Auction & claim: Banking scandal bickering intensifies

The banking scandal that's gripped this town like a Martha Stewart nightmare intensified last week with another lawsuit– as well as an auction during which bidders picked over the remains of Ivy Industries, a once-thriving maker of wood moldings.

The admitted mastermind of the check-kiting scheme that helped kill the company, however, remains unindicted and free.

On Wednesday, June 3, the final nail was hammered into the Ivy Industries coffin as a bank-ordered auction dispatched row after row of finished and unfinished wood moldings and the machines that had shaped them.

"I'm spending more money than I thought I was gonna spend," said Rick Wyatt, as he examined the "automatic feed-through finishing machine" he'd just purchased. Owner of Gaston & Wyatt, a high-end woodworking shop, Wyatt figures the machine is worth about $30,000; he got it for $9,000. [NOTE/CORRECTION: In the print edition of the Hook, the second amount was originally inaccurate.]

"Things are going really low," said Kenneth Ziegelheafer, a renovation woodworker from Petersburg. "It was worth the trip."

Former Charlottesvillian Chris Shepherd, who owns a Petersburg-based ball-point pen company and rode up with Ziegelheafer, was eyeing an IBM Selectric II typewriter. The machine was top of the line– circa 1979. Would he bid on it?

"I don't think so," replied Shepherd. "It doesn't have correction." The machine went for $15.

The mammoth factory, which occupies about half of an over-sized city block on Monticello Avenue, sits on 2.7 acres with about 70,000 square feet– or five Charlottesville Ice Parks– under roof.

The mammoth structure contained a museum's worth of early 1980s office equipment– not to mention everything needed to make some of the finest wood moldings in America.

That is, until closing abruptly in late March, when approximately 150 workers in Charlottesville and Beverly, West Virginia, lost their jobs.

Earlier that month, through an attorney, former Ivy Industries CEO John C. Reid came forward to apologize and take responsibility for the check-kiting scheme. "In an attempt to save a struggling business and to avoid admitting failure," said attorney Fran Lawrence, "he made terrible errors in judgment."

Subsequently, the bank that suffered $2.4 million in losses from those errors, Albemarle First, slapped a suit seeking about $10 million on Ivy Industries and its principals.

On the same day as last week's auction, Ivy's majority owners, Francis Troost Parker and Corwith Davis Jr., fired back with a suit of their own against Reid, another company executive, and Albemarle First Bank. They claim the bank "willfully and maliciously conspired" with Ivy executives to hide the scheme, and they demand any proceeds from the bank's lawsuit.

"I guess the best defense is a good offense," grumbles an Albemarle First insider.

In their claim, Parker and Davis portray Albemarle First at a minimum as a bumbling bank. As evidence, they submitted reams of photocopies of round-numbered checks. And as a sort of Rosetta stone, they emphasized the October, 2000 statement of Ivy Industries' real estate arm, RPD Properties LLC. That statement begins and ends with the same piddling balance: $857.25– while 21 credits totaled $890,000 and 21 debits totaled $890,000. That sort of high-volume, low-balance shenanigans "would have been readily apparent to even the most casual observer," says the claim.

Even more grotesque was July, 2001– when company deposits "totaled an astounding $15,620,000– approximately 39 times Ivy's average monthly sales."

"The bank had to have known," says the suit, "and the bank had a duty to disclose this fact to Parker."

But Parker's detractor at Albemarle First doesn't excuse him. "It isn't a question of whether or not Troost [Parker] knew, it's whether he should have known."

Moreover, the insider continues, Parker and Davis, should– like Reid– stand up and take some responsibility, including financial responsibility.

"Both of those guys have a ton of money," says the insider. "They could make it all right and still be wealthy men."

The men have retained Payne Ross & Associates to handle media inquiries.

As for Albemarle First, the bank has no comment on the suit, says president Thomas Boyd, although he points out that the bank recently raised over $2 million by allowing previous shareholders to exercise warrants which gave them the right to buy additional shares of bank stock– which typically trades around $8 on Nasdaq– for just $7.

"We're pretty much back to where we were before the kite," says Boyd.

Additional questions remain to be answered. For one, why haven't any criminal charges yet been filed against Reid? A free man and an avid tennis player who, says a source, polishes his game on the plush courts of Farmington Country Club, Reid has confessed to the massive scheme, but the FBI remains tight-lipped on the investigation.