Wells Fargo Bank, headquartered in Charlotte, NC, has filed an emergency motion for the appointment of a receiver following the abrupt shutdown of Eleets Transportation, based in Jacksonville, FL, in early November.
According to court documents, Eleets’ bank, Wells Fargo, filed the motion in the United States District Court for the Southern District of Florida in West Palm Beach, in late December 2012.
As of press time, Eleets Transportation has not filed a bankruptcy petition with the court. Wells Fargo is pushing for receivership to protect and recover the company’s remaining assets, including accounts receivables.
The filing claims the bank is owed more than $5.7 million, stemming from revolving credit loans it made to Eleets, starting back in November 2011. In its complaint, Wells Fargo claims “multiple events of default” started occurring in May 2012.
Allen Steele owned 80 percent of the company and served as Eleets’ founder, chairman and CEO for more than six years.
A former Eleets minority shareholder, Stephen Davie, who told Land Line he is owed more than $1 million of his personal money he invested into Eleets, says he and others tried to “rein in spending” in those final months before Eleets’ Transportation’s collapse in November 2012. However, he said that he and other employees were excluded from crucial meetings at the end between the Steele family and the bank.
Davie, who was a minority shareholder at Eleets, headquartered in Jacksonville, FL, for four years, claims that owner-operators are still owed an estimated $8 million for freight they hauled on the brokerage side of Eleets, but were not paid, after the company’s abrupt shutdown.
“There are a lot of people with unanswered questions, and I am one of them,” Davie told Land Line. “There was $8 million not paid out to the owner-operators, which isn’t the way things should be.”
While carriers have filed on Eleets’ $10,000 broker bond, it won’t be enough to pay the owner-operators.
Another source who did not want to be named, told Land Line that while the owner-operators on Eleets’ brokerage side were not paid, the 40-plus remaining company drivers for Eleets Transportation were paid and their escrow money was returned when the company shut its doors.
Some carriers who are still owed money from Eleets told Land Line they received a letter a few weeks ago on Eleets’ letterhead, but which wasn’t signed, stating they should not call Eleets’ customers for payment, but should look only to Eleets for payment.
According to a court document, Wells Fargo also alleges in its complaint that at least one of Eleets’ customers paid the carrier directly, which is hurting the bank’s ability to recover Eleets’ accounts receivables.
Beginning of the end
Davie said that while Eleets’ brokerage was doing well, it was Eleets’ trucking side that was “losing money hand over fist.”
He said Al Steele brought in his son, Scott Steele, as the company’s vice president of trucking operations in January 2012.
Davie said the company’s original business plan of running 80 units was suddenly upped to 300 units.
“The original business plan was for us to be light asset,” Davie said. “At some point, the decision was made to go way heavier. The new goal was now to have 300 trucks and 500 trailers. We were losing money every week.”
He said that when he and other employees at Eleets’ questioned the Steele family’s decision to continue to expand the trucking division, despite steep financial losses, their “concerns were not addressed.”
Davie said the company grew too rapidly to 240 trucks and about 500 trailers, but the decision was made too late to downsize.
“At the end, when we finally closed, we were down to 44 trucks and less than 300 trailers after a massive downsize at the end of August, beginning of September,” Davie said. “So we had downsized tremendously, but it just wasn’t fast enough.”
All of the equipment, including the tractors and trailers, were leased. Davie said all of Eleets’ vendors were stuck “holding the bag on all of the equipment.”
Davie told Land Line said the beginning of the end was when Al Steele took out a $1 million shareholder loan, which he says was against the company’s shareholder agreement. He said this decision proved fatal to the company’s future.
“Once the bank (Wells Fargo) saw the shareholder loan, they pretty much started dropping our line of credit,” Davie said. “They took a half-million cut right there, and they continually just cut it down because the assets were out of control. Our line of credit went from $12 million to about $8 million in a short period of time.”
A source said there were about seven companies looking to purchase Eleets in the two months before it closed, so there was hope that the company would be bought. However, late in the day on Nov. 8, Eleets employees were informed that the company was shutting down, but were then told to come back to work the next day. Upon arrival, the employees were then told to pack up their belongings and leave.
Davie said communication between shareholders, some of Eleets’ former employees and the Steele family started breaking down about six months before the company shutdown.
“The brokerage side was doing fine, but the trucking division lost money every single month,” Davie said. “It only took a very short period of time to run it into the ground. When you are a minority shareholder, you are pretty much in a tough place. We tried to reel it in to no avail.”
Davie said he is licking his wounds and trying to decide his next move.
It appears that some of the Steele family and former Eleets employees have now opened an agency of Scott Logistics Corp., headquartered in Rome, GA. Jay Matthews, president of Scott Logistics, told Land Line in a voicemail that the company does not have any affiliation with the former ownership of Eleets Transportation.
“We do have an agency in Jacksonville that hired some of their (Eleets) employees who are obviously part of the tragedy of the falling out, but they are not employees of Scott Logistics,” Matthews said.
Al Steele’s son, Scott Steele, is listed on LinkedIn as being a national sales manager at the new agency started in Jacksonville, FL, since November 2012, the same month Eleets closed.
Their new office has opened less than a mile down the road from where their previous office was located in Jacksonville, FL.
Davie said the bank allowed Al Steele to bid and purchase all of the assets from his defunct company for the new agency.
“He (Al Steele) was able to buy about $200,000 worth of Eleets’ assets, including computers, TVs, for about $9,000,” Davie said.
“It’s been pretty painful to watch,” Davie said. “It’s a real shame and the system is broken when someone who owes owner-operators millions of dollars can just up and leave and open up the next day under a new shingle.”
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