By Bill Britt
Alabama Political Reporter
MONTGOMERY—Mr. Mike Hubbard has always downplayed the bankruptcy of his company Craftmaster Printers.
Even in his book, “Storming the State House” Hubbard said that it was just “bogus allegations.” He writes on page 108, referring to what his opponents had said, “I had run my company into bankruptcy. [The same company, Craftmaster, filed bankruptcy papers to bring inherited creditors to the table shortly after the new ownership team with whom I’d invested took over. The creditors did agree to negotiate, an the papers were immediately withdrawn.]”
However, it was not “shortly after the new ownership” as Hubbard claimed in his book, it was almost 5 years (Craftmaster Printers was purchased in 2000).
As to the statement, “[The creditors did agree to negotiate, an the papers were immediately withdrawn.]” Indeed, in August 2005, Craftmaster filed a Voluntary Motion to Dismiss the bankruptcy – but only after creditors forgave more than $2.5 million in debt owed by Craftmaster.
AuburnBank, which was owed $4.8 million, wrote off $1.7 million and Heidelberg Inc., which was owed $1.9 million erased $800,000 (or 42 percent) of Craftmaster’s debt. Another company, identified as UniSource was owed $200,000 but agreed to “significant debt foregiveness,” according to the Motion to Dismiss filed with the bankruptcy court.
Furthermore, Craftmaster promised to “work out” payment plans with approximately 27 other creditors – including small Alabama businesses – who were owed at least $400,000 by Craftmaster.
The companies that were owed money by Craftmaster faced the choice of erasing millions of dollars in debt and getting some of their money back, or risk getting nothing in a Craftmaster Chapter 11 bankruptcy plan.
A bankruptcy court judge issued an Order to Dismiss the filing as of September 2005.
Hubbard seems to dismiss the fact that reputable companies who had given him loans somehow thought it a good idea to forgive large sums of money because he could not operate the company he had purchased. Mr. Hubbard also seems to insinuate because it was “inherited” debt that it was somehow less of an obligation. When Hubbard and company purchased Craftmaster Printers for $1, they willingly agreed to purchase the company debt.
So, it was that in the spring of 2005, Hubbard took Craftmaster Printers into bankruptcy.
The public records filed with the Chapter 11 bankruptcy show that once again political insiders played key roles in keeping Hubbard’s company afloat. The records also pose serious – and ongoing – questions about conflicts of interest created by deals Hubbard made to save his failing business.
The use of political ties, government influence and his leadership role in the Alabama Republican Party are all a part of a pattern and practice Hubbard has repeatedly used throughout his career.
In late 2004, Craftmaster was near default on $4.8 million remaining debt on the mortgage loan the Murphy family obtained during the late ‘90s expansion. The company owed principle on the loan, as well as interest, late charges and attorneys’ fees the bank apparently incurred in efforts to collect.
However, during the original restructure of the company, documents filed as part of the bankruptcy, show that Hubbard and the other investors in Craftmaster “were personal guarantors of only a small portion of the debt at Auburn Bank.” According to the bankruptcy document, the investors were personal guarantors of $80,000 of the $4.8 million debt. [Source: See Key Bankruptcy Summary Document]
According to the public records, the bank agreed to accept a substantially reduced payment of $3.1 million on the remaining debt, meaning the bank lost $1.7 million to Hubbard and company. But even with the reduction of debt, Craftmaster was not in a position to accept the bank’s offer.
At this point, Hubbard, following his usual pattern, turned to well-heeled patrons for rescue.
In what can easily be described as crony capitalism among the political class, Hubbard spun a web of interconnected business to hide assets, divert liability and create a new entities he could use to further his business and political empire.
Currently, there is a State Grand Jury investigation of Hubbard’s Craftmaster Printers receiving more than $800,000 of business either directly from the ALGOP or as a subcontractor under Florida-based Majority Strategies during his tenure as ALGOP Chairman.
The first order of business was to establish shell companies that would house the assets of the failed Craftmaster company.
On December 10, 2004, Hubbard incorporated a brand new partnership called Swann Investment LLC, whose members were listed on Alabama Secretary of State records as:
•Scott Bridge Co., the Opelika-based bridge/road construction company that did millions of dollars of business with the state.
•Thomas Whatley (the partner in Craftmaster Printing)
•Pat Dye, controversial former Auburn football coach and then board member of Colonial Bank.
•Hubbard Properties (Owned by Mike Hubbard. The company held title to the building that serves as the Auburn Network headquarters.)
•Fuller Properties Ltd., owned by developer and then-Opelika Mayor Gary Fuller.
•Rishi Rajan, an Auburn urologist
•Charles Parnell, the lawyer who represented Craftmaster in the bankruptcy filing.
Hubbard then led Craftmaster into an agreement with Swann Investments LLC to buy the land and building at 687 North Dean Road, Auburn. Swann Investments and Craftmaster then entered an agreement for the buyer to lease the land and building back to Craftmaster at the favorable price of $20,000 per month.
Hubbard’s next move was to shifted ownership of virtually all of its printing equipment to Craftmaster Holding Inc., which would also lease the equipment back to Craftmaster Printers. Craftmaster Holding Inc. was already 100 percent owner of Craftmaster Printers Inc. [Source: See Key Bankruptcy Summary Document]
With these moves, Hubbard essentially shifted the major debt of Craftmaster Printers to other corporate entities, which he still controlled, or at least had an ownership interest in.
In what might be a small but significant move on Hubbard’s part, he moved $40,000 from his person campaign fund, Hubbard Campaign PAC to the ALGOP on March 1, 2005. Hubbard was later to move $40,000 from the ALGOP back to Hubbard Campaign PAC on June 13, 2005. [Personal campaign funds are subject to bankruptcies.]
After building the shell needed to protect his interests Hubbard through Swann Investment then took out a $2 million mortgage with First National Bank of Lee County and, coupled with another $1.1 million, closed the deal with a total of $3.1 million allowing Hubbard/Craftmaster to pay off AuburnBank. [Source: See Key Bankruptcy Summary Document]
It is speculated that the $20,000 in monthly lease payments to Swann Investments is apparently to pay the interest and principle on the First National Bank loan.
Masterfully, Hubbard organized matrix of companies and cronies to save his struggling business, denying creditor million in owed funds along the way. This from a man who promise to bring his business acumen to state government to clean up waste and fraud in Montgomery.