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Roy Terry, president and CEO of Terry Manufacturing Co., pleaded guilty to felony bank, mail, and wire fraud charges, and mishandling pension funds that resulted in a loss of more than $20 million to investors, lenders, and employees.
The charges against the former BE INDUSTRIAL/SERVICE 100 company, which made uniforms for federal agencies and McDonald’s Corp., stemmed from an investigation by the FBI, the Internal Revenue Service, and the U.S. Department of Labor, according to the U.S. States Attorney for the Middle District of Alabama.
There are now more than 200 claims from creditors amounting to $96 million following Terry Manufacturing’s bankruptcy case in July 2003 and subsequent federal investigation, according to Dennis Schilling, an attorney involved in the case. “It’s probably the worst bankruptcy case I’ve seen in 22 years of doing this,” says Schilling.
Terry admitted to intentionally misrepresenting the financial condition of his company to several banks to obtain loans and comply with financial reporting requirements. He also acknowledged misusing employee and employer contributions to the company’s pension plan and engaging in a pattern of “check kiting,” during which he would deposit Terry Manufacturing checks written on an account at one bank into a company account at another bank and then do the same process in reverse to maintain the appearance of higher balances.
During this period Terry obtained more than $2 million in loans based on $8.5 million in checks written between the two accounts. To pay off loans, he admitted to lying to a supplier to get an extension of credit and making false representations to obtain $5.5 million in funding for a company that never became a formal business entity. “None of the creditors have been paid,” says Schilling.
No sentencing date has been set. At one point, Terry faced up to 30 years in prison and a $1 million fine. Under the terms of his plea agreement, however, he is now facing up to 135 months. Lawyers for Terry declined to comment.