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Bankruptcy Case Winds Down For Felonious Exec, Steve Clary

5 min read

As convicted felon Roger Stephen “Steve” Clary of Little Rock awaits sentencing in U.S. District Court for one count of mail fraud, his bankruptcy case is nearing an end.

Clary, 60, filed for Chapter 7 bankruptcy protection in July 2010 and listed $168.6 million in debt and only $1.4 million in assets, which was mainly his $1.2 million, 7,200-SF home in the gated Hickory Hills neighborhood in west Little Rock.

Reached at the home last week, the Little Rock businessman declined a request for an interview.

“We simply don’t discuss these things in the paper,” he said. “You need to write your story and say what you will.”

Attorney Frederick Wetzel III of Little Rock, who is representing Clary and his wife, Cynthia, said last week that most of the couple’s debts were discharged, except two totaling nearly $7.6 million. He said the case is still open and referred questions to U.S. Bankruptcy Trustee Randy Rice. Rice didn’t return several calls seeking comment.

The Clarys received a discharge from bankruptcy in December 2011, but that order was withdrawn in May 2012 after it was discovered that the Clarys didn’t complete a required financial management course. The filing indicates that the couple still hasn’t completed the course.

The largest debt that wasn’t discharged is owed to Waterford Investors LLC of Oklahoma City, which sued Clary in bankruptcy court to prevent him from discharging a debt of $6 million and alleged that he committed fraud. Clary agreed to the amount and a judgment was entered in May 2011.

Waterford’s attorney, Stephen Moriarty of Oklahoma City, said last week that he didn’t think Waterford has been paid any money. But Moriarty said that Waterford can continue to pursue the debt even after the Clarys’ bankruptcy is closed until it’s paid.

Still, there’s not much hope that unsecured creditors, which held $138.5 million in claims, will receive money from the Clarys after his assets, which represented just $14,100 in personal property, have been distributed.

“If you look at the bankruptcy schedules, there doesn’t look like there was anything of significant value that wasn’t pledged or mortgaged to a specific creditor,” Moriarty said.

The other debt that won’t be discharged is related to a $4.5 million loan he received in 2008 from Banc of America Leasing & Capital LLC. That loan is also the basis of the federal criminal charge to which Clary pleaded guilty on Feb. 7.

The money was supposed to go to one of Clary’s companies, Destination Ventures, to buy and customize six buses for lease. But Clary “directed the vendor who was to outfit the buses to redistribute the funds once the vendor received them,” according to a news release from the U.S. Attorney’s Office in Little Rock.

The vendor did as he was told, and $1.595 million of the loan proceeds went to companies in which Clary had a financial interest, but not for the buses.

In July 2010, Clary was indicted by a federal grand jury on four counts of wire fraud and one count of mail fraud in connection with misappropriating the funds.

Under the plea deal, the four counts of wire fraud were dismissed. Clary could face up to 30 years in federal prison and a $1 million fine, but the terms of his plea deal suggest that the sentencing guidelines will call for 33 to 41 months in prison. The judge in the case, U.S. District Judge J. Leon Holmes, does not have to abide by the guidelines.

Clary also agreed to pay $1.595 million in restitution to Banc of America. The lender sued Clary in bankruptcy court in November 2010 to prevent the debt from being discharged. He agreed in July 2011 that the debt wouldn’t be discharged from his bankruptcy case.

Bankruptcy Meeting

In September 2010, Clary sat for a bankruptcy proceeding and told trustee Rice that his businesses started to fail in 2008. But court records indicate Clary was having financial troubles in 2007 when he posted a business loss of $13.3 million.

Clary, who had an ownership interest in 21 companies as of July 2010, is known for his development of the Shackleford Crossings retail center in west Little Rock through his Clary Development Corp. of Little Rock.

Rice quizzed Clary on how he kept all his business records straight if he didn’t keep all his records in one place.

“We had good people in our office, and then once you breathe life into each of these, you generally know what’s going on,” Clary said.

He said that the turning point for his companies came when the financial firm Lehman Brothers Holdings Inc. of New York declared bankruptcy in 2008, helping to trigger the Great Recession.

“That began, you know, it complicated everything for everybody,” Clary said during the meeting. “So September of ‘08 I would say was a very significant date.”

In 2008, Clary said he wasn’t receiving any money from his companies and started borrowing or receiving money from family, friends and his church to make ends meet.

He also sold a number of his household goods, including art, lamps and chairs and generated $10,475.

He said that he sold his 2004 Mercedes-Benz for $27,000 around the first of 2009, but the bank garnished most of the proceeds, so he decided to start using cash and avoided his bank account.


Collection lawsuits started piling up against Clary in 2008.

By the time of Clary’s bankruptcy filing in 2010, most of Clary’s businesses were closed. He listed nearly $12 million in judgments against him or his businesses.

Clary’s largest unsecured creditor was M&I Marshall & Ilsley Bank of Milwaukee for $116.5 million. The debt was tied to his Shackleford Crossings, which fell into the hands of a receiver after he defaulted on a $74 million funding agreement.

In May 2011, though, the Dallas office of Invesco Real Estate bought the debt for an undisclosed sum from M&I Marshall.

In July 2011, Invesco Real Estate received the 271,675-SF center on about 40 acres of property with a $42 million foreclosure bid. Clary’s personal finances were a mess too.

The bankruptcy filing showed that Clary’s home had nine liens on it, totaling $26.73 million.

In the September 2010 bankruptcy meeting, Clary said that he didn’t know what the home was worth.

He said he was making his $5,600 monthly mortgage. The mortgage amount increased, however, to $5,800 in 2010 because he didn’t have a fixed-rate mortgage.

Clary told Rice he intended to hold onto the home, and he has.

“With any type of post-bankruptcy activity we’re able to generate enough income to [pay the mortgage]. We certainly want to do that,” he said.

The bankruptcy filing didn’t shed light on how Clary was able to continue making the payments.

Clary didn’t submit the required financial data to demonstrate that he was eligible for a federal public defender. But he was appointed one anyway because “he is entitled to immediate representation and it is in the interest of justice,” U.S. Magistrate Judge H. David Young wrote in his Sept. 13, 2010, order.

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