Posted 1/27/2014 12:00 am
Updated 3 months ago
Even at first, it sounded more like a pigeon-drop scam than a business deal.
Almost four years ago, Willy Andreas “Andy” Kirsch, the director of Malteco Business Consulting Group Inc. of Irving, Texas, offered to invest $10 million in Bean Lumber Co. of Glenwood in exchange for 25 percent ownership of the company. All Bean Lumber had to do was pay $125,000 to Malteco before it received the $10 million.
Desperate for cash, Bean Lumber took the deal in May 2010.
Bean Lumber, though, never saw any of the $10 million despite receiving repeated promises that the money was on its way, according to a lawsuit Bean Lumber filed last month in U.S. District Court in Little Rock.
Without Malteco’s funds, Bean Lumber shut its doors at the end of 2010 and filed for Chapter 11 bankruptcy in 2011, listing $15.8 million in debts and $36.8 million in assets.
Grady Bean, Bean Lumber’s CEO and one of its owners, declined to comment on the case. His attorney, Charles Boyd of Little Rock, didn’t return calls for comment.
As of last Wednesday, the defendants hadn’t filed a response to the lawsuit.
Kirsch couldn’t be reached for comment, and an attorney who represented him in connection with the transaction, Billy Parlin of Ocean Springs, Miss., didn’t return a call for comment. No representative of Malteco could be reached for comment.
Emails filed as exhibits in the case, however, give a peek inside the frantic company in the months leading up to the collapse of Bean Lumber.
Founded in 1983, Bean Lumber operated a sawmill that produced and sold lumber. Curt Bean of Amity owned 75 percent of Bean Lumber as well as the related entity, Curt Bean Lumber, which was once one of the largest independently owned Southern pine manufacturers in the country. In addition, Bean owned a 75 percent interest in C. Bean Transport Inc. of Fort Smith, a trucking company.
The Great Recession hit all three companies hard. Between June 2006 and March 2008, sawmills in Arkansas — those processing both hardwood and Southern yellow pine — shed about 3,000 jobs. In August 2007, Curt Bean Lumber closed its Glenwood plant but then reopened it in May 2008.
“We have spent the past few months restructuring our company from a debt standpoint as well as an operational one,” Tim Bean, president of Curt Bean Lumber, told the Arkansas Democrat-Gazette in 2008. “We feel that despite the tough market conditions, we have a plan that can not only sustain us for the present but help us grow and become more diverse for the future.”
But starting in 2008, the Bean companies were hit with a flurry of collection and foreclosure lawsuits seeking millions for defaulted loans.
In March 2010, C. Bean Transport filed for Chapter 11 bankruptcy protection, listing $23.26 million in assets and $19.6 million in debts. And Bean Lumber was in danger of bankruptcy as well.
A Bean Lumber customer thought he could help. Ben Gallinger, president of Gallin Group International in Portland, Ore., is a lumber broker and knew Bean Lumber was having financial problems in 2010 and needed cash fast, according to Bean Lumber’s lawsuit.
Gallinger put Grady Bean in touch with a “hard money guy” he knew in Dallas, named John Kimmey, who brokered deals for large amounts of money, the lawsuit said. (Neither Gallinger nor Kimmey could be reached for comment.)
Bean met Kimmey in May 2010 and he “seemed like a legitimate broker,” according to the lawsuit.
Kimmey told Bean about Kirsch, who was the president and owner of Malteck International of Geneva, which had an office in the Dallas suburb of Irving operating under the name Malteco Business Consulting Group.
Kirsch “typically only entered into contracts for large investments” — $300 million to $500 million — but, according to the lawsuit, he told Grady Bean that he was willing to enter into a few smaller investments as a favor to Kimmey.
Bean then received the news he was looking for: Malteco agreed to invest $10 million in Bean Lumber to refinance assets and retire specified liens.
The deal, however, came with a catch. “Before Malteco began paying Bean Lumber any of the promised $10 million Bean Lumber had to pay a ‘depository fee’ of $125,000,” according to the lawsuit.
Bean was told that the $125,000 would be used for insurance.
Bean also agreed that at the time of closing on the loan, Malteco would receive a 25 percent ownership of the company and 25 percent of the voting rights. Malteco would also receive “8 percent of the dividends from the profits during the period of investment.”
In exchange, Bean’s company would receive $1 million and then 18 payments of $500,000 each.
Bean signed the documents on May 27, 2010, and began making installment payments on the $125,000 depository fee.
Kirsch and Kimmey, according to the complaint, told Bean that he would get the initial $1 million by mid-July 2010.
It would be the first in a string of broken promises about the money.
Show Me the Money
It didn’t take long for Bean’s other creditors to start to worry. By August 2010, they didn’t think Bean would ever see the $10 million, according to the lawsuit.
At that point, Bean asked Kimmey for proof that Kirsch and Malteco were legitimate and that Bean Lumber would receive its funding.
Kirsch sent Bean a copy of his passport and two letters attempting to explain what happened.
“Due to the financial Summer Break and Summer Vacation in Europe we have experienced delays in moving the funds from our source to Bean Lumber,” Kirsch said in an Aug. 17, 2010, letter. “We expect this matter will be resolved in a timely manner.”
Kirsch followed up just three days later with another letter saying he expected the money to clear in 17 bank workdays.
“We are working diligently to resolve and address all our clients at this time,” Kirsch wrote.
After the 17 days passed, there was still no money.
By October, Bean regretted getting involved with Kirsch.
“I am really beginning [to] doubt Andy’s validity,” Bean complained to Kimmey in an email dated Oct. 3, 2010. “His stories aren’t matching up week to week. … He has seriously jepordised [sic] this company because i [sic] made decisions based on his ‘assurance’ of the first million by July 15th and then the bridge loan later on.”
Bean said in the email that Bean Lumber could have slowed production and improved its financial situation.
“And he won’t send any letter assuring that the money is actually there,” Bean wrote. “I am really beginning to get upset at the guy’s lack of honesty and inability to be forthright.”
Despite assurances from Malteco’s office between September and November 2010 that the money was on its way to Bean Lumber, it never arrived.
As creditors circled, Bean emailed Kirsch on Nov. 25, 2010, begging him for answers.
Bean’s creditors “are convinced we are never getting [the] money,” Bean said in the email. “I really need some help here Andy. I need something legit to give them to calm them down.”
Still no money arrived. Bean Lumber closed its doors at the end of November “due to a lack of operating funds,” the lawsuit said.
In an email to Kimmey on Dec. 15, 2010, Bean said Bean Lumber was cutting its ties with Kirsch.
“I also have lost my faith in [Kirsch] being an honest man,” Bean wrote. “I sincerely hope that he has acted solely in this scam and has not put other people at risk.”
Parlin, Kirsch’s attorney, agreed in March 2011 that Kirsch would return the $125,000 that Bean had given him.
Kirsch “is still upset about the threats and allegations” that Bean made, according to Parlin’s email on March 23, 2011.
Bean said in the lawsuit that, despite promises to return the depository fee, he had received only $25,000.
On June 14, 2011, Bean Lumber — like C. Bean Transport 15 months earlier —filed for Chapter 11 bankruptcy.
Bean Lumber’s filing showed combined revenue from the previous two years of $56.1 million, but it didn’t break down how much it received in each year.
Bean Lumber also reported that it was named as a defendant in 20 lawsuits between 2008 and 2010, nearly all of which were for collection of debts.
Kirsch wasn’t mentioned in Bean Lumber’s bankruptcy, though. The lawsuit doesn’t say why Bean Lumber waited until the end of 2013 to seek civil damages.
Bean Lumber’s suit alleges fraud and breach of contract against Kirsch, Malteco Business Consulting Group and several other defendants. Bean Lumber and Grady Bean are seeking an unspecified amount of damages tied to the failure to get the money and the resulting descent into bankruptcy.
Bean Lumber, however, asked in November 2011 to be dismissed from bankruptcy reorganization because its main asset — its plant — was handed over to its creditor.
“The possibility of an effective reorganization does not exist at this time,” Bean Lumber’s attorney, Stanley Bond, wrote in a bankruptcy court filing on Nov. 22, 2011.
U.S. Bankruptcy Judge Richard Taylor agreed and ordered the case dismissed on March 1, 2012.