Good News for Affiliated Foods Creditors

Financial experts who recently combed through emails of defunct Affiliated Foods Southwest Inc. of Little Rock uncovered a goldmine of information.

Through Oct. 17, that information was used to gather $3.2 million for Affiliated’s creditors. Plus, based on the information unearthed, vendors agreed to waive $721,000 worth of claims against Affiliated.

The money collected came from Affiliated vendors who were paid within 90 days before Affiliated filed for bankruptcy. Bankruptcy law forbids making preferential payments to some vendors while stiffing others.

And there’s more good news for Affiliated’s creditors. More than 100 cases are “in progress and are expected to yield substantial additional cash benefit to the Estate,” Bankruptcy Trustee Richard Cox of Hot Springs reported to the court.

Cox asked the bankruptcy court to approve the $170,882 bill it received from the team at Lain Faulkner & Co. of Dallas, which did the investigation. Lain was hired to search for “unusual payment activity” by Affiliated in the months before it filed for Chapter 7 bankruptcy protection in May 2009. The bill represented Lain’s work done between March and August.

Affiliated Foods reported annual revenue of $730 million in the fiscal year that ended June 30, 2008, the last full year of operation before it sought bankruptcy protection for $47.6 million in assets and $101.5 million in debt — $62.5 million of it unsecured.

The fallout from the company’s collapse included prison sentences for former CEO John Mills and former CFO Alexander “Lex” Martinez. Mills was released in June, after serving about 18 months of a 41-month sentence. Martinez, who was sentenced to one year, was released from Bureau of Prisons supervision on Oct. 18.

The court record doesn’t indicate why Mills was able to get out so early, and the U.S. Attorney’s Office in Little Rock didn’t reply to questions by our deadline, but his testimony against Martinez probably had something to do with it.