Manchester creditors ask court to appoint trustee to oversee company following management changes

By Caroline Salls

Pittsburgh, Feb. 13 - Manchester Inc.'s Palm Beach creditors have asked the U.S. Bankruptcy Court for the Northern District of Texas to appoint a Chapter 11 trustee to oversee the company's bankruptcy case in light of recent management changes, according to a Tuesday court filing.

The Palm Beach creditors include Palm Beach Multi-Strategy Fund, LP; Palm Beach Links Capital, LP; PBL Holdings, LLC; Palm Beach Capital Management, LLC; and Links Business Capital, LLC.

"Current management appears completely unable to manage even the most basic aspects of running this business," the creditors said in the motion.

According to the motion, Manchester holds the debt on the cars it sells and markets to higher-risk borrowers, and the business deals mostly in cash. As a result, Palm Beach said "it is essential to have competent, vigilant, and ethical management in place."

"Without quality servicing and making appropriate contact with borrowers, Manchester cannot collect on the individual contracts at a rate sufficient to fund its operations and pay its creditors," Palm Beach said in the motion.

In addition, the creditors said management must diligently supervise employees to ensure that cash is handled appropriately and ensure that accurate records of cash receipts and deposits are kept on a daily basis.

However, the Palm Beach creditors said Manchester is operating without an experienced chief executive officer or chief accounting officer because the officers who previously held those positions - Rick Stanley and Tony Hamlin - resigned on Jan. 25, "rather than follow the dictate of the board and [chief financial officer Larry] Taylor to divert funds away from Palm Beach."

The creditors said Manchester has installed board member Richard Gaines as CEO, but "Gaines' multiple roles and loyalties place him in an inherent conflict of interest."

Palm Beach said Gaines serves simultaneously as CEO and president of Manchester, Inc., as well as one of its two board members, general counsel, and secretary. The creditors said Gaines also serves as president or executive vice president of a number of the subsidiaries of Manchester, Inc., and he is the personal attorney to minority shareholder, consultant and unsecured creditor Marvin Keith.

Also, the creditors said Keith, as an independent consultant, "seeks to avoid having any fiduciary duties to Manchester's shareholders or creditors, and yet has de facto control of the company."

"Hiding behind his independent contractor status, Keith has been free to manipulate the stock price of Manchester, direct the disposition of funds, and execute his personal business plan - all without the transparency required by Manchester's status as a public company."

According to the motion, the creditors believe that Taylor has instructed employees to take money from collections, place it in personal accounts and use the funds to pay vendors.

Palm Beach said employees who did not follow these directives and reported these activities to Stanley and other representatives of Palm Beach "were met with thinly veiled threats that they would be sued, all contributing to an atmosphere of intimidation and chaos."

Manchester, a Dallas-based auto dealership that sells and finances used cars to buyers with limited credit histories or past credit problems, filed for bankruptcy on Feb. 7. Its Chapter 11 case number is 08-30703.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.