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Webster City wants electric car funds

FD couple who started business have filed for Chapter 7 bankruptcy

June 8, 2012
By ANNE BLANKENSHIP, editor@freemanjournal.net , Messenger News
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WEBSTER CITY – Webster City officials said Friday they are “working vigorously” to recoup a $790,000 economic development loan that a Webster City manufacturer planned to use to assemble electric cars.

City Manager Ed Sadler said the city has hired special legal counsel to address its interests in the bankruptcy filed by Joe Fleming, owner of the defunct Auto Manufacturing Systems Inc.

Fleming filed a Chapter 7 personal bankruptcy on April 2 in the U.S. Bankruptcy Court of the Southern District of Iowa. Fleming and his wife, Marjorie, of Fort Dodge, listed four solely owned businesses in the bankruptcy documents: AMS Inc.: Eagle Manufacturing Inc., doing business as Tour Designs Ltd.; Access Media Ltd.; and Drive Tek Inc.

The purpose of a Chapter 7 bankruptcy, according to court documents, is to discharge debts. It is a liquidation of assets, rather than a reorganization of debt.

The filing documents list Fleming’s total assets of $426,017 with total liabilities of $1,776,721.28. Sixty-six creditors are listed in the document.

Sadler said the city has been involved in meetings pertaining to the bankruptcy filing.

“We did attend the meeting with the trustees and have retained special legal counsel for this,” Sadler said. “Yes, we have collateral for the loan. The attorneys we have hired are, indeed, going through the paperwork for the collateral. We will have lots of things to check into and investigate.”

Sadler said it’s too early to predict how much of the funds will be recovered.

“We will have things to look at with the trustees, the attorneys for the Flemings. There will be things to sort out, as this is a personal filing. He was the sole owner of many businesses, so those assets count towards it,” Sadler said.

“We do have collateral in the form of equipment and buildings,” he said, adding that the city is second in line to United Bank of Iowa in terms of creditors.

“We didn’t go into this with nothing. Whether or not we retrieve all $790,000 worth of assets, I don’t know. It’s too early to tell.”

Sadler said the city is “working vigorously to protect its interests” in the matter.

The impact of this transaction could have some bearing on how future loans are handled, he said.

“I think this has to affect how we handle future economic development loans,” said Sadler. “But what I hope it doesn’t do is make us go hide.”

When major corporations and industries move into a city, they likely are not looking for cash, he said, but rather seek out land, incentives and tax credits. Smaller industries and businesses are doing that, he said.

“There is always risk to get industry and businesses here. There is a certain level of risk,” according to Sadler.

Looking at Webster City’s history, the city manager said the community was built on those many small homegrown businesses.

“Webster City was never a city of corporate giants. It was always a city of entrepreneurs who started their own businesses. Of course, eventually, they may have grown big enough for someone else to buy them,” Sadler said. “Naden’s, Nissen’s, Vantec, Tasler’s, Van Diest, Webster City Products, Beam Industries – all of them homegrown businesses.
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