in off-site locations, such as China, count toward the amount the company could borrow. This overstated the inventory by nearly $3 million.
He also changed the dates on invoices to make it appear Meadowcraft made recent sales, which added to the amount it could borrow, according to the suit. Those changes amounted to more than $3 million.
In September 2008, Echols — while he was a salesman at Meadowcraft — established a company called Outdoor Experience. His employment status with Meadowcraft then changed from sales group member to consultant, the suit claims.
Outdoor Experience then bought $5.6 million in obsolete inventory, which it then gave back in March 2009. That made the inventory count double in worth under Meadowcraft’s credit agreement — once as a sale to another company, and once more as available inventory when Outdoor Experience returned it, according to the suit.
Forced bankruptcy
Later that month, the banks forced Meadowcraft into Chapter 11 bankruptcy.
The Wadley plant closed that summer. It employed 550 people in a town of about 640. One restaurant and a trinket shop went out of business as a direct result of the plant closing, said Mayor Jim Dabbs.
“The situation got a little bit desperate,” Dabbs said. “Businesses suffered because there’s no people coming in with money to spend.”
A month after the Wadley plant closed, the lawsuit claims an investigation found that Camp, the company’s president, charged about $70,000 to Meadowcraft’s American Express card, leaving a $2,000 tip — more than 50 percent of the bill — on a steak dinner, and charging a Birmingham hotel bill from the day after Christmas, according to the lawsuit. Camp lives in Birmingham.
The suit also alleges that Maynor, the chief financial officer, charged about $40,000 on the card. The company paid $4,200 for what Blount believes was Alabama football season tickets, a $2,700 trip to an Apple Store, and $2,000 for buying and installing electronics, according to the lawsuit.
The suit didn’t say what the season tickets were for.
All this should’ve been caught by Blount, Meadowcraft’s chief executive, the suit claims. He was “reckless and grossly negligent” in allowing the fraud to happen.
Blount said he discovered the fraud in February and immediately fired those responsible.
Bad timing
He believes the deepening recession, widespread bank failures in 2008 and an uncertain economy early in 2009 factored into the banks’ decision to put Meadowcraft in bankruptcy. But he still doesn’t understand the timing of the move, given how well the 2009 season looked.
“We lost our financing and it killed us,” Blount said. “I just thought it was insanity.”
Attempts to reach Camp and Maynor were unsuccessful.
A number of defendants have changed addresses and haven’t been alerted to the suit yet. They probably just moved, said Michael Ermert, one of four attorneys representing the plaintiffs. He expects the suit to begin moving forward in a few months, once the defendants are served and have secured legal representation.
The Wadley plant has since reopened under the management of Wadley Holding, a subsidiary of a larger Atlanta-based company, Dabbs said. It’s growing and should employ about 175 people by December, which would once again make the plant Wadley’s largest employer.
But it still has a long way to go before reclaiming its spot as Randolph County’s top employer.
“It’s moving forward,” Dabbs said. “I would think it has the potential to do that. The economy’s not ideal right now, but if the economy recovers, I think they’ll be OK.”
Star staff writer Jason Bacaj: 256-235-3546
