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A bankruptcy trustee wants a judge to dismiss a Cleburne County farmer’s $38.8 million bankruptcy.
Acting Trustee of the United States Daniel Casamatta filed the suit last month in James Wayne Wilkison’s Chapter 7 bankruptcy seeking a denial of his release, which if successful would prevent Wilkison from paying off his debt.
In the year before he filed for bankruptcy protection, Wilkison was allegedly “involved in a pattern of transferring assets to and from related controlled companies to evade and hide them from creditors,” according to the complaint from the Office’s trustee Joseph DiPietro of the United States Trustee at Little Rock.
DiPietro also said that Wilkison’s bankruptcy should be denied because Wilkison failed to maintain proper financial records that could determine his financial condition or business transactions.
Wilkison filed for bankruptcy protection in April 2020 with assets of $15.1 million and debts of $38.8 million, making it one of the largest farmer bankruptcies in recent memory.
But almost all of the debt –– $36.1 million — went to secured creditors, so those creditors should get back the value of their collateral.
Wilkison owns, directly or indirectly, more than 20 agricultural and other agricultural businesses, including Wilkison Equipment LLC and Wilkison Flying Service LLC.
These companies farmed about 16,000 acres in multiple counties, with the primary crops being rice, soybeans and cotton, according to an operations report prepared by Angela Hopkins, CPA and a member of Frost PLLC in Little Rock, and filed with Wilkisons for bankruptcy.
In 2018, his companies reported revenue of $19 million and a farm net loss of $5.6 million. In 2019, the companies reported revenue of $27 million and a farm net loss of $5.5 million, Hopkins said in the filing.
In 2019, Wilkison’s crop sales were $5.3 million lower than the year before.
“Heavy rains have significantly delayed 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 several years and the difficulty in raising finance,” Hopkins said.
Instead, he chose custom farming, which includes site preparation, planting and harvesting, and formed Wayne Wilkison LLC to contract for this.
But on April 14, 2020, Wilkison filed for bankruptcy protection. In November 2020, the bankruptcy court authorized Hopkins to test the legitimacy of Wilkison’s books.
In her report, Hopkins said she was concerned about the “high number and volume of transactions between the primary companies … and other related companies.”
Hopkins asked Wilkison and Keith Lockley, who works closely with Wilkison at Wayne Wilkison LLC, for financial records. Wilkison told Hopkins that his records were in disarray and that he and Lockley “have gone through every file folder for the past four years and that much information has been filed in the wrong year or wrong folder,” Hopkins said in the filing.
Their analysis of transactions in 2019 and 2020 found payments of $13.1 million, with only $8.6 million “supported by any type of documentation,” according to the trustee’s complaint.
Hopkins also said it was difficult to get the financial documents. “We consistently encountered resistance or no response to our previous requests,” she wrote.
Hopkins said Wilkison did not keep all the records needed to determine his financial condition. The IRS requires taxpayers to keep records to document income and expenses. How long the taxpayer should keep a document depends on the action, expense, or event the document is recording, Hopkins wrote. And the taxpayer must keep the records for as long as is necessary to show the income or deductions on a tax return, she wrote.
Still, while Frost “did not find any conclusive acts of fraud” during his investigation, Hopkins wrote, “the extreme clutter of the accounting records and the lack of adequate support for transactions lend the business exploitation.” Debtor’s failure to maintain the necessary records to prove business deductions can lead to manipulation by employees, management and owners.”
As of Tuesday, Wilkison had not filed a response to the trustee’s complaint. Wilkison’s attorney, Little Rock resident Kevin Keech, didn’t call back.