JFC is saved just in time Partners buy excavating firm for $7.3 million

September 29, 1993|By James M. Coram | James M. Coram,Staff Writer

Entrepreneur Nicholas B. Mangione and a Texas auctioneering company worked out an eleventh-hour deal from the witness stand in federal bankruptcy court yesterday that will save an Ellicott City excavating company from liquidation.

Mr. Mangione and Miller and Miller Auctioneers Inc. of Fort Worth, Texas, have agreed to buy JFC Excavating on Baltimore National Pike in Ellicott City from the court-appointed trustee for $7.3 million. Mr. Mangione plans to take possession of the company at midnight Sunday.

He said he plans to honor all existing contracts, solicit new business, and keep all JFC employees on the payroll, including convicted tax evader Fred W. Allnutt Sr., JFC's founder.

"I am very pleased to have saved 75 jobs for Howard County and to have helped the Allnutt family stay in business," Mr. Mangione said. "It would have been a shame to see sub-contractors suffer" along with customers and employees had the business been shut down.

Mr. Mangione said his sons John and Louis will be involved in the running of the company along with his accountant and his attorney. The company will continue to be called JFC Excavating Inc. All federal, state, and local taxes will be paid in a timely fashion, Mr. Mangione said.

The Internal Revenue Service seized the assets of JFC Excavating last October to satisfy a $6 million tax lien -- the estimated tax, penalties and interest the IRS says Mr. Allnutt owes for failing to file a tax return for the years 1981 through 1986.

Howard County has also filed a claim against Mr. Allnutt's estate, saying he owes nearly $1 million in back property taxes, penalties and interest. Mr. Allnutt was convicted in 1983 of refusing to file a state tax return or pay property taxes.

Mr. Allnutt filed for bankruptcy last October after the IRS seized his property. Since then, Baltimore attorney Mark J. Friedman, the court-appointed trustee for Mr. Allnutt, has been running the company.

Last week, Mr. Friedman told federal bankruptcy Judge James F. Schneider that JFC Excavating was dying and asked permission to liquidate the company.

Mr. Mangione said he decided to make an offer for the company after reading that it was going to be liquidated. His attorneys worked over the weekend to put together a deal, but the final offer of $7.1 million was $450,000 less than a Canadian firm offered.

Yesterday, Mr. Mangione and his attorneys sought to convince Judge Schneider that it would be better for the estate to take less money if it meant saving the company. Keeping the company operating would save 75 jobs and service customers by completing work on contracts still outstanding.

Mr. Friedman said the difference between what Mr. Mangione was offering and what the Canadian firm was offering was too great, even under those circumstances. Throughout the day, negotiations continued, but at 2:33 p.m., Mr. Friedman told Judge Schneider "no meaningful discussions" had yet occurred.

Mr. Mangione testified an hour later, saying he had increased his offer by $100,000 earlier in the day. He was telling Judge Schneider his frustrations with the deal when Mr. Friedman asked him under cross-examination if he was prepared to offer an additional $100,000 for the equipment owned by JFC. Mr. Mangione demurred. He asked if he could confer with counsel.

Judge Schneider recessed the proceedings and for the next 26 minutes attorneys and advisers gathered around Mr. Mangione -- who was still seated at the witness stand -- in a lively, animated conversation.

When court resumed, Mr. Friedman announced that Mr. Mangione and the auction company had agreed to pay $6.6 million for the equipment and $700,000 for the real estate, bringing the total offer to $7.3 million.

Mr. Friedman suggested it was not altogether fair, however, in light of the Canadian firm's earlier, higher offer. He suggested that the competing suitors were now on a par and that bidding should continue in $25,000 increments.

Judge Schneider would not hear of it. He said he preferred to approve an offer that will save 75 jobs, protect creditors, and allow the business to continue rather than liquidate the company through an auction of assets. He objected that the auction contract contained an escape clause should any of the equipment be faulty.

"I have no alternative other than to ask the court to confirm the sale," Mr. Friedman said. "It is an unfortunate consequence for auctioneers who came forward when no other viable option was available."

Judge Schneider said he would sign a court order authorizing the sale as soon as it is brought to him.

"I am enormously relieved," said Stanton J. Levinson, attorney for Mr. Allnutt. "It is a victory for everyone concerned."

"I look forward to putting this behind me and going forward," Mr. Allnutt said as he greeted employees following the decision.

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