MYRTLE BEACH — The owners of a pair of Triton Stone franchises in Conway and Charlotte, N.C. – including one of former S.C. Gov. Carroll Campbell’s sons – paid themselves thousands of dollars in consulting and labor fees and took thousands more from the petty cash fund even as they told creditors there was not enough to pay past-due bills, according to a report by a bankruptcy court-appointed financial examiner.
The examiner’s report is a sharp contrast to a civil lawsuit that franchise owners Carroll “Tumpy” Campbell and John Cattano filed last year against Triton Stone Group, the national granite and stone wholesaler that brokered the sale of the Charlotte and Conway franchises.
In it, Campbell, son of the late governor, and Cattano, former treasurer of the S.C. Republican Party, claim Triton Stone misrepresented the franchises’ finances and then used extortion and “strong-arm tactics” to get them to pay debts owed by the previous franchisees.
Triton Stone denies the allegations, saying Campbell and Cattano agreed to take on the franchises’ liabilities when they bought the dealerships in 2010 for about $3 million – nearly $2 million less than their book value without the liabilities.
George DuRant, the examiner in the bankruptcy case, said in his report that the low sale price indicates Campbell and Cattano agreed to take on the franchises’ liabilities. His report also includes e-mails from Campbell and Cattano that DuRant says indicate the men agreed they were responsible for the previous owners’ past-due bills.
The civil lawsuit is pending in federal court, with an April 2013 trial date scheduled.
Todd Kincannon, a lawyer representing Campbell and Cattano, said the bankruptcy court findings are not expected to impact the civil lawsuit. Kincannon said the bankruptcy case deals only with financial transactions that took place shortly before and then after the franchises filed for bankruptcy protection in January.
“It doesn’t have anything to do with whether they were defrauded up front” during the sale, Kincannon said.
Joshua Kessler, the managing director of Triton Stone Group, said he thinks the examiner’s report vindicates his company and will be a deciding factor in the civil litigation.
“The facts are the facts and you can read them in the report,” Kessler said. “They [Campbell and Cattano] destroyed the businesses and a lot of jobs.”
Meanwhile, in a countersuit filed in May, Triton Stone accuses Campbell and Cattano of taking $85,000 worth of sinks belonging to Congaree Triton Acquisitions LLC – the company Campbell and Cattano formed to buy the Myrtle Beach and Charlotte franchises – and transferring them to a new company they “secretly formed” called Palmetto Stone. That countersuit also is pending.
Congaree Triton Acquisitions LLC was forced into Chapter 7 bankruptcy liquidation last month by Judge John Waites. The company had hoped to reorganize under Chapter 11, but Waites said financial information submitted by Campbell and Cattano “was both inaccurate and misleading, making it nearly impossible for [court officials] to rely on the financial picture being painted” particularly in light of significant ongoing losses.
Waites also said in his order that there is evidence of gross mismanagement of the Myrtle Beach and Charlotte franchises.
For example, Campbell reported to the examiner in April that about 377 stone slabs weighing about a half-ton each had been stolen from the Charlotte franchise sometime in January or February, costing the company about $215,000. Congaree Triton Acquisitions did not disclose the loss in its monthly operating reports to the court until about three months after the alleged theft, according to court documents.
“The fact is that under the debtor’s watch, a significant amount of inventory weighing more than 300,000 pounds disappeared,” Waites wrote in his order to convert the bankruptcy to a liquidation case. “In addition to the significant value of the inventory loss, the court cannot ignore the sheer quantity of the inventory that is missing.”
DuRant’s report, filed on May 24, also shows Campbell and Cattano were paying themselves while telling creditors they would have to wait for their long-overdue money.
Cattano – in a March 18, 2011, e-mail to a creditor owed $53,000 – wrote: “Currently, I have every supplier we do business with screaming at me for full payment now, and unfortunately everyone cannot be paid in full now. . . . As funds become available for us, you will be repaid.”
In a May 26, 2011, e-mail to another creditor owed $482,000, Cattano wrote: “In all candor, it will be next to impossible for us to repay your full amount quickly and it will take some time to repay the funds owed to your company. . . . I do not even know where to begin with a payment schedule.”
During the same time period, however, Campbell and Cattano were taking between $1,000 and $3,000 each week from the company’s petty cash account without providing any documentation of the use or purpose of the withdrawals, according to bankruptcy court testimony by Allison O’Dell, the company’s former accounts receivable clerk in Charlotte.
Also, during March 2011, financial records show Campbell paid himself $25,000 and Cattano paid himself $14,000 for consulting fees. The two men combined to take $39,173 in April 2011 for consulting fees and other, unspecified withdrawals.
All told, Campbell and Cattano took $186,178.86 in consulting fees and petty cash withdrawals in less than 10 months, according to DuRant’s report.
That is in addition to $131,000 Campbell, Cattano and Mike Campbell – Carroll Campbell’s brother – were paid in total from the company’s contract labor account, the report states.
When Congaree Triton Acquisitions filed for bankruptcy protection, it reported about $9.1 million in debts against $3.2 million in assets, not counting any of the disputed past-due payments the company made on the previous franchisees’ debts.
DuRant, however, said in his report that the court cannot rely on the company’s financial statements.
“Because the debtor has failed to maintain complete and accurate books and records, both [before and after bankruptcy], its historical financial condition and results of operation cannot be reliably determined,” DuRant stated, adding that even normal business expenses such as taxes had not been paid. “The debtor has been non-responsive to the examiner’s multiple efforts to determine its current financial condition.”
There have been 70 claims totaling nearly $6.4 million filed against Congaree Triton Acquisitions in the bankruptcy case. Those claims include $1.8 million in unpaid bills owed to Triton Stone Group and $133,573 in unpaid federal taxes, according to court documents.
The Conway and Charlotte franchises were shut down as a result of Waites’ order and any remaining inventory will be liquidated to pay creditors.
Spain hoping for release on gun charge
Kashief Spain, the Myrtle Beach man who police say was caught with a former public safety director’s stolen handgun and then escaped home detention by removing a GPS monitor ankle bracelet, could soon once again be out of jail.
Spain has requested a detention hearing to determine whether he can be released on bond pending a trial on federal charges of being a felon in possession of a handgun. The hearing is scheduled for 2:30 p.m. Tuesday in federal court in Florence before Magistrate Judge Kaymani West.
Spain was arrested on Nov. 14 following a pursuit along the Carolina Bays Parkway. During the police chase, Spain tossed a handgun out of the window of his car, according to a police report. The gun – a .40-caliber Glock pistol – turned out to be a police service weapon that had been stolen nearly two years earlier from a vehicle belonging to William Bailey, the former public safety director in North Myrtle Beach.
Spain – who has a long criminal history including burglary and drug charges --- was indicted on the federal handgun charge on Feb. 28, and Horry County Solicitor Greg Hembree dismissed numerous charges against Spain two days later. Those charges included drug possession, failure to stop for a blue light and possession of a stolen weapon. With the federal case moving forward, the solicitor’s office also dropped charges associated with Spain’s escape from home detention.
Federal prosecutors likely will use Spain’s prior convictions – including six concurrent 15-year prison sentences for burglary – to argue that Spain is a threat to others and should be held until his trial. Spain’s escape also can be considered, even though the charges have been dropped.
Spain initially waived a detention hearing when he pleaded not guilty to the charge on March 14. The waiver meant Spain could be held on the basis of the indictment. Spain has been incarcerated at J. Reuben Long Detention Center in Conway, according to the center’s web site.
Spain previously requested a detention hearing in April, but later withdrew that request.
The federal charge carries a sentence of not less than 15 years in prison because Spain has been convicted of at least three previous violent felonies or drug offenses.
Embezzlement charge dropped
An Horry County woman accused of embezzling money from a local Regions Bank branch has been accepted into a pre-trial intervention program and likely will not face prosecution, according to documents filed last week in federal court.
Cynthia Lee Wooten was indicted in October on one felony charge of embezzlement from the bank, where she was an officer. The indictment did not state an exact amount that allegedly was stolen, only that it was more than $1,000. Wooten entered a not guilty plea in January.
Last week’s court document states that Wooten’s prosecution will be delayed for an 18-month period “for the purpose of allowing the defendant to demonstrate good conduct.” The case could be dismissed at the end of that 18-month period.
Contact DAVID WREN at 626-0281