Bean Lumber: Money Woes Fault of Family

A flurry of lawsuits involving Curt Bean Lumber Co. of Glenwood, once one of the largest independently owned Southern pine manufacturers in the country, has revealed a bitter family fight.

In June, the company was pushed to the brink of filing for bankruptcy protection.

Bean Lumber blames the company's financial problems on Curt Bean's daughter and son-in-law, accusing them of orchestrating elaborate schemes that cost the company possibly millions of dollars in profits and sales.

"That's all false," Scott Thomason, who is married to Curt Bean's daughter, Corey, said last week. "We denied all that."

Thomason said the economic slowdown that started in 2006 and has caused a number of Arkansas sawmills to shut down was behind Bean Lumber's money troubles.

A 2008 collection lawsuit by an Oregon timber company against Bean Lumber was the first in what is now a cascade of claims and counterclaims that include allegations of theft and check-kiting.

On Nov. 2, Bean Lumber is scheduled to go to court in U.S District Court in Hot Springs over allegations involving the Thomasons. The roots of that case date back to April 2008, when North Pacific Group of Multnomah County, Ore., sued Bean Lumber seeking $749,000 for more than 90 shipments of wood products it delivered to the company between June and August 2007.

Bean Lumber, however, filed a counterclaim in December unveiling the allegations against the Thomasons, adding that North Pacific was a participant in part of the alleged scheme.

Although Bean Lumber tried to sue the Thomasons as part of that lawsuit, U.S. District Court Judge Robert Dawson ruled in May that those allegations weren't in his jurisdiction and dismissed them from the case. The allegations have resurfaced in a Pike County Circuit Court lawsuit that was filed Sept. 14 against the Thomasons and their company, Mid-Ark Lumber Inc. of Glenwood.  

As part of that lawsuit, Scott Thomason said Bean Lumber owes his company $351,000 for wood shipments made in 2007. Mid-Ark has filed a counterclaim against Bean Lumber to collect that money.

Curt Bean referred questions to Grady Bean, who is Curt Bean's cousin and has an ownership interest in the lumber company, or to Curt Bean's son, Tim Bean, who is president of Bean Lumber.

Grady Bean referred calls to the company's attorney, Charles Coleman of Little Rock, who was unavailable last week.

The Thomasons haven't worked for Bean Lumber since 2007. Since then, Bean Lumber has sold its property, shut down for several months and faced a handful of other collection lawsuits.

 

'Old Style Integrity'

Bean Lumber and its subsidiaries attributed the company's success to "hard work, old style integrity and a dedication to quality," according to the company's Web site.

The company grew to three locations, including Amity and Buckner, Mo., and produced more than 150 million board feet of pine lumber and 120 million feet of treated lumber annually.

The Bean family expanded in 1996 when Scott Thomason married Corey Bean. Scott Thomason then went to work for his father-in-law; his job duties included stacking lumber. Corey Thomason also spent time working with the company's books in an office she shared with her father.

By 1998, Scott Thomason had been promoted to salesman. He told Arkansas Business last week, however, that Curt Bean wasn't grooming him to take over the business.

Scott Thomason continued working at Bean Lumber even though in 1999 he started his own company, Mid-Ark Lumber Inc., which is just down the road from Bean Lumber. Mid-Ark started out as a remanufacturing and wholesale company but has expanded to include handling all types of Southern yellow pine.

Scott Thomason said working at Bean Lumber was stressful in 2000 and 2001 because of the economic slowdown during that period. Rough times began anew in 2006.

Between June 2006 and March 2008, sawmills in Arkansas, those processing both hardwood and Southern yellow pine, shed about 3,000 jobs.

"We were at record year lows," Corey Thomason said. "We were at industry lows."

 

The Allegations

Bean Lumber alleges that between 2006 and 2007, the Thomasons created an elaborate scheme to steal from the company, according to the lawsuit Bean Lumber filed in Pike County last month.

Among the allegations are that the Thomasons created phony invoices to make it appear that Bean Lumber had $1.9 million worth of inventory it didn't have. They did that, the lawsuit said, to draw credit from Wells Fargo Bank, which under the terms of the credit agreement allowed the lumber company to draw up to 85 percent of the value of its accounts receivable and 65 percent of its inventory.

"Corey Thomason then immediately caused Curt Bean Lumber Co. to draw additional cash from Wells Fargo and used the cash to pay payables which she had also approved, some of which were also false, fraudulent or not properly payable," the lawsuit said.

Other allegations include the doctoring of invoices. The lawsuit accused the Thomasons of taking invoices from their own company, Mid-Ark, and altering them to show Bean Lumber owed the money, the lawsuit said.

Then one of the Thomasons would OK the invoice and have Bean Lumber pay the bill for Mid-Ark, the suit said.

In addition, Bean Lumber at times would deliver its lumber to Mid-Ark's customers and Mid-Ark would collect the money, the lawsuit said.

The schemes left Bean Lumber with at least $4.6 million worth of invoices or accounts for which it didn't receive any money, the lawsuit said.

Bean Lumber also accused a trader at North Pacific, Donnie Burke, of structuring lumber transactions so that Mid-Ark would acquire lumber products from another customer and then sell those to North Pacific. Then Burke would sell the same lumber products back to Scott Thomason while he was acting as a buyer for Curt Bean Lumber.

"In each of these transactions, when North Pacific billed Mid-Ark for the cost of the lumber products, Scott Thomason and Corey Thomason (at Mid-Ark) altered the invoice to make it appear to be payable by Curt Bean Lumber," according to the company's court filings.

Bean Lumber accused the North Pacific trader of knowing about the alleged fraud and is seeking an unspecified amount of damages.

North Pacific has denied the allegations in its court filings. Burke declined to comment.

Bean Lumber also accused Corey Thomason of running a check-kiting operation involving a bank account and $1.5 million credit line at Regions Bank. It also had another bank account and credit line at Chambers Bank of Danville.

The lawsuit blames Corey Thomason for issuing checks drawn on Regions and Chambers banks when no money was available.

Corey Thomason then wrote checks drawn on Bean Lumber's subsidiaries to cover the checks drawn on the Bean Lumber Co. accounts, the lawsuit said.

Regions and Chambers discovered the alleged check-kiting scheme and stopped it in August 2007, the lawsuit said. At that time, Bean Lumber had an overdraft balance with Regions of $537,600 and $68,000 with Chambers, the lawsuit said.

The lawsuit also accused the Thomasons of destroying company records to cover their tracks. Some of the records, however, have been recovered through the use of forensic accountants and computer experts "at a great expense" to Bean Lumber, the lawsuit said.

Bean Lumber is seeking an unspecified amount of damages for several counts, including fraud and breach of fiduciary duties.

 

Tough Times

The Thomasons left Bean Lumber on Aug. 16, 2007, which is when the company's problems started, the Bean Lumber lawsuit said. Bean Lumber's bank accounts were frozen because of the alleged check-kiting scheme, the lawsuit said.

As a result, Bean Lumber said, it couldn't pay its employees or vendors, resulting in it shutting its operations at its three locations, leaving more than 360 people out of work.

Bean Lumber said it sold its treatment plants in Glenwood and Buckner, Mo., at the end of 2007 to pay the debts caused by the Thomasons.

The lawsuit didn't say how much the properties sold for, but the price would have been higher if they were sold "as going concerns than as closed facilities and absent the fraud of the" Thomasons.

In April 2008, Bean Lumber did have some good news to report. It announced it was reopening its Glenwood plant in May of that year, but with about 150 workers instead of the 250 it had in August 2007, according to an April 2008 article in the Arkansas Democrat-Gazette.

"It has been a tough past eight months, not only for our company, but for this community and surrounding areas," Tim Bean said in the article.

Creditors, however, were already circling the company.

In October 2007, Financial Federal Credit Inc. sued Bean Lumber in U.S. District Court and accused it of defaulting on several loans worth $5.6 million. It also named as a defendant Curt Bean, who had personally guaranteed the loans. (As of April 13, 2009, most of the loans had been repaid, court filings showed. But Curt Bean still owed more than $1.6 million, according to a court filing.)

The company appeared to be on the brink of bankruptcy as well. Bean Lumber in June made special arrangements with Arch Wood Protection Inc. of Atlanta to pay off a debt of $779,000.

Arch Wood sued Bean Lumber in U.S. District Court in Hot Springs in April in an attempt to collect the money, which had been borrowed in January 2008.

Bean Lumber said in its court filings that if a judgment were entered, it would be forced to file bankruptcy, which its management didn't want to do.

Arch and Bean Lumber agreed to suspend the lawsuit until July 30, 2010, while Bean Lumber makes payments. But if Bean Lumber defaults on the consent agreement, the lawsuit will be reopened.  

Since Bean Lumber filed the lawsuit against the Thomasons, Corey Thomason said, she occasionally speaks to her father, but it's a difficult, trying situation.

"Never in your wildest dreams would you imagine that it would happen to you," Corey said. "You're basically busting your butt all these years for your family and trying to make sure that your family is first. It puts a whole different perspective on things."