Courthouse Notebook | Former governor’s son Campbell says he was duped in Triton Stone deal

The son of former S.C. Gov. Carroll Campbell Jr. says he and a business partner were cheated out of millions of dollars by the owners of Triton Stone Group – a national granite and stone importer and wholesaler – during an Horry County business deal last year, according to a lawsuit that alleges extortion, fraud and “strong-arm tactics” by Triton Stone officials.

Carroll “Tumpy” Campbell III said the Triton Stone owners misrepresented the financial health of a pair of franchises – Triton Stone of Myrtle Beach and Triton Stone of Charlotte, N.C. – that he and John Cattano, the former treasurer of the S.C. Republican Party, agreed to buy last year.

The Triton Stone owners then forced Campbell and Cattano to pay millions more in debt that the two franchises had incurred before the sale took place, even though Campbell and Cattano were not obligated to take on any of the franchises’ prior liabilities, according to the lawsuit filed on Nov. 21 in circuit court in Conway.

Triton Stone “aggressively cooked the books” before the sale, the lawsuit states, then “exploited their newfound business leverage over the purchasers [Campbell and Cattano] to force, or try to force, the purchasers to pay millions of dollars in debts the purchasers did not owe.”

Joshua Kessler, the managing director of Triton Stone Group, called the accusations “outrageous, ridiculous and unbacked” and said Triton Stone intends to file a countersuit.

“We operate with integrity and we are well respected, unlike some of the plaintiffs,” Kessler said, adding that Campbell and Cattano had “full access to our records, employees, our inventory and software. They did a private audit and they had numerous lenders do physical audits, so I was really floored to see these allegations in this lawsuit.”

A formal answer to the allegations by Campbell and Cattano has not yet been filed in court.

According to the lawsuit, Triton Stone representative Christian Jensen met with Cattano late last year and told him the Myrtle Beach and Charlotte franchises historically had been run poorly and that he, Kessler and a third partner – Randy Mathis – had taken over management of the two locations and were interested in selling them.

Cattano, a Columbia real estate developer, contacted Campbell about the deal and the two men started negotiating a sale price with the Triton Stone officials.

During the negotiations, the three Triton Stone representatives presented Campbell and Cattano with financial documents that appeared to show the Myrtle Beach and Charlotte locations “were a healthy, profitable business operation,” according to the lawsuit. Campbell and Cattano agreed to purchase the franchises’ assets for $3 million – slightly less than what the financial documents indicated the assets were worth – and the sale was completed on March 11.

“Not long after closing the asset purchase, faint warning signs began to emerge that something was wrong,” the lawsuit states.

Campbell and Cattano learned that Kessler had written about $600,000 in checks just days before the sale was completed to several vendors who were owed money by the Charlotte franchise, according to the lawsuit. Kessler did not disclose those payments to Campbell or Cattano, who closed out the former franchises’ bank account and opened a new one under their corporate name when the sale closed.

“Vendors began depositing the checks written by Kessler on the now-empty [old] account, and the checks began bouncing,” the lawsuit states. “Cattano and Campbell then heard from vendors complaining about the bounced checks and learned for the first time what Kessler had done.”

When Campbell and Cattano confronted Kessler about the checks, Kessler told the two men that they now had to pay the bills or he would put them out of business, according to the lawsuit.

Campbell and Cattano had to repeatedly come up with money to pay past-due bills that had been run up by the previous franchises’ owner, according to the lawsuit. Since Kessler controlled the supply chain for the Myrtle Beach and Charlotte locations, Campbell and Cattano said they had no choice but to pay the debts.

“Though the payments continued to drain Congaree of funds, it was a choice between a damaged business and a destroyed business,” the lawsuit states, adding that Kessler and the others “made it increasingly clear … that any resistance would be met with more abusive tactics.”

In July, Mathis told Campbell and Cattano that they must obtain additional outside financing to pay even more outstanding debts or Triton Stone “would swoop in under the franchise agreement and take control of all [their] assets,” according to the lawsuit.

By late July, Campbell and Cattano said, the forced debt payments were taking a serious toll on their ability to continue to do business. When they missed some of the payments Kessler and others told them to make, the lawsuit states, Triton Stone took control of a shipment of stone that was supposed to go to the Charlotte franchise and kept it sequestered at its Port of New Orleans entry point. Campbell and Cattano said they understood future shipments would be seized if they did not pay the previous owners’ debts.

It was about the same time that Campbell and Cattano say they realized the financial documents they had been provided prior to the sale were false and misleading.

“In trying to get an idea of how much old debt was out there … Cattano and Campbell found that a tremendous number of invoices and expenses had been left out of the accounting system,” according to the lawsuit.

Campbell and Cattano said they learned the annual profit for the two franchises was about $350,000 per year – less than half the amount Kessler and the others had claimed on financial documents. That means Campbell and Cattano paid more than twice what they should have paid for the Myrtle Beach and Charlotte locations, according to the formula both sides used to calculate the sale price.

Finally, in late October and into November, the Myrtle Beach and Charlotte franchises could no longer pay its operating costs, debt service and the past-due bills run up by the previous owners.

Campbell – who lost in his bid last year for the U.S. Congress – and Cattano estimate they were stuck with about $4.4 million in old debt that they should not have had to pay in addition to overpaying for the two franchises by $1.7 million.

Campbell and Cattano are alleging fraud, negligent misrepresentation, breach of contract, civil conspiracy and unfair trade practices against the Triton Stone defendants. The two men are seeking at least $10 million in actual and triple damages plus unspecified punitive damages. They also want a judge to declare that all the old debt they were saddled with belongs to the previous owners. No court date has been set for the case.

Gun suspect out on bail

Kashief N. Spain, the Myrtle Beach man accused of being in possession of a stolen police handgun belonging to William Bailey – the former public safety director in North Myrtle Beach – has posted a $47,000 bond and is on home detention awaiting trial, according to Tom Fox, director of the J. Reuben Long Detention Center.

Spain is charged with possession of a stolen handgun, drug possession, driving under suspension and failing to stop for a blue light.

A police report shows highway patrol officers attempted to stop Spain on Nov. 14 for a traffic violation and he fled from police. During a pursuit, Spain threw a handgun out of the vehicle, which was later recovered by drug enforcement unit agents, according to the report.

That handgun turned out to be the .40 caliber mini Glock that was stolen in 2009 from Bailey’s unlocked truck. That theft played a key role in Bailey’s forced resignation last year.

It is unclear how Spain wound up with the gun because he was in prison when the 2009 theft occurred. Spain was released from prison in late 2010 but has been arrested at least three times since then on drug and other charges. Greg Hembree, the 15th judicial circuit solicitor, said this area’s drug enforcement unit continues to investigate the case.

“Our DEU guys are working to find out how that gun went from William Bailey’s truck to Spain’s hands, but they don’t have any answers yet,” Hembree said last week.

DEU spokesman Dean Bishop declined to comment because the investigation is still pending.

Horry County officials returned the handgun to Bailey last week, who then turned the gun over to North Myrtle Beach officials.