Falsehoods alleged in AmerLink bankruptcy

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By Christopher Brooke, Reporter

WILSON, N.C. — The U.S. Bankruptcy Court has ordered a trustee be appointed in the case of log home manufacturer AmerLink and allowed its attorneys to withdraw after company president John Barth Jr. allegedly made false statements to the court.

AmerLink filed for protection from $20 million in debt owed by the company to more than 200 creditors, one of which is Carroll County.

Carroll sued for the return of $600,000 in economic development funds and 32 acres of land provided to AmerLink in an economic development deal that was supposed to create 200 jobs, which never materialized.

Barth had continued to act as president of AmerLink after the company entered the bankruptcy proceeding, and his duties included preparing documents and helping the attorneys with the case.

He continued to receive compensation for his position.

On Aug. 24, the bankruptcy court issued an order to approve a motion to appoint a Chapter 11 trustee for AmerLink, according to court papers.

United States law “provides that on request of the Bankruptcy Administrator, a court shall order the appointment of a trustee for cause,” the document says. “Cause is defined as, but not limited to, fraud, dishonesty, incompetence or gross mismanagement of the affairs of the debtor by current management.”

The court, in its order, expressed “grave concerns regarding the ongoing operation and current management of AmerLink, Ltd.

“Questions have been raised regarding the veracity of communications made by John M. Barth Jr., the court-appointed president of debtor, and a substantial inconsistency in the bank statements provided to the bankruptcy administrator,” the order said

The court decided to appoint Stephen Beaman of Wilson as the Chapter 11 trustee.

National Cooperative Consumer Bank, also known in the court papers as NCB, was making a loan to AmerLink and wanted assurances that the loan would be repaid, said an emergency motion filed Aug. 20 by the bankruptcy administrator for the trustee. AmerLink's president, John Barth Jr. had provided assurances in the form of an e-mail, supposedly from his father, John Barth Sr.

“Mr. Barth represented that he was obtaining a loan from his father, John Barth Sr., and the loan from his father would pay NCB $8.2 million,” the motion stated. “NCB then would assign the note to John Barth Jr..”

This would occur after AmerLink's plan for coming out of bankruptcy was confirmed.

“NCB wanted assurances that the loan would be made,” the motion states. “On July 22, 2009, Mr. Barth Jr. forwarded an e-mail to debtor's counsel that was from Mr. Barth Sr., acknowledging that he had agreed to loan his son the money to complete this transaction.”

On Aug. 19, AmerLink's attorneys sent out an e-mail to attorneys for the bank, the bankruptcy administrator and others that implied Barth Jr.'s statements to the court about the loan from his father were false, according to the motion.

“Counsel for the debtor produced a letter from Mr. Barth Sr.'s attorney which states that Mr. Barth Sr. did not write the July 22, 2009, e-mail, and that he has no intention of loaning any money in connection with the AmerLink Chapter 11 bankruptcy,” the motion said.

The bankruptcy administrator believes that bank statements for AmerLink had been falsified by Mr. Barth Jr. Two bank statements for the same account, both for periods in July, showed that AmerLink either had $120,027 or negative $197 in it, according to the bankruptcy administrator.

After the bankruptcy administrator's motion was made, AmerLink's attorneys got permission from the court to withdraw from the case.

In other action, attorneys for Carroll County filed Aug. 18 motions for discovery on AmerLink.

County attorneys Jim Cornwell and William Gray say that want to find out why, among other things, AmerLink continues to say that the site for its saw mill in the Carroll Industrial Park is vital to the log home manufacturer's Chapter 11 reorganization.

County Administrator Gary Larrowe said in a press release that the court's decisions on AmerLink are good news for Carroll.

The reason for the discovery motion is to ask the court to “examine all angles and question AmerLink's moves on every turn at this point,” Larrowe said.

The matter is complicated, Cornwell said. “We are continuing to fight for the right outcome for Carroll County.”