The bankruptcy trustee in charge of MILA’s Chapter 11 case says there is evidence that MILA’s founder and CEO allegedly collected $32 million from MILA during the years before its demise, “improperly draining the Mountlake Terrace company’s assets as its fortune declined.”
From the Seattle Times:
“I think the executives at MILA knew by 2004 that this bubble was bursting and did their best to take out as much money as they could before it became obvious to everyone else,” says Brian Esler, who represents the bankruptcy trustee in the suit.
The suit claims Sapp, who owned about 90 percent of MILA, paid himself more than $10 million in dividends in 2004 and 2005 when the company was already “functionally insolvent,” meaning it had insufficient capital to continue normal operations and should have been preserving cash.
It also alleges he took $11.5 million in salary for each of those years, though “by March 2005, MILA was already delaying payments, even to important customers, to conserve cash.”
The trustee’s suit also claims that Sapp damaged MILA — and its creditors — in other ways:
He “surreptitiously seized” the mortgage software MILA developed and had another of his companies bill MILA for using it; charged MILA exorbitant amounts for his private yacht and business jets; and, in a “theft of corporate opportunity,” created separate companies to own a four-story office building and a parking lot that were leased to MILA, rather than having MILA buy the properties.
Sapp’s attorney, Jack Cullen, declined to discuss the allegations in detail but said: “We consider the claims nonsense. We don’t think they are founded in law or fact.”
Sapp did not return a call to his Hunts Point home.
Esler is asking the court to freeze $12 million in cash belonging to Sapp, to keep it available to creditors.
Bankruptcy Trustee Esler’s plan is to convince the court that MILA was technically insolvent for over two years before the company abrubtly closed it’s doors in April of 2007. Esler cites improper accounting and a twelve-fold increase in the number of loans MILA was required to repurchase from 2002 to 2004.
To protect creditors, the suit says, as early as 2005 “Sapp should have attempted to sell, liquidate or reorganize MILA at a time when it still had significant value, instead of continuing to manipulate and loot it for personal gain for another two years.”
The suit also takes a microscope to transactions among the various entities owned by Sapp. One example: The company that owned his 130-foot yacht billed MILA $395,374 over two years — although “MILA used that yacht only twice for asserted business reasons,” the suit says.
MILA’s creditor claims have ballooned up to 2 billion dollars. By asking the court to freeze Layne’s personal assets, is the Bankruptcy Trustee is gathering evidence to try and make a case that the corporate veil was pierced? This means Layne might have co-mingled corporate assets with personal assets. An example of that would be if personal expenses were paid for with corporate funds. This will be an interesting local case to follow.
Bankruptcy Trustee:
Miller Nash
Brian Esler
206-622-8484
Lisa Peterson or Bruce Rubin
360-699-4771
MILA Legal Counsel:
Jack Cullen
Foster Pepper
(206) 447-4689
I’m sure Lane believed he had rights to the monies he paid himself through various conduits, after all it was his hard work that made that money. He just became neglectful of business and social ethics that come with great success. He is simply one of many that have a disease of personal greed. Whether he actually violated the law is for the legal process to figure out, perhaps he was smarter than the thieving Enron execs. Again, this is what fosters the rise of governmental regs that can stifle free enterprise. His business practices coupled with 1000’s of others like him is esentially what has collapsed the US econmy. Remember Kruschev, he once made the comment, unregulated capitalism will fall from within, thats not word for word but its close enough and he was right. The real question is, will ethical business practices ever prevail over greed. We have front row seats in that movie, lets work rather than hope for a happy ending.
The damage is done, to MILA customers, and to MILA employees. Now the taxpayers have the burden of finding fault. Even if they find Sapp quilty the Bankruptcy court cannot change the course of events. I does come down to, who wants to run a sucessfull business and not let greed enter thier heart!
This is getting redundant. Thats ludacris to say this man had no prior knowledge of the companies financial situation. If he didn’t know, then he didn’t care to know. I doubt much will happen to him, but his greed has affected so many lives. So many, he couldn’t imagine. Freezing his assets would only be the start.
It’s hard to see what to make of Sapp. He ran his company into the ground by taking away its financial ability to function. Probably anticipating the downturn in loan originations. Sounds like a plan to me. It does say a lot about his sense of responsibility to others, especially people he borrowed from. There probably are some violations of law here but if he was the sole owner I guess he could do whatever he wanted with minimum legal risk.
I nees some information about my old loan who can i contact if mila do not exitsanymore