Spin Doctor

Spin Doctor

Copyright 2002, Traffic World Magazine

Computrex Logistics President M. Cleve Collins is playing fast and loose with the facts surrounding the bankruptcy of sister company Computrex Inc., a freight payment bureau. That's my conclusion after I showed a press release from Collins to the U.S. Bankruptcy Court trustee for Computrex Inc.

Two weeks ago I quoted a press release from Computrex International - which does business as Computrex Logistics - in which Collins said a March 28 ruling from the U.S. Bankruptcy Court for Eastern Kentucky "vindicates (that) the spin-off (of Computrex International from Computrex Inc.) was all above board, well documented and taken with the utmost integrity."

John Morgan, the attorney for Trustee James Lyon, took issue with that. "I have expressed my displeasure with their attorney," Morgan said. "I disagree with the quotes and I disagree with how he's characterizing the motion," he said.

"I don't think anywhere in the motion does it say the spinoff was well above board. Or even that it was well documented. Nor do we say that it was taken with the utmost integrity," Morgan said.

You could say the press release - "Computrex International Released in Bankruptcy Case" - was incorrect in its entirety. The legal release is contingent upon payment of $700,000 to Computrex Inc. for distribution to debtors. The press release was issued on April 19 and on May 15 the company still had not paid.

The $700,000 is a discounted settlement negotiated by Computrex International for the repayment of $864,000 owed to the bankrupt firm. Of that amount, $789,197 was for repayment of money taken from Computrex Inc. to finance Computrex International in a commingling of funds that was not properly accounted for until six months after it was taken.

The April 19 press release doesn't mention the $864,000 debt to Computrex Inc. or that the court approved the release of Computrex International to get $700,000 in cash for the debtors.

The payment is important because it may end up constituting a large portion of the assets that will be left over to pay back a small percentage of the $25 million that some 120 shippers lost when the Computrex Inc. freight payment bureau went bankrupt. Attorneys estimate that as much as $20 million never will be recovered. Internal accounting memos released in June 2000 during a court battle for control of the company indicated that the money appeared to have been spent during at least 10 years of operating at a loss. Money was spent on salaries, bonuses, expense accounts, company cars, bad investments, questionable loans to insiders, severance payments to executives and the construction, furnishing and equipping of an office building.

Morgan also objected to Collins' comment that "the two portions of the business were based in separate cities and operated separately."

"That's not the case. There's no question about it, in May of 2001 they were all the same company, I don't care what they say," Morgan said. "After they split they continued to commingle accounts. At some point the accountants go in and they analyze all that commingling and they determine that International is short some $789,000 of money that it owes to Inc. International used Inc.'s money to operate. That is not two separate companies distinct from each other. That's terribly commingled."

Morgan also repeated that Collins and others still could face action from the bankruptcy court. Computrex International executives are to be released from liability for Computrex Inc., but both companies had identical shareholders and directors. Any of them could be sued for actions taken "with their Computrex Inc. hat on," Morgan said.