By Kirk Johannesen, The Republic
johannesen@therepublic.com
A Pennsylvania bank has sued Columbus Components Group's owner to recoup millions of dollars in defaulted loans, and a Delaware company filed suit seeking hundreds of thousands of dollars from CCG for non-payments of goods.
CCG, whose longtime community presence started decades ago with Arvin Industries, is closing the plant at 15th Street and Central Avenue on Friday.
CCG owner Patrick James and former owners Jay Schabel and Mike Klinginsmith have closed at least 10 manufacturing plants in North America in the last 10 years, eliminating at least 1,500 jobs and leaving suppliers and employees owed money.
Pittsburgh-based Tristate Capital Bank filed suit June 26 in Ohio against Patrick James, four companies he owns or has owned - Columbus Components Group, Red Rock Stamping, Tremont Manufacturing and Hawthorn Manufacturing - Elizabeth James and Columbus resident Charles Schiavello, CCG's former chief financial officer.
Tristate claims James defaulted on more than $6 million in loans, and accuses the defendants of fraud, conversion and conspiracy in obtaining the loans, lying about their ability to repay them and taking money from one company that should have been paid to the bank.
Material Sciences Corp., which coats and laminates steel coils, alleges in a suit filed June 29 in Illinois that CCG has not paid for $272,220.80 in goods delivered to CCG between Jan. 28 and March 3. MSC also alleges that CCG in February made an unauthorized $32,107.99 deduction of goods. MSC seeks $304,328.80, plus attorney and court costs. Five other lawsuits and two liens against CCG seek a combined $413,130.81. Four default judgments have been awarded against CCG totaling $75,511.84.
Bank sues
Tristate alleges that the $6.25 million in loans given to Arizona-based Red Rock and Ohio-based Tremont on April 30, 2008 was based on false and inflated accounts receivable and inventory figures for the companies, and did not reflect money they owed to other companies, which misrepresented the companies' financial strengths.
Red Rock and Tremont also fraudulently overstated their ability to borrow by hundreds of thousands of dollars, the suit alleges.
Patrick James informed Tristate Dec. 16, 2008 that Red Rock operations had shut down, and on Feb. 12 told the bank that Tremont operations had been terminated, the suit alleges, and subsequently both companies defaulted on their loans.
The defendants also collected more than $1.5 million in management and consulting fees from Red Rock and Tremont, even when the companies could not have "satisfied the criteria" for such payments, and in violation of loan terms by Tristate, the suit alleges.
The bank claims that the defendants were not forthcoming in turning over collateral, particularly business records for Red Rock and Tremont, after the companies defaulted on the loans.
After obtaining the records, the bank learned of the financial discrepancies hidden from Tristate, and of $575,000 in inventory that was allegedly sold from Red Rock to Tremont, and then billed to CCG for the same amount, the suit claims.
This caused the value of inventory to be misleading, and the transfer of inventory was unlawful because Tristate had a secured interest in it as collateral for the loans.
Tristate alleges that Patrick James, Elizabeth James and Schiavello were the principal decision makers for the companies and controlled the companies' funds.
The bank seeks compensatory and punitive damages, possession of collateral and the management fees paid to the defendants.
Elizabeth James' relationship to Patrick James is not stated in the lawsuit, but an address for her is the same as the one listed for Patrick James in the suit.
Schiavello claims in his response to the complaint that his employment at CCG ended Jan. 21, 2009, and that many of the allegations occurred after his departure.
He also claims that he was a "plantlevel" employee and not an elected officer, and that he did not create and direct account entries.