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UMB Bank sues Dr. Michael Coleman for $38+ million in Express Grain collapse

Monday, December 12, 2022, 4:58 pm News Flash Archive

As long anticipated, UMB Bank has filed suit against Dr. Michael Coleman for $38+ million it says he owes the bank due to the collapse of Express Grain.

Dr. Coleman owned 99% of the Express Grain enterprise.

His son, John Coleman, ran the companies. John Coleman was arrested last week by both state and federal authorities for defrauding the farmers, UMB Bank, and two state entities. See our previous reporting here: Federal Court sets trial date for John Coleman in Express Grain collapse indictment; potential penalties disclosed

Express Grain filed for bankruptcy September 29, 2021, just days after UMB Bank called loans worth $71 million. John Coleman filed personal bankruptcy the same day.

There have been no charges or allegations of wrongdoing against Dr. Michael Coleman, a Greenwood ophthalmologist.

Rather, UMB Bank has sued Dr. Coleman because he signed a personal guaranty that he would stand behind the huge loans made by UMB Bank to his companies.

The lawsuit against Dr. Coleman was actually filed in late August in Missouri. It has stayed on that court's docket unnoticed by local reporters until earlier today.

The lawsuit has proceeded very slowly, since Dr. Coleman has requested and been granted by the court three extensions to the deadline for filing an answer to the complaint.

According to the third motion for extension of time to file an answer, Dr. Coleman's attorney states to the court:

The parties are continuing to engage in discussions to attempt to resolve this matter without the need for further litigation.

The full complaint by UMB Bank against Dr. Coleman may be seen here: UMB Bank vs. Dr. Michael W. Coleman - Complaint

The third motion for extension, which was granted by the court, may be seen here: Coleman's Third Motion for Extension of Time to Answer

In the lawsuit, UMB Bank describes once again the sad tale of how it had to call the loans taken out by EG when it discovered that EG had provided false information to the bank. Indeed, the federal government has filed just such charges against John Coleman in the last several weeks.

Several technical violations were committed by EG against the terms of the $71 million in loans, including failure to provide audited financial reports in a timely manner, failure to maintain less than $50,000 in debt, and exceeding the cap of $1 million on capital expenditures.

But the worst of it was, according to UMB Bank, that EG lied to the bank about how much grain EG had in inventory to back its borrowing from the bank. The grain was used as collateral for much of the loans, and was the basis for determining how much money EG could borrow on its "revolving note" with UMB Bank.

UMB Bank discovered, on September 23, 2021, that EG was claiming $42 million in grain assets which it did not in fact own, but had sold, some of it more than once, to other financial lenders.

According to UMB Bank's complaint:

Thus, Borrowers [EG] made material misrepresentations regarding the receipted commodities sold to the Repo Lenders by an amount exceeding $42,000,000.

By underreporting the receipted commodities sold, Borrowers overstated the amount of Borrower-owned commodities and eligible inventory. In other words, Borrowers represented that the commodities sold to the Repo Lenders were still owned by Borrowers, when in fact, they were not. As a result of the misstated receipted commodities, the company owned inventory reported by Borrowers in borrowing base certificates, compliance certificates, and financial statements are also false.

Under Section 11.2 of the Loan Agreement, it is an Event of Default for Borrowers or Guarantors to make any false, incomplete, inaccurate, or misleading statement or representation to Plaintiffs.

Borrowers' misrepresentations to Plaintiff regarding the eligible grain inventory is an Event of Default under the Loan Documents.

UMB Bank notified EG and John and Dr. Michael Coleman that it was calling the company's loans on September 24, 2021. See a copy of the bank's Notice of Default here: Notice of Default

The reason that UMB Bank has sued Dr. Coleman for only $38 million, instead of the full $71 million that EG owed, is that UMB Bank has been, effectively, repaid about half that amount through the bankruptcy proceedings. See our previous reporting on this matter here: Bankrupt Express Grain still owes UMB Bank $35.8 million

The interest does not continue to accrue against bankrupt Express Grain, but it does continue to mount up against the guarantor Dr. Michael Coleman. Thus, according to UMB Bank, the amount owed by Dr. Coleman has swelled to $38,514,005.81, and will continue to grow along the way.

UMB Bank cannot sue John Coleman to enforce his guaranty, because he is under bankruptcy protection, but UMB Bank did receive a judgment against Coleman for the entire $71 million due to fraud by John Coleman against the bank. That debt, or what remains of it, will still exist even after Mr. Coleman exits bankruptcy.

As to Dr. Michael Coleman, the bank asserts:

Borrowers [EG] are in default under the Loan Documents. Accordingly, Plaintiff accelerated the balance due under the Notes and made demand for immediate payment from Defendant.

By failing to repay the Loans after demand, Defendant [Dr. Michael Coleman] materially breached the Guaranty.

Accordingly, Plaintiff demands judgment against Defendant for breach of contract under the Guaranty in the amount of $38,514,005.81, together with all accruing interest and costs, including, without limitation, default interest, prepayment premiums, attorneys' fees, and all expenses incurred by Plaintiff in collecting the Obligations.

Dr. Coleman's answer is now due Friday, December 16.


To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles

John Pittman Hey
The Taxpayers Channel

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