The owner of United Furniture Co., who disappeared after laying off its 2,700 employees in the middle of the night just days before Thanksgiving, has reemerged in court this week to press for a Chapter 11 reorganization — and creditors are accusing him of trying to grab the company’s remaining cash and assets for himself.
David Belford, a wealthy Ohio businessman who is the Mississippi-based company’s chairman and majority shareholder, asked the court last week for permission to file for a Chapter 11 reorganization and to move the case to Ohio after UFI’s lender asked the court on Dec. 31 to approve a Chapter 7 liquidation.
According to the filing — which is looking to move the case from US Bankruptcy Court in the Northern District of Mississippi to the Southern District of Ohio where Belford’s hedge fund is based — UFI has secured $10 million to “run a sale process” for its real estate portfolio, which it says is worth more than $50 million.
But Wells Fargo, which claims it is owed $99.2 million by UFI, accused Belford of creating a “new narrative” about the shutdown in order to liquidate UFI’s assets for the benefit of his “family trust,” according to a Wednesday filing. The company’s Chapter 11 petition is “an exercise in revisionist history and contains gaping factual holes,” according to the filing.
Specifically, Wells Fargo blasted Belford’s claim in a Jan. 6 court filing that the company had “management, employees, a chief restructuring officer, an independent director, an outside general counsel, and a host of experienced restructuring professionals,” in place “for the past month-plus” following the surprise layoffs to protect the company’s assets.
Instead, the bank accused Belford of “abandonment,” alleging that a coterie of outside professionals were hired “only weeks after UFI’s shutdown” and that “none of these individuals have taken any material action to preserve and protect UFI’s assets.”
UFI on Jan. 6 had pushed back on claims it had deserted its operations, calling them “curious at best, or more likely dishonest,” noting that it assembled an army of professionals, including Oxford Restructuring Advisors on Dec. 21, to file for bankruptcy in Ohio, where Belford lives and runs an investment firm called Stage Capital.
The company also claims that appointing a trustee in the case would result in “corporate chaos.”
Legal experts had expected the company to file for bankruptcy shortly after it shuttered. Instead, it took “50 days and counting” after the shut down for UFI to request bankruptcy, according to the Wednesday filing. Accordingly, Wells Fargo claims it has been forced to shell out more than $1.5 million since Nov. 21 to pay for services including insurance, utilities and 24/7 security to protect the company’s 15 buildings and the furniture that’s sitting in factories.
The San Francisco-based lending giant claims that Belford has “security interests” in some of UFI’s real estate and is proposing that he take charge of the company “to run a process intended for the sole benefit of himself.” Under Belford’s Chapter 11 petition, creditors including Wells Fargo “will be left with scraps while UFI focuses its efforts on making its equity holders whole,” the Wednesday filing states.
Following the surprise Nov. 21 bloodbath — in which employees learned they were fired in a barrage of late-night emails and text messages — Belford went silent for several weeks. The following month, he claimed in an interview with an Ohio business publication that he was a “passive investor” in the company with “limited” insight into UFI’s finances.
In the days and weeks following the layoffs employees were given no information about how they could reenter the buildings to gather their personal belongings and were worried that they wouldn’t receive W2 statements, according to social media posts.
Despite this week’s back-and-forth in legal filings, sources say it still remains unclear why it took so long for UFI to file for bankruptcy protection.
“There was a baffling period of radio silence,” said Jack Raisman, an attorney representing California employees who are suing UFI after they were fired. “But there is now the visibility that bankruptcy provides that had been missing.”
UFI’s attorney, Mark Melickian, did not return a call for comment.
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