Timp Harley-Davidson in Lindon files Ch. 11 bankruptcy
The Daily Herald
http://www.heraldextra.com/business/local/article_4442e458-f2c3-5dcd-badb-d464fdced575.html
Grace Leong - Daily Herald | Posted: Wednesday, October 14, 2009 12:30 am
The owner of Timpanogos Harley-Davidson in Lindon filed for Chapter 11 bankruptcy protection to stall an acrimonious legal battle over millions of dollars in alleged unpaid debts to several lenders including Nu Skin founder Blake Roney.
Tupelo Investments LLC, which owns the 60,000 square-foot Lindon motorcycle dealership and a motorcycle-themed restaurant called Marley's at 555 S. Geneva Road, filed for bankruptcy last month to avoid transferring the dealership to the lenders, which include Roney's investment group, Scrub Oaks LLC; Walter "Charlie" Openshaw; McKell & Associates; and RRD Investment Co.
In bankruptcy court documents, the lenders claimed the bankruptcy filing was made "in bad faith" and that Timpanogos Harley-Davidson owner David Tuomisto reneged on an agreement to transfer the dealership to them after getting bailout assistance to keep the dealership's assets from being seized and its business shut down by another lender, Harley-Davidson Credit Corp.
Court filings show the list of creditors include: Harley Davidson Credit, which is owed $4.3 million; Monarch Recreation Sales is owed $760,922; Scrub Oaks is owed $400,000; the Utah State Tax Commission is owed $151,363; and millions more owed to hundreds of other businesses and individuals.
"I was one of the investors in Scrub Oaks that approved the $400,000 loan to Dave so he can try to save the place," Roney said Tuesday. "Dave's my friend. Between the dream of the building, which he spent all of his money on, and the bad economy, it was just a collision that didn't work."
Tuomisto declined comment on the bankruptcy filing and the lawsuits. But Rick Story, the Lindon dealership's general manager said several offers have been made to acquire it.
Potential buyer Joe Timmons, owner of Salt Lake City-based Intermountain Harley-Davidson Co., declined to comment on the status of the buyout.
"Timmons has an offer on it with a contingency," Story said. "There are four other offers by local people attempting to get the franchise. The building is so unique that it doesn't make sense to have anything but a Harley-Davidson dealership in it."
Tuomisto's financial problems began mounting after his company, Timpanogos Fruit Growers Association, ran into problems finishing the Lindon dealership, which he blamed on substantial cost overruns resulting from fraud committed by his original contractor.
To make its construction deadline, Tupelo, in court documents, said it had to help Fruit Growers finance the completion of the building, instead of making payments to its lender, Harley-Davidson Credit.
But Fruit Growers later defaulted on its loan obligations to Far West Bank, causing the bank to foreclose on the Lindon building in June. A month later, Tuomisto sued the bank in Fourth District Court in American Fork.
In spring this year, Tuomisto began negotiations to sell the dealership and the restaurant to the lenders after defaulting on $3.12 million in loans to them and after foreclosure proceedings on the building began. But talks stalled, and only resumed in June when Tuomisto turned to the lenders again for bailout assistance after Harley-Davidson Credit sued to shut down the dealership and seize its assets, forcing him to agree to pay $400,000 by July 8 to settle the suit.
According to court documents, the lenders were initially reluctant to "throw good money after bad," but later agreed to help Tuomisto if he agreed to finish negotiations to sell the dealership and the restaurant.
But Tuomisto, after benefiting from the bailout, on Sept. 1, tried to back out of transferring the dealership allegedly by lying to the manufacturer Harley-Davidson Motor Co. that the lenders had terminated the transfer, and then filing for bankruptcy two days later after being threatened with a lawsuit by the lenders, according to attorneys for the lenders.
Tuomisto, in court documents, argued that the sale agreement "undervalues" Tupelo's assets, which include the Harley-Davidson dealership, inventory, service center, and parts department, a Harley-Davidson merchandise store, a restaurant, an outdoor safety-riding course, as well as the Marley brand and the Timpanogos Harley-Davidson brand.
He said he believes the company can "obtain superior value for its estate through either continued operation of its business, or through a sale or equity investment."
Attorneys for Harley-Davidson Credit are suing to dismiss Tupelo's bankruptcy which they say was filed "in bad faith" to nullify the sale to the lenders, and the dispute between the lenders and Tupelo is now the subject of an adversary proceeding in bankruptcy court.
They alleged that Tupelo's petition is "not to protect the company as a going concern, but to give Tuomisto "greater leverage to negotiate a personal buyout or employment contract for his own personal benefit."
They also alleged concerns that much of Tupelo's financial reporting has been "contradictory and inaccurate" and that its revenues are "significantly below budgeted projections, and that there will be continuing losses and diminution of the estate."
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