M&M Environmental Group filed a voluntary petition Feb. 12 seeking bankruptcy protection under Chapter 7 of Title 11 of the United States Code after amassing $8.4 million in debt.
M&M’s holds $3.2 million in assets and reported its gross revenue in 2015 at $6.3 million, according to court documents.
However, Centennial Bank of Conway, M&M’s biggest creditor, say they are owed about $4.3 million. Equipment, vehicles and accounts receivable is where the debt is secured.
Further debt of $2.7 million is owed to 149 companies that have unsecured claims, court documents indicate.
The company has seen turmoil in the past year, starting with a dump truck overturning on Highway 64 in Vilonia, spilling 15 tons of reclaimed oil last March.
Following that incident, M&M’s majority client, Southwestern Energy, ended its partnership with the company, causing M&M to lay off 80 percent of its workforce, or 200 of its then-250 employees.
Prior to these events, Omega Capital of Tulsa, Oklahoma, purchased 60 percent of M&M’s units from oil services for $7 million Dec. 12, 2014.
According to court documents, while Sam McFadin was chief executive officer and a member of the board of directors, he "committed misconduct, mismanaged M&M and its assets and liabilities, eventually moving into self-dealing transactions."
He was terminated on Oct. 26, 2015, but the board of directors ratified the termination date of McFadin, pushing it back to Oct. 30, 2015.
After his termination, Centennial Group was updated on the status of M&M operations and cash flow. M&M, Omega and Bell & Company coordinated payment of critical vendors.
McFadin tried to block the filing of bankruptcy in order to keep the company operational until it could be liquidated in an orderly manner, according to court documents.
The lack of repayment by M&M led to a court case between Omega, M&M and Centennial.
Then, Omega planned earmark funds to M&M, so the company could pay funds. Centennial didn’t object and allegedly didn’t inform Omega that it would take the funds advanced and earmarked to M&M for itself.
"As a result of Centennial’s actions, checks to numerous key creditors and vendors of M&M bounced and M&M was without a source of funding for key operations," court documents state.
Centennial denies allegations made in the counterclaim.
The case has been put on hold because of the bankruptcy.
(Staff Writer Andy Robertson can be reached by email at firstname.lastname@example.org or by phone at 505-1246. To comment on this and other stories in the Log Cabin, log on to www.thecabin.net. Send us your news at www.thecabin.net/submit.)