Whitbeck Bankruptcy Dismissed by Exasperated Judge

by George Waldon  on Monday, Sep. 1, 2008 12:00 am  

The same business practices that got Frank B. Whitbeck in trouble with state insurance regulators and federal prosecutors recently drew the ire of U.S. Bankruptcy Judge James Mixon.

Shoddy record-keeping with gaps of documentation and mingled funds between the Little Rock businessman and entities he controls led to a four-hour hearing on Aug. 22 – two months before he is scheduled to be sentenced in federal court for one count of mail fraud.

During the sometimes testy proceeding, Mixon accused Whitbeck of mismanagement and fraud in connection with the operation of his Winrock Grass Farms Inc. Three days later, Mixon dismissed the company's Chapter 11 bankruptcy case.

A focal point of the hearing was Whitbeck collecting $329,615 in salary from Winrock during the past 12 months, an expense that left the company with a small loss that was covered by a $41,880 loan from Whitbeck.

Whitbeck testified that he used only $147,953 personally and that the balance was invested in hopes of generating money for Winrock.

He said $181,662 was spent to raise turf grass through Butterfield Investments LLC, which owned about 72 acres and leases another 75 acres near the Little Rock Port.

Whitbeck said that revenue from Butterfield would be used to benefit Winrock, which is months away from losing its leased operations in west Pulaski County. However, no documentation exists to substantiate the financial arrangement he described. Whitbeck is the sole owner of both Butterfield Investments and Winrock Grass Farms.

Once the Winrock Grass Farms lease is gone at the end of the year, so is the company's only tangible revenue-producing asset. Whitbeck placed the value of unharvested and unsold Winrock turf at $750,000.

Winrock lost ownership of the grass-growing property after a $4.55 million foreclosure sale on July 5, 2005. The 814-acre spread along the Big Maumelle River is on Highway 10 about 11 miles west of Chenal Parkway.

Judge Describes 'Looting'

Judge Mixon didn't buy Whitbeck's testimony regarding the Winrock-Butterfield relationship and described a different scenario behind the flow of money between Whitbeck and his two ventures.

"I've heard Mr. Whitbeck's explanation, and I just simply do not believe his explanation," he said, adding, "Here's what I think was going on: that Mr. Whitbeck was looting Winrock Grass Farms, taking all the money out that he possibly could, either spending it on his personal expenses, paying these tax debts, these other personal obligations and then converting it over to [Butterfield Investments] and then when Winrock ran completely out of resources, it would be easy enough just to let the case get dismissed or die on the vine. The transactions when viewed in that light make sense."

Whitbeck was taken aback by Mixon's observation.



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