Woes for WMG just won’t go away

Just when a 19-month legal ordeal seemed over, a judge last week reopened the bankruptcy case of Windsor Marketing Group (WMG) of Suffield, a taxpayer-subsidized company that left more than 100 jobless when it folded in August after a failed attempt to reorganize under Chapter 11 protection from creditors.

U.S. Bankruptcy Judge James Tancredi took that action Monday after an attorney for WMG’s biggest creditor, People’s United Bank, told him during a hearing that WMG owner Kevin Armata has failed to adequately cooperate in accounting for “missing equipment” that the bank may be entitled to sell at a public auction that it’s scheduled for Oct. 15 and 16 to recover part of the $6 million it’s owed by WMG.

The bank gets to auction off WMG’s assets as collateral on unpaid debts, according to an order that Tancredi issued in August, when he dismissed the Chapter 11 petition WMG had filed in January 2018. Tancredi’s order required the parties to cooperate, so the final liquidation would go smoothly and “chaos” would be avoided.

But it hasn’t been smooth, and the bankruptcy case that took so long to die — as the judge kept cutting the company slack, granting continuances until it finally gave up — now refuses to stay dead.

The case is reopened for limited purposes, which emerged in Tancredi’s Hartford courtroom Monday when People’s attorney, Scott Rosen, said, “There are some unaccounted-for items of equipment.”

Several of the 15 items on a “missing equipment” list, submitted by People’s, included a heavy-duty soil screener, a small bulldozer and trailers. Rosen said some listed items seemed more suitable for use at the Suffield horse farm of Armata and his wife than at WMG, which produced large, full-color signs for displays inside stores such as Stop & Shop. “All of these items on this list were derived from an asset list by the debtor, Windsor Marketing Group,” Rosen said, adding that WMG was “a printing company, not a farm.”

Rosen said People’s can’t determine whether the items should be sold by the auctioneer company that it’s hired unless Armata cooperates in establishing who owns them (that is, the Armatas or WMG) and where they’re located. But “we have not gotten a response,” he said. “It’s certainly our reading of your honor’s orders that Mr. Armata was to cooperate in an orderly liquidation and accounting of all the equipment.” Rosen asked Tancredi to reopen the bankruptcy proceeding so the judge would retain his authority to enforce his order.

Armata’s lawyer, Timothy Miltenberger, took strong ex

ception to Rosen’s request and description of the facts. He said Armata had cooperated by answering repeated questions from People’s about the equipment, but the bank kept increasing its demands for what amounted to a costly accounting. He noted that People’s has litigation pending against Armata in state Superior Court, separate from the bankruptcy case, and has discovery avenues there. “Mr. Armata, through his lawyers, has told the bank that they’re prepared to cooperate,” he said. “We tried to work out a reasonable agreement out with People’s and were flatly and uniformly rejected in our efforts to do that.”

There was still another complication: Rosen said that Armata had made a $250,000 payment to People’s “in exchange for a release of [People’s] mortgage on their residence, horse farm and horse farm equipment” in Suffield. After that, Rosen said, “it’s now being told to us that some of the items that were owned by the company were actually farm equipment that would be released by the bank.”

Miltenberger said it this way: “Some of that equipment is clearly farm equipment to which they’ve waived their security interest, regardless of who owned it during the bankruptcy case or any time thereafter.”

‘Cooperation means cooperation’

Tancredi listened for more than a halfhour, then said: “My inclination, sitting here on the bench, is cooperation means cooperation. And if an affirmation that ‘the debtor owns this property and it’s here,’ or ‘I own the property and stay out of my way,’ is too much, it sounds to me like that kind of claim is antithetical to cooperation.”

He formalized his courtroom comments with a written order that “[WMG] and its officers, agents and control parties are directed to promptly confer with counsel for People’s United Bank and cooperate … in the identification and location of the claimed, disputed or missing collateral.” Or, in the alternative, Tancredi wrote, the WMG camp should “state the bona fide basis upon which such property has been claimed by a party other than WMG” — that is, one or both of the Armatas — “so as to be outside the scope of the People’s Bank collateral.”

Government Watch reached Armata by phone Thursday and asked if the two sides had conferred as Tancredi ordered. He said yes, “all through emails.”

Beyond that, Armata said, the proposition that any of the farm equipment was owned by WMG is “100 percent inaccurate.” He added: “It’s farm equipment that was paid for outside the corporation.”

What about Rosen’s statement that the list of “missing” farm equipment was derived from an asset list compiled by WMG? “It was never listed as [owned by] the company,” Armata said. “None of it was paid for by Windsor Marketing or has anything to do with Windsor Marketing. … They created a list of stuff that they knew I own.” He added: “They listed my son’s pickup truck that he bought himself. … Why are they doing that?”

What happens now? How long will the case remain open? No one has yet answered those questions, but it could be that the judge will want to hold onto authority to enforce cooperation in the liquidation until the auction is complete and the sold items are removed from the Suffield building. That should happen by the end of this month. Sometime in November, People’s needs to be out of the building, which it took control of when the bankruptcy case closed in August and now has placed under 24-hour supervision by a security firm pending the auction.

As if all of the above isn’t complicated enough, here’s more:

A new eviction action has been filed in state Superior Court against the broke, Armata-owned WMG. The plaintiff is an Armata-owned real estate entity, Marketing Research Park, LLC, which owns the Suffield building that WMG has occupied as a tenant. Rosen said in bankruptcy court Monday that he was worried the eviction action might interfere with People’s use and occupancy of the WMG building and blow up the mid-October auction. Miltenberger insisted repeatedly that Armata has no such intention. After a while, Rosen and Tancredi indicated they accepted that reassurance. Miltenberger said Armata’s landlord entity wants to terminate the rights of Armata’s WMG as tenant so that once the auctioned equipment is removed from the building, “it is able to market and lease that property as quickly as possible.” He said the Suffield building “is now under foreclosure” by still another lender, The First National Bank of Suffield, and the landlord entity “wants to clean up the legal rights it has to its building.”

A lawyer for the state Department of Economic and Community Development said at Monday’s hearing that DECD still hopes to recover something on the two loans it advanced on generous terms to WMG, but saw the company default on: $2 million in 2009 and $1.5 million in 2015. The lawyer acknowledged DECD is behind People’s in its legal position to collect any funds. And it’s generally believed that People’s won’t come close to getting all of its money back — so what’s available to reimburse state taxpayers is questionable. The use of taxpayers’ money to benefit WMG was a big reason for public interest in the bankruptcy case. David Lehman, DECD commissioner for first-year Gov. Ned Lamont, now says he doesn’t foresee any more loans structured as generously as WMG’s to stimulate job creation, except in the smaller amounts of the sub-$300,000 Small Business Express program.

Jon Lender is a reporter on The Courant’s investigative desk, with a focus on government and politics. Contact him at jlender@courant.com, 860-241-6524, or c/o The Hartford Courant, 285 Broad St., Hartford, CT 06115 and find him on Twitter@jonlender.