The bankruptcy of Oread Inc. did more than cost 225 employees their jobs, leave dozens of contractors unpaid and quash the promise of a fast-growing contract-pharmaceutical powerhouse in Lawrence.
It also will cost Douglas County taxpayers more than $620,000.
"It's a sickening feeling," said Jere McElhaney, a Douglas County commissioner. "We tried to put some trust and faith in an enterprise that had made its commitment to the city of Lawrence and Douglas County, and it just didn't follow through. It just didn't hold up.
"Now it's leaving taxpayers holding the bag."
Instead of collecting the full $671,000 balance on Oread's unpaid personal property taxes since 1999, county officials have accepted the pain of knowing they will be forced to accept a $50,000 check instead.
Such is the public price paid for the failure of a private enterprise.
"We're not saying it's reasonable or fair or equitable for the taxpayers," said Craig Weinaug, county administrator. "It's just the best we could get."
The proposed tax settlement already endorsed by commissioners is included in Oread's Chapter 11 reorganization plan, awaiting approval this month from the U.S. Bankruptcy Court in Topeka. Creditors are being asked to vote on the plan by Jan. 22.
As is the case with many bankruptcies, officials involved from government leaders to business owners to hired attorneys acknowledge that there will be few winners.
If approved, the plan would:
l Provide about $190,000 to cover the unpaid vacation and sick time owed to former Oread employees.
l Cut into the massive mortgage owed to Bank One of Chicago, which thus far has recovered only about $10 million of the $32 million it was owed when the case was filed.
l Give the county $50,000 to cover a fraction of Oread's personal property taxes, which are owed on the company's equipment, furnishings and other items at its two Lawrence campuses: 1501 Wakarusa Drive and on Kansas University's West Campus.
All other creditors dozens of service companies, contractors, suppliers and others will be forced to wait for financial leftovers that officials admit are unlikely to materialize.
Craig Spidle, president of CRB Builders Inc. in St. Louis, said Oread still owed his company about $250,000 for a renovation job at Oread's labs on West Campus.
While Spidle was named to the bankruptcy case's unsecured creditors committee, the group never bothered to send an attorney or other professional to argue on its behalf. Its members knew there simply wouldn't be enough money to satisfy the debts owed to dozens of companies, large and small.
"It's ridiculous," Spidle said. "I don't think the general public realizes that bankruptcy allows unethical businesspeople to escape their obligations. We've got better places where we could have invested that money. We're a small operation, and it could have very easily put us out of business.
"There are not a lot of companies that could take a $200,000 hit. It took us probably a year to work out of that hole."
What little hope remains for any additional financial proceeds to the bankruptcy estate rests with attorneys and real estate agents.
In court documents, Terrence Brown, trustee for the bankruptcy, said he was considering filing a claim against an insurance policy covering Oread directors and officers with a face value of $10 million.
Brown also is trying to sell Oread's bulk actives pilot plant, which cost $12 million to build just west of the Oread campus near 15th Street and Wakarusa Drive. So far, the highest credible offer received was $1.2 million.
Brown also is seeking repayment of $360,000 from David Kimbrell, Oread's owner. Brown alleges that Kimbrell received the money from the company within a year of its bankruptcy filing.
Recovering all the money still wouldn't be enough to cover Bank One's claims, Brown said, and that drives McElhaney owner of his own business, McElhaney Fence Builders nuts.
"When somebody thinks of a bankruptcy closing a business, they always think of their friends or their neighbors being laid off and losing their jobs," he said. "This is one not only where our citizens have been hurt, but also the taxpayers as a whole.
"It's police and fire protection, ambulance work, road work, soil conservation districts, extension offices, our court systems the list just goes on and on. It does make you angry."
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