The Daily Southerner, Tarboro, NC

Local News

February 19, 2009

Who gets paid first?

Hearing on Farmtrac assets

T.J. ROYAL

The fight for who'll receive first payment from the sale of Farmtrac North America's assets continued Wednesday in Edgecombe County Court.

The hearing held before Judge Frank Brown was mainly to collect testimony from former Farmtrac employees, who explained their roles and what actions they say took place leading up to the Tarboro-based tractor company's financial insolvency and its assembly plant closure in January 2008.

The company, founded as Long Manufacturing by William Redden "Bill" Long II in Tarboro in 1941, entered receivership in February 2008. In 1998, when it was known as Long Agribusiness, the Tarboro tractor company was bought by Escorts Group of Faridabad, India.

Farmtrac's remaining assets were sold at auction on Nov. 17 for $14.1 million, to Montana Tractors of Springdale, Ark.

South Korean tractor parts manufacturer LS Mtron, formerly LS Cable Inc., brought suit against Textron Financial Corp., of Atlanta, Farmtrac North America's largest guaranteed creditor, seeking payment for parts it said it produced for the Tarboro company, but was not compensated for.

Farmtrac North America had reportedly owed Textron Financial around $50 million, while LS Mtron reported it was owed $11.6 million.

Wednesday afternoon, LS Mtron's attorney Joe Eason questioned former Farmtrac employees about their actions while Vijay Raina and Pranab Ghosal acted as the company's chief executive officers in 2005-2007.

Former Farmtrac Chief Financial Officer Alton Cobb said that when Ghosal succeeded Raina as CEO, the practice of billing the company's dealers for tractors they hadn't ordered "started before (parts) inventory arrived" at the Tarboro plant.

Eason asked Cobb about the effect an order for 5,000 decker units in 2006 would have on the company's supply. Cobb replied that for 2006, that order "overstuffed the pipeline" for its inventory, because part of Farmtrac's business was to ensure a steady flow of inventory each year. He said that "zero" decker units would've been available in 2007 because of the order.

Eason then asked Cobb if he knew about a line of asset-based lending (ABL) that had been extended to Farmtrac from Textron, where the company would be allowed to borrow more money based on the level of equipment inventory that it physically recorded on its lots.

Cobb said that ABL line of credit had only been brought to his attention by a Textron representative, not by his superiors or other Farmtrac employees.

Although he had reservations about the decision to have the large equipment order made up front, Cobb said there was "nothing against the law about it."

Eason asked his next witness, Sue Joines, a former Farmtrac account manager, about $25 million in wire transfers made to Escorts Group while creditors in the U.S. were still owed money.

Joines said that while she was there, "if you wanted to keep your job, you had to do it," instead of issuing funds elsewhere.

Joines also said that when an auditor would come to the Tarboro facility to physically check on serial numbers on equipment that was reportedly at the plant, Ghosal would order an employee away so questions about serial numbers would go unanswered.

Libby Wobbleton, a former Farmtrac billing manager, said she had only learned Wednesday that invoices she ordered for dealers were ones for equipment that was "still on the water," not at Tarboro's or any other Farmtrac facility.

She said she had been approached by management about filling out orders as such, but she offered to clear out her desk and quit because she felt it was unethical. Wobbleton said she only continued to send dealers invoices on equipment because she was reassured she would "never" be asked to perform that again.

"I was assured ... that the tractors were at least in Tarboro," she said.

Textron Financial attorney David Warner asked Wobbleton if she received follow-ups on dealers' invoices to ensure the tractors had been received. She said she had not.

She added that she could not issue a credit for the invoice unless it was approved by management. She did say, though, that the credit could be issued to dealers by other personnel, like territory and sales managers.

Ervin Gupton, a former North Carolina territory sales manager for Farmtrac, said that he had been requested by management to generate sales on equipment that had not been ordered by dealers.

He also said that dealers' credit limits had been raised to accommodate the additional equipment "frequently," without their permission.

Textron Financial Senior Vice President Ralph Infante was at Wednesday's hearing, with his company represented by Warner and attorney Eric Anderson.

Eason said the matter was not resolved Wednesday, that more witnesses and documents would be called upon. But he added that the next hearing date was not set for the civil case.

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