Tuesday, February 14, 2023, 7:28 pm
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John Coleman has asked the federal court for a lengthy continuance in his criminal fraud trial.
Mr. Coleman was president of Express Grain when it utterly collapsed in bankruptcy in September 2021. Before it was over, farmers were left unpaid for $48 million in grain they had delivered, and various banks and financial lenders were owed almost $150 million more. To read our original reporting on EG's collapse, see here: Bankrupt Express Grain still owes UMB Bank $35.8 million
Last November, Coleman was indicted by state and federal grand juries on multiple counts of fraudulent activities related to EG's bankruptcy. He is accused to providing forged, fictitious, and false documents to UMB Bank, various state agencies, and the grain farmers in the area.
Mr. Coleman has entered pleas of not guilty on all the charges. To see our original reporting on the criminal charges, view here: Express Grain president John Coleman arrested by the FBI, indicted on multiple federal counts of wire fraud
John Colette, Mr. Coleman's criminal defense attorney, had asked for a continuance for the federal trial which was originally set for January 30, 2023. Colette stated at the time that the government prosecutors had not yet turned over the discovery that Mr. Coleman was entitled to receive. The court then moved the trial to May 8, 2023.
But now, Colette says the discovery has been turned over, but it is massive in scope:
it consists of hundreds of gigabytes/documents and files that will require a significant amount of time to review and go over with the defendant, in addition to the Discovery submitted in the companion State case which may contain similar documents and/or the same documents to a degree.
Colette is asking the court to move the trial to October or November 2023, stating that Mr. Coleman waives his speedy trial rights related to such a continuance. Colette also told the court that the prosecutors do not oppose his request for a continuance.
Most intriguing is Colette's statement about the review of the massive discovery:
counsel believes after review of the Discovery materials a trial may not be required.
It is not clear whether this means that Colette believes the discovery will clearly vindicate Mr. Coleman, or whether it will result in a plea bargain once the amount of evidence against Coleman is fully understood by the defense.
The motion for a continuance may be seen here: Coleman's Motion for a Second Continuance of Trial
Meanwhile, in Mr. Coleman's personal bankruptcy, the parties are arguing over whether to convert his case to Chapter 7, which is a forced liquidation and distribution of his assets by a court appointed trustee, due to the huge claims made against him by his creditors.
Over $90 million in claims were filed against Coleman personally, all flowing from the EG collapse and bankruptcy. Most of those claims were filed by banks, including UMB Bank and several farm lender institutions who had a security interest in the farmers' grain which EG never paid for.
Early on, Coleman himself tried to get the court to dismiss his bankruptcy petition, but the court refused to do so, rebuking Coleman for "bad faith conduct" in the course of his personal bankruptcy proceedings. To see the court's findings, view here: Bankruptcy Court rebukes John Coleman for "bad faith conduct" in his bankruptcy case
Last spring, other parties wanted the court to convert the case to Chapter 7, but the court instead appointed an Examiner to dig into Coleman's finances, looking for undeclared assets or fraudulent transfers. In the end, the Examiner found nothing useful, but racked up bills and legal fees approaching $130,000, which the court ordered Coleman's bankruptcy estate to pay.
Now, the United States Trustee has asked the court to convert the case to Chapter 7, and provided a number of reasons very similar to Coleman's original justifications for dismissing his case. The Trustee's motion may be seen here: US Trustee's Motion to Convert Case to Chapter 7
The Trustee provided numerous reasons why the court should convert the case to Chapter 7:
Pursuant to various motions and orders granting same, the Debtor's real property assets have been sold, and the proceeds are being held in a DIP account controlled by Debtor's counsel and inaccessible to Debtor.
Currently there is no disclosure statement or plan filed. Considering the multiple criminal indictments entered against Debtor, there is no reasonable likelihood for reorganization.
. . . grounds for cause exist to convert this case to a chapter 7 proceeding as they existed months ago [in January 2022] when the Court entered its order [instead appointing the Examiner]. These grounds for cause include, but are not limited to, the following:
(a) Failure to comply with a court order;
(b) Failure to timely file monthly operating reports; and
(c) Absence of a reasonable likelihood of rehabilitation.
But now, Mr. Coleman has filed a motion objecting to the request to convert his case to Chapter 7. His bankruptcy attorney, Craig Geno, makes a number of arguments:
Debtor has been indicted by criminal indictments presented in both state court and in federal court. This means, in all likelihood, any further examination of the Debtor (in a Section 341 meeting or otherwise) is likely to be presented with the Debtor's response being reliance upon by advice of counsel to invoke the Debtor's privilege against self-incrimination.
The most significant claim in the Debtor's Chapter 11 case is held by UMB Bank, N.A., and the claim is of such an amount that UMB Bank, N.A. will receive the vast majority of distributions of any funds held in the Debtor's accounts.
Conversion to a Chapter 7 would only increase the costs, fees and expenses in this case, to the benefit of no one.
Coleman's attorney thinks he has a better plan:
A better, more efficient and cheaper result, would be for the Debtor to file a motion to distribute assets to creditors having filed proofs of claim, or whose claims are listed as non-contingent, undisputed and liquidated in order to dispose of the funds on hand.
Any other claims of creditors that remain unpaid after such a distribution motion can be liquidated in state or federal court, and creditors can take such action as is appropriate for them, although it appears that the Debtor is hopelessly insolvent.
Saddling a Chapter 7 trustee with duties and responsibilities would only increase the fees and expenses in this case with the result being less distribution for creditors and parties-in-interest.
It appears that Coleman's attorney wants to make sure that all the lawyers get paid before anything drastic is done:
. . . if the Court is inclined to convert the case, conversion should be delayed until all Chapter 11 professionals can file, and have allowed (or disallowed for that matter) their applications for compensation.
To read Coleman's opposition to the conversion of his bankruptcy case, see here: Coleman Opposition to Conversion to Chapter 7
According to Mr. Coleman's recent filings, and his December 2022 monthly operating report, all his tangible assets have been liquidated, including two homes and three parcels of land in Carroll County.
The net cash raised by these sales is $458,033, the remainder of which is held in escrow by Mr. Geno and cannot be touched without a court order.
However, large fees have been either paid, or approved for payment by the bankruptcy court, totaling so far $154,253. Most of that was generated by the Examiner and his attorney, with most of the rest due to Mr. Geno.
That leaves only $263,091 left to distribute to Mr. Coleman's creditors, who are still owed tens of millions of dollars.
To see Mr. Coleman's latest monthly operating report, view here: John Coleman Personal Bankruptcy December 2022 Operating Report
To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles
John Pittman Hey
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