SC Cotton Gin Bankruptcy Flooded with Undocumented Loans and Unanswered Questions | Business
Federal bankruptcy officials are wondering whether an investigator or forensic accountant should be hired to find out what happened to the nearly $ 6.5 million that went missing from Rickenbaker Gin’s historic bank accounts.
Gin, located at the small Davis station in Clarendon County, owes the farmers money for the crops it sold on their behalf. The 76-year-old company never passed the money on to the growers, prompting the SC Agriculture Department to cover the payments through two special programs designed to protect crop losses.
Now the state agency wants its money back.
“We need an account of what happened,” Rick Mendoza, an attorney representing the department, said at an Oct. 1 hearing in Charleston. ” Where did the money go ?
The State Law Enforcement Division asks the same question. He opened a criminal investigation into the financial transactions of gin.
Elisabeth Gasparini, a lawyer for the US trustee’s office in Colombia, tried to get answers during a 3.5-hour meeting of Rickenbaker Gin’s creditors in the case.
During questioning, owner Burt Rickenbaker blamed floods, hurricanes, government programs that allegedly pay farmers not to farm and his former accountant for the company’s financial collapse.
In documents filed Oct. 1, the listed assets of the gin total nearly $ 2.1 million, although Rickenbaker said much of the value was his own estimate and a formal appraisal did not been carried out. The debts total just over $ 8.1 million, including what is owed to the Department of Agriculture.
These debts were incurred primarily in 2019 and 2020, even as gin reported nearly $ 35 million in revenue for the period.
Gasparini focused some of his questions on numerous transactions between Rickenbaker and Santee Leasing Inc. owned by neighboring James “JC” Black of Manning, whom Rickenbaker called a friend he has known since he was a teenager.
Rickenbaker said he often borrowed money from Black or Santee Leasing to help with the gin treasury. Rickenbaker said Black would write him a check as a loan, and Rickenbaker would then give Black a check for the same amount plus 2% interest to deposit in 10 days.
There was no documentation for the loans, such as their purpose, other than the checks that were deposited into each other’s accounts.
In addition, among the debts recorded in the plant’s financial statements is an unsecured loan of $ 650,000 from Santee Leasing. Rickenbaker said Black asked him to sign a promissory note for that amount earlier this year when gin started to have financial problems. In another case, Black filed a mortgage in February 2020 on a property Rickenbaker owns to secure a $ 200,000 loan. Rickenbaker said he did not make any payments on the loan, which is not on the gin’s bankruptcy filings.
Black declined to answer questions about the loans when contacted on October 1.
Gasparini also asked Rickenbaker about an $ 80,000 loan his wife made to gin last December. He said the money was for operating expenses, although there is no documentation for the loan, which he said came from his wife’s personal income. Rickenbaker said the gin paid off the money, including $ 2,000 in interest, a few months later.
Throughout the interrogation, Rickenbaker – who was earning a salary of $ 115,000 a year – described a business practice in which he put his own money in company accounts when operating funds were low and then was reimbursed by withdrawing money later. There was no documentation for disbursements, which totaled around $ 100,000 per year in 2019 and 2020, with the exception of bank transactions.
“I would put it back on and take it off as and when I needed it,” Rickenbaker said at the hearing.
The next order of business will be whether a court-appointed examiner or forensic accountant paid by Rickenbaker should be hired to dig deeper into the finances. Lawyers for all parties said on October 1 that they were unsure how far such an investigation should go back and how detailed it should be. They also do not want to spend more funds than necessary on such an investigation, as that would reduce the amount that could be paid to creditors.
Eighteen cotton farmers and 28 grain farmers were paid through the harvest programs of the Ministry of Agriculture. The funds that were used to compensate them are financed by the assessments of farmers and warehouses, so no tax money was involved.
The lawsuits and criminal investigation are a long way from the history of gin as a second-generation business founded by Rickenbaker’s father upon his return to South Carolina after World War II. The SC legislature recognized the company in a 2003 resolution for its “commitment to the cotton industry in Clarendon County”.
Burt Rickenbaker – a past president of the Southeastern Cotton Ginners Association – was named ginner of the year by this group in 2019.
To reach David Troglodyte at 843-937-5550 or on Twitter at @David_Wren_