Sunday, January 08, 2006

Court documents accuse O'Sullivan officials of using 'insider plans' to enrich themselves

O'Sullivan Industries officials hid their true intentions from the public and continued to "receive goods and services on credit," right up until the day they declared bankruptcy, according to documents filed Jan. 6 in U. S. Bankruptcy Court for the Northern District of Georgia.
That and a laundry list of accusations against O'Sullivan officials are included in the documents filed by the official committee of unsecured creditors. The committee says O'Sullivan's disclosure statement "does not disclose why the debtors filed on Oct. 14, 2005." The reason, the documents say, is simple. "This particular date has significance because it was the last business day prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 becoming effective."
If O'Sullivan officials had waited until after that date, the court documents indicate, they would have had much more difficulty asking for funding to keep key employees. Such funding was the basis of the $1.6 million request for bonuses for 22 key employees included in the amended bankruptcy petition filed Jan. 3.
"While the disclosure statement makes reference to incentive, retention and equity plans that will benefit management and undisclosed directors, the disclosure statement provides little information on these insider benefit plans.
"In contrast, the debtors spent a substantial amount of time and money developing their management plans and negotiating them with the Ad Hoc Committee of Senior Secured Noteholders."
The committee filing adds, "while the debtors were ostensibly preparing a 'wipe-out' plan of reorganization, the debtors continued to receive goods and services on credit. Indeed, in the week preceding the filing, the debtors received approximately $4 million of additional unsecured credit."
The committee also took O'Sullivan officials to task for failing to mention that they might declare bankruptcy. As evidence, the committee included a number of company news releases filed with the Securities and Exchange Commission.
The July 15 release said, "O'Sullivan fully intends to continue to serve its customers and to pay its employees and vendors in the ordinary course."
Bob Parker, the company's million-dollar CEO, said in an Aug. 15 news release, "We will continue to provide our customers with the same high-quality products and superior customer service without any interruption, and will continue to act responsibly toward our employees and vendors."
The committee noted that Parker expressed optimism about the company's directions in news releases issued Aug. 19, Sept. 14, and Sept. 29, the last one made public just two weeks before the bankruptcy filing.
In the court documents, the committee also criticizes O'Sullivan officials for not giving more information on just how it intends to "transform" the business. Only six pages of the disclosure statement, which the committee described as a "masterful 108 pages of obfuscation and misdirection," and "self-interested fiction," relate to the company officials' vision for the future. "The disclosure statement must be substantially augmented and expanded with respect to a description of the debtors' business operations, turnaround actions, and future outlook. Without such a description, there is no context for the projections that are included in the disclosure statement, and thus no ability for the reader to understand and evaluate the projections."
The court documents also note that the key employees who must be retained, according to the O'Sullivan filings, have not been identified. The company's plan also does not tell who would hold the new "O'Sullivan Holdings Common Stock," which has been proposed.
The unsecured creditors' committee is asking the judge to slow down the process to give the issues time to be examined thoroughly.


Joe said...

Could this story get any sadder?!

Anonymous said...

What a mess.

Concerned said...

A good source tells me there may be more shady deals being investigated. Some dating back before Orr jumped ship.

Anonymous said...

What about the 401k program? Can they take the money that the workers have already put in there if the company liquidates?

Anonymous said...

Or can they even take what they matched it with? Does anyone know for sure?

Anonymous said...

As I look at my Withdrawl Confirmation Sheet after 22 years with O'Sullivans, upon my quitting in Aug. 2005 I was payed .04 cent for all of my shares of O'Sullivan Preferred Stock ! In my shame I now wonder if I am to blame for their financial hardship? OH MY !!