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A bankruptcy trustee wants a judge to dismiss a $38.8 million Cleburne County farmer’s bankruptcy case.
U.S. Acting Trustee Daniel Casamatta filed the lawsuit last month in the Chapter 7 bankruptcy of James Wayne Wilkison seeking a denial of his discharge, which if successful would prevent Wilkison from being excused to pay his debts.
In the year before filing for bankruptcy, Wilkison allegedly “engaged in a pattern of transferring assets to and from related controlled business entities for the purpose of evading and hiding from creditors,” according to Trustee’s Complaint by Joseph DiPietro of the United States Administrator’s Office in Little Rock.
DiPietro also said Wilkison’s bankruptcy should be denied discharge because Wilkison failed to keep proper financial records from which his financial condition or business transactions could be determined.
Wilkison filed for bankruptcy protection in April 2020, listing $15.1 million in assets and $38.8 million in debt, making it one of the largest farmer bankruptcies in recent memory. .
But almost all of the debt — $36.1 million — was owed to secured creditors, so those creditors would have to recover the value of their collateral.
Wilkison owns, directly or indirectly, more than 20 farms and other agricultural operations, including Wilkison Equipment LLC and Wilkison Flying Service LLC.
These entities operated approximately 16,000 acres in several counties, with the main crops being rice, soybeans and cotton, according to an operating report prepared by Angela Hopkins, CPA and member of Frost PLLC of Little Rock, and filed in bankruptcy. by Wilkison.
In 2018, his businesses reported revenue of $19 million and a net farm loss of $5.6 million. In 2019, the companies reported revenue of $27 million and a net farm loss of $5.5 million, Hopkins said in the filing.
In 2019, Wilkison’s crop sales were $5.3 million lower than the previous year.
“Extensive amounts of rain have significantly delayed the planting of all crops in Arkansas,” Hopkins said.
In late 2019, Wilkison “decided that he no longer wanted to farm personally, given the losses he had suffered over the past few years and the difficulty in securing funding,” Hopkins said.
Instead, he opted for custom farming, which includes site preparation, planting and harvesting, and formed Wayne Wilkison LLC to enter into employment contracts for this purpose.
But on April 14, 2020, Wilkison filed for bankruptcy protection. In November 2020, the bankruptcy court allowed Hopkins to review the legitimacy of Wilkison’s books.
In its report, Hopkins said it was concerned about “the high number and volume of transactions between the Principal Entities…and other related entities.”
Hopkins asked Wilkison and Keith Lockley, who works closely with Wilkison at Wayne Wilkison LLC, for financial records. Wilkison told Hopkins that his files were a mess and that he and Lockley “had gone through all the files for the last four years and a lot of information had been filed in the wrong year or in the wrong file,” Hopkins said in the folder.
Its analysis of transactions in 2019 and 2020 found $13.1 million in payments with only $8.6 million “supported by some type of documentation,” according to the trustee’s complaint.
Hopkins also said it was difficult to get the financial documents. “We have continually encountered resistance or no response to our previous requests,” she wrote.
Hopkins said Wilkison did not keep all the records necessary to determine his financial situation. The IRS requires taxpayers to keep records to support their income and expenses. How long a taxpayer must retain a document depends on the action, expense or event recorded in the document, Hopkins wrote. And the taxpayer should keep the record for as long as necessary to prove income or deductions on a tax return, she wrote.
Yet, wrote Hopkins, while Frost “found no conclusive actions of fraud” during his investigation, “the extreme mess of the accounting records and the lack of adequate transaction support expose the company to Debtor’s failure to maintain required records to substantiate business deductions may result in manipulation by employees, management and owners.
As of Tuesday, Wilkison had not filed a response to the trustee’s complaint. Wilkison’s attorney, Kevin Keech of Little Rock, did not call back.