As we posted late last year, United Furniture abruptly laid off 2,700 employees, notifying them via email in the middle of the night. Now the company’s CEO David Belford is at the center of controversy over the company’s layoffs and the decision to file for Chapter 11 bankruptcy protection. Belford and United Furniture have been accused of attempting a “cash grab” in the wake of the layoffs and bankruptcy filing, as creditors and lenders have come forward to reveal the chaos surrounding the situation.
It Began With An Email
The United Furniture saga began on Monday, November 21st at 11:49 pm when employees received an email instructing them to not report to work the following day. It was later rescinded and followed up with another email informing them that they were permanently laid off and they would not be receiving COBRA benefits. It was also confirmed by the North Carolina Commerce Department and the mayor of Winston-Salem where about 600 residents were employed by United Furniture that the company did not file a WARN notice of the closings.
Lenders Reveal Chaos
Lenders to United Furniture, including Wells Fargo Bank, state they were shocked by the abrupt layoffs, as the company had hours before allegedly demanded “substantial capital immediately” because it could not continue operations without the cash.
Wells Fargo, along with 2 other creditors are asking a US bankruptcy judge to force the company into Chapter 7 liquidation bankruptcy. Wells Fargo has not provided a detailed amount they are owed by United Furniture, but in court documents they state they are owed more than $99 million. The bank had approved $130 million for the company the summer before, securing the loan by company assets.
Layoffs Included Abandonment
According to the court filings, when the company laid offs its workers, it also abandoned all its properties, leaving 15 facilities without security and without insurance coverage after November 30. The filings also state that some of the landlords of United Furniture properties locked up their facilities and denied access to anyone, in some cases not allowing employees to collect personal items. Weeks later a former employee spoke with Business of Home on condition on anonymity stated, “Most of us understand that losing our jobs and health insurance can’t be undone, but keeping everyone from their personal belongings is pretty unacceptable,” says the former employee. “Some of us kept priceless things in our offices, like college diplomas and pictures of family that we could never get back if we’re not allowed to retrieve them. One of my co-workers had a chalkboard in her office that was written on by her children right before they tragically passed in an accident. That chalkboard is probably worth $5 to anyone else, but it’s priceless to her.”[row] [col span=”6″ span__sm=”12″] [ux_image id=”5502″ image_size=”medium” caption=”true”] [/col] [col span=”6″ span__sm=”12″]
Owner Surfaced Weeks Later With Questionable Claims
Weeks after the mass layoffs on December 12th, United Furniture CEO gave an interview to Columbus Business First where he stated he was “devastated by the turn of events” and called the situation “agonizing.” He also claimed that he was only recently informed of how dire the situation had become because his “insight into the company’s finances was limited” since he was a “passive investor.”
However, United Furniture’s former president and board member, Larry George, disputed Belford’s claims. He stated that Belford “was always pretty aware of what was going on. We had board meetings every quarter and we’d meet once a month to discuss the financials. David either attended the monthly board meetings in person or via conference calls.”[/col] [/row]
Delayed Bankruptcy Filings
While many legal experts expected United Furniture to file for bankruptcy protection shortly after closing, it took more than 50 days for it to happen. Belford asked for permission to file Chapter 11 reorganization and to move the case from US Bankruptcy Court in the Northern District of Mississippi to the Southern District of Ohio. United Furniture’s headquarters were in Mississippi, while Mr. Belford’s lives in Ohio and runs an investment firm called State Capital.
UFI Creditors Call Foul
Many of United Furniture’s lenders and creditors have accused Belford and the company of attempting to take advantage of the situation. They allege that Belford and the company used the layoffs and bankruptcy filing to try to avoid paying out the money they owe to creditors, while also attempting to free up cash that could be used to pay executive bonuses.
Wells Fargo accused Belford of attempting to liquidate UFI’s assets for the benefit of his “family trust” and that their Chapter 11 filing contains “gaping factual holes and revisionist history.”
They raised questions about the intentions of Mr. Belford, noting that he did not hire outside professionals to assist with restructuring until weeks after the company’s shutdown, and that they had taken no material action to preserve and protect the company’s assets. In addition, Wells Fargo claims that it has spent over $1.5 million dollars since the November shutdown to pay for insurance, utilities and 24 hour security to protect the company’s 15 buildings and assets and accused Belford of “abandonment.”
They also claim that Mr. Belford has “security interests” in some of the company’s real estate and is attempting to “run a process intended for the sole benefit of himself” because with Chapter 11, United Furniture will be able to focus efforts on making its equity holders whole while leaving its lenders out in the cold.
The accusations against Belford and United Furniture have also been backed up by documents that were released in the wake of the layoffs and bankruptcy filing. These documents show that the company had been planning to close several of its stores for months before the announcement of the layoffs. This suggests that the company was aware of the financial trouble it was in and had been planning for a potential bankruptcy filing for some time.
The documents also reveal that Belford had been working on a restructuring plan for the company for months but had failed to inform the lenders and creditors of the plan. This has raised further questions about Belford’s intentions, as it appears that he was trying to keep the plan under wraps until after the layoffs and bankruptcy filing were announced.
Other Companies Affected
Keith Sechrest, co-owner of North Carolina based Seagrove Lumber LLC, was affected by the United Furniture layoffs, and also questions Mr. Belford’s claim that he was out of the loop regarding the company’s finances. “I can’t imagine having a company as large as UFI and not know what’s going on,” he stated. UFI owes Seagrove $1.2 million in unpaid invoices, forcing the company to lay off its 45 employees when the vast majority of its business went away due to United Furniture’s closing. He also stated that his brother owns a lumber company that was forced to shut down and lay off 30 employees as UFI owes his brother’s firm $500,000, and that a small blade-sharpening business that worked with both companies is on the verge of closing, which would result in another 4 jobs in the state lost.
Much of the ire towards Mr. Belford and United Furniture stems from the fact that they were mislead about the situation at the company. They stated they had been told recently that business was improving, and one North Carolina senior executive visited the plants in October and was told that “things were moving in the right direction.”
A former employee of United Furniture refuted Mr. Belford’s claims that he was unaware of the financial situation of the company, stating, “David came down within the last 6 months. So he could of gave us more warning. Instead [the] CEO kept telling us business was improving.”
The situation with United Furniture is bad no matter how you look at it. Thousands of people and communities have been affected, and the ripple shows no signs of letting up.