Icon (Close Menu)

Logout

The Rise and Fall of Ed Harvey’s Business Empire

11 min read

Until 2008, Edward M. Harvey was known as an entrepreneur whose diverse and complex business portfolio had made him a millionaire many times over.

But the 78-year-old Little Rock man, who once owned Gibraltar National Insurance Co. – itself the center of controversy lately – and one of the largest trucking companies in Arkansas, Continental Express Inc. of Little Rock, wasn’t able to ride out the Great Recession. Judgments started piling up against Harvey and his companies.

"Virtually everything that he was involved in collapsed," Marvin Jones, a financial adviser to Harvey, said in a deposition taken in April as part of a collection lawsuit against Harvey.

Arkansas Business has used interviews, public documents and court records to chronicle Harvey’s business rise in the timber industry in the 1970s to the point last month when two banks filed separate federal lawsuits alleging that he transferred assets to his wife, Bonnie, to avoid paying $2.5 million worth of judgments.

Jones said Ed Harvey’s net worth was about $100,000 in April while Bonnie Harvey’s net worth had risen by between $20 million and $30 million.

"The transfers from Mr. Harvey to Mrs. Harvey were made with actual intent to hinder, delay or defraud Metropolitan [National Bank] in its efforts to collect the debts owed by Mr. Harvey," the Little Rock bank said in a lawsuit filed in U.S. District Court on July 6. Harvey "made the transfers with the intent to defeat Metropolitan in its efforts to collect the balance owed on those notes."

Metropolitan had received a $1.7 million judgment against Harvey on May 18 in Pulaski County Circuit Court for loans to Continental that Harvey had personally guaranteed. But Metropolitan’s attempt to collect was met with Harvey’s position that "he is judgment-proof because he does not have any assets," the bank complained in federal court.

Nine days after Metropolitan filed its federal lawsuit, First Security Bank of Searcy filed a nearly identical one against the Harveys to collect a $756,000 judgment against Harvey and his Eaves Manufacturing of Beebe.

First Security was awarded its judgment on Dec. 15 in White County Circuit Court. But it, too, turned to the U.S. District Court after being unable to collect.

David Donovan, a Little Rock attorney representing the Harveys, told Arkansas Business recently that the couple did nothing wrong in transferring the assets.

"They haven’t done anything to try and hinder, delay or defraud anybody," he said. "They’re trying to work through the legal issues right now, and I’m sure they will."

The assets were transferred to "get their estates planned … and leave Mr. Harvey with sufficient assets for all of his obligations," Donovan said.

First Security hoped to ask Ed Harvey about those assets in a deposition for its White County collection suit, but his lawyer instead filed an exhibit dated March 24 in which Dr. Pham Liem of Little Rock said Harvey had been diagnosed with Alzheimer’s disease. Circuit Judge Thomas Hughes ruled on June 24 that Harvey must sit for the deposition, but a date hasn’t been set, Donovan said.

Meanwhile, Harvey is still on the board of a bank his wife now owns, Preston National Bank in Dallas. The bank’s president, Douglas Hester, didn’t return several calls seeking comment.

 

‘A Real Innovator’

Harvey, father-in-law of U.S. Sen. Mark Pryor, D-Ark., has never granted an interview to Arkansas Business and declined through Donovan to be interviewed for this article. If he’s ever been interviewed at length, Arkansas Business couldn’t find a report of it.

"He was a humble man," said his friend of nearly 40 years, Charles Nash of Lockesburg. "He didn’t go around blowing his horn or seeking publicity."

Harvey "had almost boundless energy and a vision to see how to do things that was different than other people," Nash said.

It’s unclear what Harvey did immediately after he graduated from the University of Arkansas at Fayetteville in 1954 with a bachelor’s degree in mechanical engineering. But on Oct. 28, 1966, Harvey filed paperwork with the Arkansas Secretary of State’s Office to form Harvey Engineering & Manufacturing Corp. of Hot Springs.

Nash, 75, said that he started his long association with Harvey by going to work for Harvey Engineering in 1973. They created a lumber recovery system for the timber industry, he said.

"We developed a laser measuring system that enabled the computer to take a 3D picture of the board," he said.

The computer initially determined how to get the most usable boards from a wood slab, Nash said. Later, the equipment was programmed to maximize profit based on the current market price of various sizes of board.

The equipment was revolutionary for the timber industry in the 1970s, Nash said.

"Frequently, we worked well after midnight on a project. It had to work right," he said. "And he was there and so he paid attention to every detail of the business."

Harvey also designed equipment to cut curved logs, said Bobby McDowell, a friend for about 40 years who is also a director of Preston National Bank. "He was a real innovator."

McDowell, who lives near Dallas, said Harvey bought from him some of the first Intel computer products ever sold. The lumber equipment, McDowell said, was "where he really made his money."

"Ed’s an engineer at heart," he said. "He turned out to be a very good businessman."

 

Business Growth

Harvey first signaled his plan to expand into other industries when he announced in June 1985 that James P. Jett, who had resigned as president and chief operating officer of Worthen Bank & Trust, had been named president and COO of Harvey Industries of Little Rock, according to an article in the Arkansas Gazette. At the same time, Harvey appointed John K. Fletcher president of Harvey Engineering & Manufacturing Corp., where Fletcher had worked since 1970.

"The election of these two men represents a move by the company to both strengthen our position in the wood products industry and offer the company an opportunity to explore other business areas that we may come up with in the future," Harvey said in the article, one of the few times he was quoted in a news story.

In the summer of 1985, some 300 employees worked for Harvey Industries and its subsidiaries, which included Harvey Engineering & Manufacturing Corp. and Hemco Trucking, both of Hot Springs; Hemco-Beebe, Metal Fabricating Systems, Harvey Properties and Tiecor, all of Little Rock; Hemco Sales of Jacksonville, Fla.; and Continental Lumber Co. of Rapid City, S.D., the article said.

By the end that year, Harvey had formed Continental Express Inc. with five trucks. The company quickly took off, then-president Ralph Bradbury told the Gazette in 1990. Revenue was approaching $20 million and Continental owned or had an interest in more than 500 tractors and 800 trailers.

But Harvey was not done building companies. He formed Guardian National Insurance Co. of Little Rock in 1988 to sell property, casualty and workers’ compensation insurance. The company changed its name to Gibraltar National Insurance in 1994.

Gibraltar’s president in 1988 was M. Kelly Wooldridge, one of several management hires with whom Harvey would have legal battles. Harvey also decided to buy a bank, and he picked the struggling Preston National Bank in Dallas, which had been formed in 1985, according to McDowell.

"He had gotten frustrated with the banks in Arkansas," McDowell said. "The banks were failing down here in Texas, and he just decided to come down here and buy his own bank."

Preston National Bank grew, but slowly. In 1992, the earliest financial figures available from the Federal Deposit Insurance Corp.’s website, the Dallas bank had $15.5 million in assets and $223,000 in net income. By 1995, the bank’s assets had nearly doubled, to $29.6 million, and its net income was $473,000. But 15 years later, Preston National’s assets are only $60.5 million – smaller, that is, than Logan County Bank at Scranton – while it earned $1.1 million in 2009.

Harvey "ran that bank like a business," McDowell said. Harvey also started Travis Lumber Co. in 1988, but no financial information for that company is available.

 

Lawsuits

Not all of Harvey’s business ventures were successful, and squabbles with his managers have been common.

Harvey, Bill MacPhee and Brent Leslie formed the Harvey Group in 1987 "for the purpose of acquiring, developing and selling various businesses," according to a lawsuit MacPhee filed in Pulaski County Circuit Court in 1988.

Harvey eventually had separate legal battles with both MacPhee and Leslie. Harvey won a $50,000 judgment from MacPhee while his case with Leslie was dismissed for failure to prosecute.

Similarly, Harvey bought part of Beech Trucking Co. of North Little Rock in 1990 and ended up in a legal fight with minority owner Arthur Beech over $1.1 million worth of missing equipment. Harvey invested "$2 million of his own money in the ultimately doomed enterprise," which closed in 1998, according to filings in the case which was dismissed in 2003 on Harvey’s motion for a summary judgment.

In 2002, Diane Miller, who had been president of Continental Express since 1999, filed a lawsuit against Harvey and Continental alleging that she was paid less than her predecessor, Ralph Bradbury, because she was a woman.

Miller was hired in 1985 and was promoted to executive vice president in 1986. During her tenure as president, Harvey "continually complained" about the performance of the company, according to the court filings. In 1999, Continental reported revenue of $61 million to Arkansas Business. By 2001, Continental’s performance "was substantially worse than it was in 1999," the court filings say, although no financial numbers are listed in the filing. In 2002, Continental reported revenue of $82 million with 540 trucks and 700 employees to Arkansas Business, but the company’s profitability is unknown.

Both sides agreed to dismiss the case in June 2004.

 

Continental Express

With Miller gone, Harvey turned in November 2002 to longtime associates Kelly Wooldridge and Todd Tiefel to run Continental.

By the end of 2003, Continental’s revenue had grown 19.3 percent over 2002, according to the numbers provided to Arkansas Business.

Wooldridge, in addition to being the president of Harvey’s Gibraltar insurance company, had been on the board of Harvey’s Conx Capital Corp., which was formed in 1998 in Carson City, Nev., but which maintained a Little Rock address. Conx, which was registered with the Securities & Exchange Commission, was created to originate and service loans and equipment leases to small companies, particularly regional trucking companies. But the company’s only revenue came from Continental Express, according to SEC filings.

Tiefel had been the chief financial officer of Harvey Inc. since 1996 and served with Wooldridge on the board of Conx. Conx terminated its registration with the SEC in May 2005. (The company peaked in 2001 with revenue of $4.7 million and net income of $890,000. By 2004, revenue had fallen to $1.9 million and net income to $77,800.)

While running Continental, President Wooldridge and CFO Tiefel schemed to take more than $1 million from the company, according to charges brought by the U.S. Attorney’s Office in Little Rock. Tiefel pleaded guilty in January 2008 to aiding and abetting mail fraud and was sentenced to 16 months in prison and ordered to pay $558,000 restitution. Tiefel is scheduled to be released from federal prison this week.

In January 2009, a U.S. District Court jury in Little Rock found Wooldridge guilty of mail fraud conspiracy. Wooldridge was sentenced to 22 months in prison and ordered to pay $1 million in restitution. His expected release date is in August 2011.

"The embezzlement problem caused a great deal of stress with that company," Donovan, the Harveys’ attorney, told Arkansas Business.

 

For Sale

In October 2008, Continental failed to pay monthly rent of $15,000 to Fleet Equipment Leasing LLC of Memphis, according to Fleet’s lawsuit filed in Pulaski County Circuit Court.

At the same time, Gibraltar National Insurance "was on the verge of receivership," Amanda Rose, associate counsel for the Arkansas Insurance Department, told Arkansas Business earlier this summer.

In 2008, Gibraltar reported a loss of $2.7 million on $3 million in premium. The previous year, it had net income of $424,000 on $2.2 million in premium.

The Insurance Department discovered Harvey "had some questionable business transactions," Rose said in June. "He had reported several items, like his skybox in Fayetteville at the football stadium, as assets of the company, and, of course, those are not admitted. Once all that was discovered, the company was technically insolvent."

The company was sold in January 2009 to insurance agent Steve Standridge of Mount Ida, who last month surrendered his insurance license after the Insurance Department accused him of 72 counts of wrongdoing. Harvey ended up with $2 million for Gibraltar, which was officially declared insolvent when the AID took it into receivership in March.

Attorney Allan "Dick" Horne of Little Rock, who represented Harvey in the transaction, previously told Arkansas Business that Gibraltar was solvent at the time of the sale. "Ed Harvey, in case you don’t know, has got all kinds of money," Horne said in late June.

Harvey’s attorney Donovan said Harvey’s Travis Lumber of Mansfield also was suffering financially in 2008 because of the downturn in the economy.

At the end of 2008, Harvey sold Continental Express to the Celadon Group Inc. of Indianapolis for $24.1 million. But Celadon only bought Continentals assets, not liabilities like the loan from Metropolitan National Bank. Continental generated $92 million in revenue in 2007, according to information from Celadon.

Travis Lumber was sold in 2009 for an undisclosed price.

"He was trying to sell off those businesses to meet financial obligations," Donovan said. "He was working hard to take care of the financial obligations he had."

Donovan said Harvey’s companies were victims of the economy.

 

Asset Shift

In the middle of 2008, the Harveys hired Marvin Jones, the financial adviser, to evaluate their portfolio of companies.

At the time, they were "having financial difficulties," Jones said in his April deposition in First Security Bank’s collection suit.

In mid-2008, "it was feasible that he could take a $15 [million] to $17 million personal hit" just on Continental’s loans he had personally guaranteed, Jones said.

Jones also said that, as of 2008, Harvey had personally guaranteed between $50 million and $60 million in outstanding loans. Jones told Ed and Bonnie Harvey that they needed to protect his assets.

By the end of 2008, Harvey had transferred his assets – including his Little Rock home, property in Florida, Harvey Manufacturing Corp. and 99 percent of the stock of Preston National Bank – to his wife. Preston National’s book value is about $8 million.

Ed Harvey’s monthly income is now limited to the approximate $1,000 he collects from Social Security while his wife’s monthly income is between $75,000 and $80,000, Jones said.

Both First Security Bank and Metropolitan National Bank have asked in their lawsuits that the transfer of assets to Bonnie Harvey be voided or that she be made responsible for the defaulted loans. The banks also want a receiver appointed to care for the assets.

"Unless a receiver is appointed to take charge of the fraudulently transferred assets, it is likely that Mr. and Mrs. Harvey will again try to conceal them through further transfers to keep them beyond the reach of Mr. Harvey’s creditors, including Metropolitan," the MNB lawsuit said.

Donovan said Bonnie Harvey became involved in her husband’s businesses because of his health issues.

"She has learned a lot about what businesses there were and how she needs to deal with it," he said. "Mrs. Harvey is a very strong person and is determined to fight through these difficulties, and I’m sure she will."

 See also: Harvey’s Business Declines Affect Pryor’s Finances

Send this to a friend