Trustee sues AmerLink for $25 million

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Log home maker's officers, subsidiaries allegedly conspired to commit fraud.

By Christopher Brooke, Reporter

WILSON, N.C. — Several of AmerLink's officers and sister companies conspired together to commit fraud, claims the court-appointed trustee in a lawsuit seeking $25 million in damages in U.S. Bankruptcy Court.

The suit filed by court trustee Stephen Beaman names AmerLink owner Richard Spoor and former president John Barth, both of their wives, plus Harlingen Stables, Tall Grass Farms, Pro-Form Construction and several others in an attempt to retrieve funds for creditors of the defunct log home manufacturing company.
AmerLink is in the process of being liquidated by the federal bankruptcy court.
The lawsuit alleges that Spoor and Barth committed fraud, breached contracts and violated federal and North Carolina racketeering laws to benefit from AmerLink's assets, according to the court filing.
Part of this involved establishing an "employee stock option plan for the company to use as a means for the transfer of at least 49 percent of Spoor's stock in AmerLink," the court papers say.
According to the lawsuit, Spoor and Barth's actions included merging AmerLink Ltd. with AmerLink N.C. Ltd.; merging Harlingen Holdings and In the Woods into AmerLink Ltd.; and incorporating Pro-Form Construction with AmerLink as the only shareholder.
This plan proceeded while AmerLink was the midst of an economic development deal with Carroll County to locate a processing plant in Carroll County and create 200 jobs in exchange for 32 acres of land and $600,000 in grants.
After the creation of the employee stock option plan, Spoor transferred 49 percent of his stock to the ESOP, court papers say. Then he transferred his remaining 51 percent of shares into JR International Holdings, in which Barth and Spoor were partners.
Spoor entered AmerLink into a "trustee engagement agreement" with Horizon Trust and Investment Management. "This agreement was part of the plan of Spoor to extract cash from AmerLink."
The court papers lists stock trades made to Spoor and values of property owned by AmerLink and transfers to other companies by mergers and other practices.
These included the ESOP, JR International Holdings, National Consumer Cooperative Bank and Capital Community Foundations, all named defendants in the suit.
JR International Holdings is a company formed by Barth and Spoor, according to the court filing.
More than 1.3 million shares in AmerLink were issued to Spoor, the trustee writes. At the same time, North Carolina Community Foundation and Capital Community Foundation received 17,177 shares each.
According to financial report, AmerLink's value in assets property and equipment topped $17 million, while its long-term debts were almost $12 million. The suit says that AmerLink's retained earnings were nearly $5 million.
The company's income before taxes was nearly $633,000, and the cash flow was $309,000.
AmerLink then gave land, buildings, equipment and vehicles worth about $2.1 million to Pro-Form, the trustee argues.
AmerLink also agreed to provide Pro-Form with the land from Carroll County, together with $1.3 million in materials and labor for the improvements to the property.
"In exchange, AmerLink received 100 percent ownership of Pro-Form" the filing states. "AmerLink then transferred 100 percent ownership of Pro-Form to Spoor."
AmerLink inherited several loans for more than $6.8 million from Spoor or companies owned by him, the trustee alleges.
"On or about Feb. 12, 2007, Spoor and Barth caused the AmerLink ESOP to purchase 650,268 shares of AmerLink stock and 17,177 shares of AmerLink stock from Capital Community Foundation, Inc.," the suit says. "The ESOP gave its note payable to Spoor in the amount of $13,250,000 and to Capital Community Foundation Inc. in the amount of $350,000 to evidence the purchase price of said stock."
Later in 2007, AmerLink took out another three loans totaling $13 million, the lawsuit alleges. Though some loan proceeds went towards operating expenses, about $4.7 million went first to the ESOP and then to Spoor.
"Spoor received other cash payments on account of the ESOP note from the ESOP and/or AmerLink for total cash payments... through Sept. 12, 2008, in the amount of $7,536,671.11," the lawsuit argues.
After all these transactions, the worth of AmerLink showed up on balance sheets as $12.6 million in assets and nearly $24 million in liabilities, the trustee argues.
These and other actions taken "were designed solely for the purpose of creating means and methods for Spoor to extract as much cash as possible from the business and for Barth to be placed in a position to take control and ownership of the company," the lawsuit alleges.
Proceeding with this plan involved Barth paying $8 million into JR International Holdings and Spoor transferring all of his stock in AmerLink to JR, the lawsuit says. Barth's father was also involved in this part of the plan.
"Barth made false statements to the court regarding financial transactions with his father, including falsifying one or more documents filed with this court," the trustee wrote.
"He was prosecuted for these acts and sentenced to three years probation…"
The trustee argues that these actions amount to fraud under North Carolina law.
Transfers made between AmerLink and the ESOP "were not made for a reasonably equivalent value," the trustee argues.
"In essence, the establishment of an ESOP by AmerLink was for inadequate consideration to AmerLink, which required it to incur significant debts to fund the scheme to funnel money to Spoor," the suit says.
"Its remaining assets after the transactions were unreasonably small in relation to the business of debtor and the transaction."
Spoor and Barth undertook these actions "for their own personal enrichment, gain and benefit," and led to AmerLink becoming loaded with debt, the trustee writes. This combined with fiduciary failures of other defendants caused $25 million in damage to AmerLink.
The trustee argues that this entitles AmerLink to claim all the assets of Spoor, Barth and companies Harlingen, Pro-Form and Tall Grass.
Because Spoor and Barth's plan involved interstate commerce and the mail, the actions that they carried out amount to racketeering under federal law, the trustee argues.
The trustee believes that Spoor and Barth will try to shield their assets from being taken to repay creditors, and he asked the court to issue an injunction to stop the defendants from transferring their properties to any third parties.
He asked the court for at least $25 million in damages from the defendants.