As Temple’s MTC faces receivership, employee-owners need voice (TX)

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A March 16 hearing before Bell County 169th Judicial District Court Judge Gordon Adams saw attorneys on two fronts characterizing Materials Transportation Company (MTC) as the personal piggy bank of Bill Jones, the employee-owned company’s president/CEO and the city of Temple’s mayor.  Troubling as this is, with a potential sale of MTC and removal of Bill Jones from the company being frequently mentioned throughout the hearing, how the MTC employee-owners have not been brought into this action as a necessary party has become the truly compelling issue.

This latest hearing was for arguments on an application of turnover relief and appointment of a receiver in an action whereby Jencer Investments, Inc., seeks to satisfy a nearly $500,000 judgment by taking possession of or selling “all leviable property of Defendants” including Jones’ MTC stock shares, his MTC Employee Stock Ownership Plan shares, all financial accounts held by a third party and other assorted assets, including those belonging to his BJ3 Industries, Inc.

This action is further complicated by Jones’ pending divorce.  Citing “adultery” as cause for the divorce, his wife of 35 years and also an MTC employee, April, could be entitled to more than half of her husband’s assets, assets simultaneously sought by Jencer.  Whose claim might first be satisfied and what will be left for remaining parties are still to be determined.

Much of Friday’s testimony mirrored that heard in a divorce proceeding last month before 264th Judicial District Court Judge Martha Trudo.  The Feb. 8 hearing was scheduled to request that payment of April Jones’ spousal support be shifted from MTC to Bill Jones personally along with two other issues – distribution of a $50,000 income tax refund jointly issued to Bill and April Jones, and a request for interim attorney’s fees in order to hire specialized legal/forensic financial professionals.

Hours of February testimony reinforced the “piggy bank” concept by focusing on Bill Jones’ 39 percent MTC minority ownership and control of the company, control bolstered by his serving as MTC president, CEO, board of directors member and corporate officer along with as Employee Stock Ownership Plan (ESOP) trustee.  Jones testified to having seemingly unfettered discretion over MTC operations, including his subordinates’ salaries, and described a system that suggested no functional oversight or executive accountability. After characterizing Bill Jones’ perspective as “Alice in Wonderland,” Trudo instructed Jones to raise April Jones’ MTC salary to cover the spousal support.  With Jones having taken sole possession and spending the $50,000 income tax refund, that issue was rendered moot as likely will become Trudo’s order for Jones to set aside $15,000 to be paid to April Jones’ attorney Carol Prater and other court-approved specialists.

With attorney Aubrey Williams serving as co-counsel, opening statements at the recent hearing kicked off with Jencer Investments’ attorney Mickey Wade describing Jones choosing to make no payments on the judgment and instead continuing his normal activities including Hawaiian vacations.  He also highlighted the “piggy bank” theme discussing Jones’ personal debt to MTC and use of company credit cards, including the purchase of non-business related airline tickets for girlfriend Clydette Entzminger.  He advised the court has discretion to grant the turnover and advocated as such.

Attorney and 146th Judicial District Court candidate Jack Jones next argued against the receivership.  As a closely-held private company, he said a turnover would “decimate” stock values as well as the company warning that action against nearly 200 MTC employees would have a “chilling effect” on customers, financial institutions and vendors.  Jones also noted the court’s discretion, but said it would be contrary to the best interests of everyone involved.   Although the receivership action only identifies Jack Jones as representing Bill Jones and BJ3 Industries, prior Bill Jones’ testimony listed Jack Jones as also representing MTC – a status which may become an issue as Bill Jones’ and MTC interests continue emerging as materially and directly adverse to each other.

Attorney Carol Prater finished the opening statements noting her intervention status on behalf of client April Jones.  A sale of the company, marketing it reasonably so that all involved parties can get a fair price for their shares, was her advocated course.  She recognized, though, uncertainty as to just how this can be legally accomplished.

Prater cited an unwillingness for a “fire sale” or for Bill Jones to control any sale instead  asking for court oversight so that legitimate creditors and liens could be paid with remaining funds placed in the court registry outside of Jones’ control.  She described a “worst case” company sale scenario of asking the divorce court to let April Jones vote community estate shares and hopefully remove Bill Jones from MTC.  Terming Bill Jones’ spending as uncontrollable, she said “it just gets worse and worse.”

Mickey Wade replied to the opening statements explaining that as a matter of law, his team’s only interests are with Jencer, but that they are willing to help protect other parties by requiring any proceeds from a company sale to be placed in the court registry.

MTC Controller Russ Wilson was then first to testify.  Wilson waived his Fifth Amendment rights despite Adams advising of his right to counsel, right to remain silent and cautioning that, as a court of record, testimony given could potentially be used in future criminal investigations – should they occur.

He testified about the buyout of former MTC president and minority owner Robert Neill, that an initial $500,000 payment was made with monthly $24,000 payments scheduled over the next five years.  He discussed his knowledge and participation level in the defaulted loans made to Bill Jones using MTC funds and claimed all loans received approval from Wells Fargo, the institution with which MTC currently has a $3.5 to $4 million credit line.  Jones’ MTC loans total at least $1.2 million and are the result of two separate $500,000 loans, one from 2004 and another from “a year and a half to two years later.”  Another $50,000 loan took place in May 2011.  The second $500,000 loan and the $50,000 loan were reportedly executed without documentation.

When asked about Bill Jones’ use of company credit cards for personal expenses, including travel expenses for Entzminger, Wilson said Jones currently owes the company $3,000 – that he doesn’t keep up with personal use levels, but that he has staff which tracks employee receivables.

MTC shares – those owned by individuals, the ESOP or placed in treasury – were discussed.  The distribution, status and voting rights of these shares could influence approval of a potential sale.

In cross examination by Jack Jones, Wilson said a receivership could negatively effect MTC including that as a secured creditor, it could prompt Wells Fargo to demand payment.  He went on to describe how it could impact relations with customers and vendors.  He said that finding a buyer for Bill Jones’ minority share would also be difficult.

In cross examination, Wilson answered affirmatively when Carol Prater asked if a $39,000 expenditure recently charged by Bill Jones to his MTC credit card was to begin the process of selling the company.  He said that Jones does not owe the company for this expenditure, that it was a fee to explore selling the company.  When asked if perhaps the fee was for a seminar to learn how to sell the company, Wilson said he wasn’t sure.  He also stated that shareholders had not been notified of Jones interest in selling the company and that no duty exists at this point for such a notification.

Another interesting Wilson revelation came with regard to the ESOP trustee role.  Bill Jones previously provided sworn testimony that he is no longer the ESOP trustee.  He said the responsibility was split between Wilson, Jim Granfor and Leonard Pate.  Wilson testified that not only have the documents removing Jones not been executed, they – to his knowledge – haven’t even been drawn.

Next on the stand was Mark Lipscomb, the individual proposed by Jencer Investments to serve as receiver.  Lipscomb is a principal with Blackhill Partners, a Dallas-based private merchant bank described on its web site as active in three main business areas: investment banking, restructuring and merchant banking.

After providing his credentials, Lipscomb discussed his turnaround experience, including a company, Ampad, in which “the owners were taking money out faster than we were making it.”  His company bio describes the Ampad experience noting that the company developed a plan which satisfied creditors with a 100 percent recovery on the debt owed and then successfully emerged from a bankruptcy action.

Throughout the hearing, Prater repeatedly expressed concerns about “fire saling” the company. To that, Lipscomb replied that it’s not about “fire saling,” it’s about maximizing value, it’s about a personal reputation.  He went on to say if you can turn something around, that’s a good thing.

With Bill Jones on the stand, testimony similar to the Feb. 8 hearing was taken.  Debts over and above that owed to MTC and Jencer Investments including $400,000 to an acquisition called Trace Erase and $100,000 in personal credit card debt were discussed.  The failure to prepare and execute the trustee paperwork was described as an administrative detail requiring follow-up after a verbal agreement via phone.

He testified that Entzminger had not spent time at MTC presumably being trained for some unidentified position.  When asked if he used the company as his piggy bank, Jones replied that he “can’t take money anytime I wish.”

Bill Jones said that despite six weeks elapsing since providing Generational Equity $39,000 to explore potential MTC sale options, he had yet to complete the confidential client profile.  Regarding the sale, he told Prater that he would agree to a sale that doesn’t retain him, but listed several factors including “sufficient income” as a condition.  Jones also testified that he believes it “maximizes company value” if he stays in control of a sale indicating leadership continuity and his knowledge depth as key points.

With regard to voting on a company sale, Jones affirmed that the prospect of 6,000 undistributed shares might aid him in retaining control of the company.

In response to Carol Prater asking if he can understand that his promises no longer “hold a lot of weight,” Jones replied “I understand how people would think that.”

Jones’ testimony reiterated loan debt of more than $2 million:  $1 million+ along with another $30,000 to MTC; $400,000+ to Jencer; $400,000+ to Trace Erase; and $100,000+ in credit card debt.  When asked if making payment on those debts, Jones replied that he was making small, but no major payments.  He acknowledged that a sale of MTC was “the only way” out of his financial situation.

In closing statements, Aubrey Williams began saying that while it gives no pleasure to make such a statement, the testimony given – including by Bill Jones – and any efforts planned to satisfy his debt are “just delusional.”  He said asking Jencer Investments to “hope for the best” is not justified.

Williams continued that the status quo was the worst possible scenario, that while not required by law, Jencer Investments would like to see a course of action that generates enough cash to satisfy all parties involved.  He said that while some paint a picture of devastation should a receiver be appointed, what about a company that has more than $1 million in outstanding debt to an individual running the company “as if it were his own piggy bank” and that this debt includes $500,000 or more which is unsecured and in default?  That, he said, is “ludicrous,” worse than anything a receiver might bring.

The complexity with which all involved view this case continued as Adams questioned the ESOP’s potential role in a company sale and Williams acknowledged an inability to provide specific answers.  The judge later commented though that if “all those folks” knew what was going on, perhaps they would all be here asking for a receiver.  Williams concurred that was Jencer Investment’s point, but also said they are open to alternative resolutions.

Adams and the lawyers then discussed that in the absence of compelling arguments that Jencer failed to prove the case for receivership, did grounds exist for him to deny it?  They again discussed the court’s discretion with Jack Jones saying, based on the legal standard to be met, the legislature’s intent is to allow discretion and not necessarily mandate a specific outcome.

Adams reiterated that he must keep his ruling in the context of the motion and suggested the attorneys research and explore other options.  He advised that a ruling would not come in the next week, but that they should submit any new arguments or alternatives within that timeframe as he could rule at any point after March 26.

Again, sale of the company, removal of Bill Jones as MTC’s CEO – where are the employee-owners in this equation?  Let’s hope they get a voice before any final decisions are made.

DISCLOSURE: Lou Ann Anderson was employed from 2004 – 2009 by Materials Transportation Company as producer of The Lynn Woolley Show, a business interest at that time financed through Capitol Media Group, a then-subsidiary of Materials Transportation Company.

Lou Ann Anderson is an advocate working to create awareness regarding the Texas probate system and its surrounding culture. She is the Online Producer at www.EstateofDenial.com, a Policy Advisor with Americans for Prosperity – Texas and a Director of Women on the Wall. Lou Ann may be contacted at info@EstateofDenial.com.

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Commentary
  • mtcfamilyworker

    what a son of a bitch! what about all of the workers? their families? i hope your piece of ass bites your ass!

  • mtcfamilyworker

    what a son of a bitch! what about all of the workers? their families? i hope your piece of ass bites your ass!

  • 1SS-welder

    Glad I got out when I did. The ESOP is in trouble and someone needs to stand up to the front office to include granfor,pate and wilson. Good Luck!!! Glad I got my money, you may not.

  • iGotOutWhenICould

    What about the rest of the balance sheet? What about the *tremendous* amounts of debt that MTC owes to other contractors? If I was stupid enough to let my personal finances even partially resemble that of MTC, I would have put a bullet between my eyes a long time ago!

    I understand that this is centering around Bill, BJ3 Industries, and any loans he may have taken from MTC. But, how is any of this going to be rectified (along with spousal support) if they are swimming in currently undisclosed debt and lackluster sales?

    There were many, many months where they tried to float by on credit cards — but then that bill wouldn’t get paid….repeatedly. Employees with cards always knew this was the first confirmation the business was in trouble because time and time again they received notices of lost rewards points as a penalty for the company having it’s cranium in the rear.

    What about all of the months that monies were not paid into said ESOP? Isn’t that against the rules? Surely all of those employees who worked their entire lives at MTC (even some from Mohawk for God’s sake) would like to see someone take a closer look at those activities.

    I think this is a much, much larger problem than just a few ridiculously large abuses of company power. That place is in the shitter. Has been since Billy Boy took over from his padre and it will never make its way out.

    I feel so sad for all of those workers who show up every day and are forced to drink the ESOP Kool-Aid. They work long hours in a non-airconditioned tin can during the extensive Texas summers, paid less than $12/hr after working there for decades, and still continue to have pride in their work all because they have been made to feel like they are part of something. Yeah, part of funding Billy’s multitude of failed businesses that they have absolutely nothing to deal with.

    This man should be ashamed of himself, but he’s a narcissistic sociopath so don’t ever expect to get a half-assed apology or an attempt at fixing all of the damage he has caused. Besides, he’s too busy out banging the City Secretary (sorry, former – she was made to retire because of her adulterous relationship).

  • Former MTC Employe Owner

    MTC is a good company to work for. I feel horrible for the turmoil that the employee owners and their families must be going though. I hear Jim Granfor was promoted to CEO. It was the best move MTC could make. Mr. Granfor is well qualified for the position and will look out for the best interests of the employee owners.