Local auto dealer denies charges

SHE Group LLC is being sued over disposition of vehicles

By Josh Flory
A local auto dealership working its way through U.S. Bankruptcy Court was sued in Loudon County last year in a complaint that alleges two owners of the business participated in the fraudulent disposition of vehicles.

SHE Group LLC, which did business as Oak Ridge dealership Dean Stallings Ford Lincoln Mercury, filed for Chapter 7 bankruptcy protection last month and appeared in Bankruptcy Court in Knoxville on Monday to meet with creditors.

A lawsuit filed in Loudon County Chancery Court last November by General Motors' finance company, GMAC, alleges that SHE Group also did business as Lane Chrysler Buick GMC, a Lenoir City dealership.

The GMAC complaint lists SHE Group, Kenny Lane, a major Knoxville-area car dealer, and Randy Hinton , a Knoxville-area tow operator, as defendants.

A statement of financial affairs in SHE Group's bankruptcy case lists Lane, Hinton and former Sheriff Tim Hutchison as one-third members of SHE Group. Hutchison is not identified as a defendant in GMAC's suit.

Hinton and Lane declined comment Monday about the lawsuit. Hutchison could not be reached for comment.

As of last week, the Loudon County Chancery Court's clerk and master listed the suit as an active case. Andrew Colocotronis, an attorney representing GMAC, said the matter has been resolved, adding that the defendants "paid their obligations."

The lawsuit alleges that GMAC and SHE Group entered an inventory financing and security agreement, also known as a floor-plan agreement, in January 2008 in which GMAC financed vehicles acquired by SHE Group.

It alleges that in November, GMAC conducted an on-site vehicle inventory audit and determined that approximately 50 inventory-financed vehicles listed as collateral were missing from the dealership. The suit alleges that SHE Group did not provide GMAC with substantial records concerning the vehicles, and that the firm's controller prevented GMAC employees from inspecting records.

In the auto dealership business, it is common for floor-plan lenders to conduct such inventory audits to ensure that vehicles are on the lot or easily accounted for.

The suit also alleges that before the audit, a "significant number of vehicles" left the dealership at one time and were believed to have been disposed of in violation of the floor-plan agreement. The suit alleges SHE Group was "out-of-trust" - an industry term for the value of missing collateral - by more than $900,000.

A filing later in November said some information was provided to GMAC, but that 34 vehicles were still unaccounted for, and that the defendants were still out of trust by $577,866.

The original lawsuit contended that SHE Group co-owners Lane and Hinton guaranteed payment of SHE Group debts and participated in "the fraudulent disposition of Inventory Financed Vehicles."

In an affidavit that is part of the case file, Fred Sinclair, director of commercial lending at GMAC, said he had seen documentation indicating that some of the floor-plan vehicles were sold without payment to GMAC to an affiliate dealership of which it was believed Kenny Lane was the principal owner.

In their own filing, SHE Group, Lane and Hinton denied that they were out-of-trust and allege that GMAC had $577,000 of the defendants' money.

"The defendants would further show that the plaintiffs have taken the titles, keys, and (manufacturer's statements of origin) of all vehicles of the dealership, placed a security guard at defendant's premises and have in fact put the dealership out of business," the filing states.

Although the Bankruptcy Court asks filers to make a full disclosure of business arrangements and litigation, a statement of financial affairs filed as part of the bankruptcy did not list Lane Chrysler among the businesses in which SHE Group was a partner or had a stake of at least 5 percent. That filing also said there were no suits or administrative proceedings to which SHE Group was a party within a year of the filing.

Lynn Tarpy, an attorney representing SHE Group in the bankruptcy matter, said in an e-mail message that the statement of financial affairs would be amended to reflect the litigation and to reflect the Lenoir City dealership. Tarpy said that dealership - which he identified as Lane Chevrolet Buick Pontiac GMC - "ceased operations some time ago."

Hutchison has said he sold his interest in the SHE Group in February 2008. A document in the Loudon County case, however, said Hutchison - who has said he is considering a bid for county mayor in 2010 - was among those served with a subpoena in November.

In February, Loudon County Chancellor Frank Williams III signed an order that, among other things, restrained SHE Group from selling or removing vehicles from Lane Chevrolet Buick without approval of GMAC and required SHE Group to pay off the deficiency balance under the floor-plan agreement. It also required Lane to provide all documents relating to the transactions between Lane Chrysler and any dealership with which he has an affiliation.

The judge's order makes reference to both Lane Chevrolet Buick and Lane Chrysler Buick GMC, but court documents list both entities at the same address, 1272 Highway 321 North, in Lenoir City.

Auto dealer hearing delayed

Creditors meeting stalled for SHE Group LLC

By Josh Flory

Creditors of a local auto dealer will have to wait a little longer to ask questions in bankruptcy court.

SHE Group LLC - which at one time operated dealerships in Oak Ridge and Lenoir City - was scheduled to meet with creditors on Monday, but the U.S. Bankruptcy Court hearing was interrupted after a fire alarm forced attendees to evacuate the Howard H. Baker Jr. U.S. Courthouse.

SHE Group LLC formerly did business as Dean Stallings Ford Lincoln Mercury in Oak Ridge and as Lane Chevrolet Buick Pontiac GMC in Lenoir City. SHE Group filed for Chapter 7 bankruptcy protection last month and is seeking liquidation of assets.

Monday's meeting was stopped after bankruptcy trustee Wayne Walls asked numerous questions of Randy Hinton, one of three people identified in the filing as members of the limited liability company.

Walls' questions focused largely on SHE Group's finances and borrowing. Hinton told the trustee that SHE Group was formed in December 2006 and that the firm's owners are himself, Kenny Lane and Tim Hutchison. Hutchison, a former Knox County sheriff, has said he sold his interest in the company in February 2008. Hinton, who has owned Knoxville businesses Cedar Bluff Towing and Chestnut Street Garage, was the only principal in SHE Group to testify during the creditors hearing. Lane, who has had interests in Knoxville-area auto dealerships, and Hutchison were not available for comment.

At Monday's hearing, Hinton said SHE Group borrowed $5 million from Citizens National Bank to purchase Dean Stallings Ford, although $500,000 of that money was used as operating capital. When Walls asked if that loan was unsecured, SHE Group attorney Lynn Tarpy said the bank thought the loan was secured, but "they didn't properly perfect" it.

Hinton said he didn't have a copy of the closing documents or settlement statement for that transaction and gave Walls permission to obtain those from another attorney.

Asked about a pair of loans from American Trust Bank of East Tennessee, Hinton said a $447,200 loan was secured by 33 acres of property on Cabbage Road in Halls. An attorney for American Trust, however, said both loans - which totaled more than $797,000 - were collateralized by the same property.

Hinton told Walls that originally they borrowed $750,000 from Citizens National Bank, but refinanced with American Trust. Hinton said he thought only he and Lane signed the American Trust loan, and that they were planning to develop the land in Halls. "We didn't ever do anything with it," he added.

Hinton said they didn't have an appraisal done for that property. Asked by Walls why Hutchison didn't sign on the American Trust loan, Hinton said he didn't remember and that he could be wrong about Hutchison not signing it.

"Mr. Hutchison didn't want to get into the development of it with us," Hinton said, adding that "we had a side agreement with him."

In response to a question from Walls, Hinton said he didn't think that agreement was written.

Hutchison has said he never participated in the day-to-day operations of Dean Stallings Ford, and Hinton on Monday agreed with that statement. Hinton declined further comment after the hearing.