In Bankruptcy, Caldwell Admits Selling Property but Denies Fraud

In Bankruptcy, Caldwell Admits Selling Property but Denies Fraud
In 2018, Wayne Caldwell Sr. transferred ownership of his house at 5 Cambridge Place in Dumas to his fiancée, Patricia D. Thompson, for $200,000, according to bankruptcy filings. (Google Maps)

A Dumas agribusinessman who admits to selling property used as security for millions of dollars in bank loans expects to be charged by federal prosecutors, but as of Wednesday he was still waiting.

Wayne V. Caldwell Sr. said in a bankruptcy proceeding in May that he sold the property without telling Relyance Bank of Pine Bluff and didn’t use the proceeds of the sales to repay the loans, court filings show. Last fall, Caldwell “admitted he was wrong” in interviews with the U.S. Secret Service, his defense attorney, John Wesley Hall of Little Rock, told Arkansas Business last week. “He’s not denying his responsibility.”

Hall said he thought COVID-19 had delayed Caldwell’s indictment on charges that could cover bank fraud, wire fraud or mail fraud. The U.S. attorney for the Eastern District of Arkansas wouldn’t confirm or deny any investigation.

Caldwell freely told the federal government about sales of property used as collateral for several loans, and he also turned over documents, Hall said. “They did not know about it when he came in, but they would have found out sooner or later. We cooperated every way we could,” Hall said.

Caldwell’s financial problems surfaced this year when lenders sued him to collect debts. On March 6, Caldwell, who is about 60, filed for Chapter 7 bankruptcy liquidation, listing $7.3 million in debts and $700,000 in assets.

Six creditors filed separate lawsuits to prevent Caldwell from discharging his debts to them in the bankruptcy process. Caldwell has settled the cases with five of the creditors, and agreed that those debts, totaling about $700,000, won’t be discharged from his bankruptcy.

Relyance Bank’s lawsuit remains, however. It seeks to block Caldwell from discharging the $3.9 million he owes it. Caldwell’s “conduct was fraudulent and shows clear fraudulent intent for the Debtor,” Relyance said in its complaint, which was filed in September.

Though Caldwell said in a bankruptcy proceeding that he sold the land and farm equipment used as collateral, he denied defrauding or making material misrepresentations to the bank to get financing, according to his lawsuit response. The response was filed by Caldwell’s bankruptcy attorney, Frank Falkner of the Dilks Law Firm of Little Rock. Falkner declined to comment.

Caldwell’s response also suggested that Relyance might share some blame. Relyance “sent agents to inspect the collateral, compiled the list (or simply used the previous one), and knowingly falsified the information marking certain collateral as ‘still there’ when in some cases it was not,” Caldwell’s filing said.

Through attorney Kendel Grooms of Campbell & Grooms of Little Rock, Relyance Bank said it wouldn’t comment, citing a company policy of staying silent on pending litigation.

Caldwell’s bankruptcy documents shed light on the financial collapse of a farmer who also operated a company that sold used farm equipment. He reported $9.59 million in gross income from operating businesses in 2018.

On March 5 — the day before Caldwell filed for liquidation — Relyance Bank filed a foreclosure suit against Caldwell and his fiancée, Patricia D. Thompson of Dumas, alleging fraud in connection with a 2016 sale of 220 acres of Lincoln County land that the bank didn’t know about until more than two years later.

Caldwell and Thompson borrowed $1.9 million from the bank in 2015 to buy 770 acres of farmland. The bank held the mortgage on the property as collateral.

Thompson’s attorney, Hani Hashem of Monticello, told Arkansas Business that Thompson has been in a relationship with Caldwell for years and agreed to intertwine their finances, a decision that snagged her in the litigation.

“Obviously, she knew a little bit about his business, but … obviously there was a whole lot she didn’t know,” Hashem said. “To the best of my knowledge from all the evidence I’ve seen, Mrs. Thompson was involved in no fraudulent conduct.”

A year after getting the bank loan, Caldwell said in that May bankruptcy proceeding, he decided he wanted to sell a portion of the 770 acres. He didn’t find a real estate agent to list the property. Instead, he told “individual people” and got word out that it was for sale, he said.

Steven Pharr of Monticello bought 220 acres from Caldwell for $760,000 in 2016, according to the documents. Pharr’s attorney, Whit Barton of Monticello, didn’t return a call for comment.

Instead of the proceeds going to Relyance, as they should have, the money was deposited into the Relyance Bank account of another Caldwell company, Tractor Finders LLC. “At the time, we were overdrawn some,” Caldwell said in the May bankruptcy proceeding. “It was agreed that I could take the proceeds and put it in Tractor Finders to operate with.”

Caldwell said the bank gave him verbal consent to sell the property to Pharr.

But the bank said it didn’t know about the sale and still holds the mortgage on it. The bank alleged Caldwell hid the sale to prevent it from “initiating legal action, cutting off other business or loans” given by the bank, its suit said. Caldwell also borrowed money for Tractor Finders.

In July 2016, the bank lent him $1.7 million for the company and used its inventory and equipment as part of the collateral for the loans. But the bank later alleged that he sometimes used collateral he didn’t have in order to obtain loans. And once he got the loans, Caldwell sometimes would sell collateral “without the bank’s knowledge or consent,” according to the bank’s suit.

Other Issues

2019 was a bad year for Caldwell. His yield from his 2019 crop of rice and soybeans was lower than his yields in each of the previous three years, he said.

“I didn’t get planted till … June for the most part,” Caldwell said. “They were very late getting planted.”

Caldwell didn’t say what caused the delay, but 2019 brought major flooding along the Arkansas River, causing millions of dollars in damage, and it was a wet and difficult planting season.

He also said a crop duster sprayed about 150 acres, killing his soybean crop. Caldwell said he filed a crop insurance claim, but it was denied. Caldwell said he was told that the claim should have been brought against the crop duster. By July 2019, Caldwell had loans with Relyance Bank totaling about $4 million.

Caldwell also seemed to be scrambling for money. Tensas Plantation Inc. of Concordia Parish, Louisiana, said in a suit filed in Caldwell’s bankruptcy case that Caldwell contacted it in August 2019.

Caldwell said he had a potential buyer for the company’s 2014 John Deere combine that Tractor Finders sold to Tensas in August 2018 for $220,000. Tensas agreed to have Tractor Finders sell the piece of equipment, but it never received the proceeds from the sale.

“The undisputed evidence confirms that [Caldwell] had received more than $220,000 in 2019, but he cannot account for any of it,” Tensas’ attorney, Paul Rainwater of Crossett, said in the lawsuit. He asked that Caldwell not be allowed to discharge Tensas’ debt in bankruptcy.

The lawsuit also alleged that Caldwell “embezzled funds that were in his care but that were owed to” Tensas.

Last week, U.S. Bankruptcy Judge Phyllis Jones agreed to Tensas’ request and ordered that $176,000 owed to Tensas would not be discharged from Caldwell’s bankruptcy.

“Caldwell’s actions were fraudulent and Caldwell materially misrepresented his ownership in the combine, Tensas’ status as the actual owner of the equipment, and his right to sell the combine,” Jones wrote.

Caldwell had denied Tensas’ allegations, but “in order to avoid the uncertainty, time, trouble and expense of litigation” agreed to settle the case, according to his pleading.

At the end of December 2019, Tractor Finders stopped operating. It has not filed for bankruptcy protection, but Caldwell listed in his filing that its debt exceeds its assets.

Bank Discovery

In late 2019, Relyance Bank discovered that property and equipment used as collateral for Caldwell’s loans had been sold without the bank’s knowledge.

Caldwell defended the practice and said the bank didn’t ask for the information. The bank “asked me … not to send paperwork every time” he sold collateral because it meant a lot of work for the bank, he said. Caldwell said that proceeds from the sale of property were placed into the bank account of Tractor Finders, and then Tractor Finders used the money to pay down the loans. There were also times when Tractor Finders made payments to him.

Between February and March 2019, Tractor Finders paid Caldwell a total of $40,000.

Caldwell said he occasionally took draws and put money in his account to pay personal bills.

He said that arrangement had been working well. “We were paying so much a month to try to reduce the debt because they knew I was selling inventory,” Caldwell said.

He said he was making the monthly payments. “And then it come to where they didn’t want to do that anymore, so that left us where we’re at.”

In September, the bankruptcy trustee in the case, attorney Hamilton Mitchell of Little Rock, asked for more time to decide whether to file a pleading asking Judge Jones to prevent Caldwell from discharging all his debts in the case. Jones agreed and extended the deadline to Jan. 29.