Alvamar Inc. is suing its former management company, saying the namesake operation’s leaders kept misleading books, charged improper fees and misappropriated complimentary memberships to the country club that drove development in much of western Lawrence.

The case, filed this month in Douglas County District Court, seeks the return of more than $2 million in fees and payment of damages in excess of $75,000 from Alvamar Development Corp. and its remaining principals: Beverly Smith Billings, chairwoman, and Larry Chance, president.

Finances a concern

The suit comes nearly a year after a group of dissatisfied Alvamar Inc. shareholders – angry and frustrated about the company’s dwindling financial condition – successfully ousted a majority of Alvamar Inc.’s board of directors, and fired Alvamar Development Inc. as its management company.

Smith Billings, the widow of Alvamar co-founder Bob Billings, soon was replaced as Alvamar Inc. chairwoman, although she remained on the board. She has since taken a leave of absence.

“Alvamar deeply regrets that litigation has become necessary, but believes this step is warranted to protect the interests of its shareholders,” said Dick Stuntz, a board member and president of Alvamar Inc., in a statement.

Smith Billings, while declining to comment directly on the specifics of the case, said that she and Chance have been building on the legacy that her late husband had created since Alvamar’s founding in 1967.

Bob Billings, who died in 2003, had been the catalyst behind a development powerhouse – fueled by a handful of partnerships – that had a hand in developing 3,000 acres west of Kasold Drive, between Sixth Street and Clinton Parkway.

“For years, the Alvamar board and the Alvamar shareholders were appreciative and certainly supportive of Bob’s direction and his guidance of Alvamar, so it’s really surprising that some members of this current board have chosen to file this lawsuit,” Smith Billings said. “We will vigorously defend the work that Bob and Alvamar Development Corp. have done for Alvamar over the years.”

Details of lawsuit

Among the contentions included in Alvamar Inc.’s lawsuit:

¢ Alvamar Development – which Bob Billings formed to manage Alvamar Country Club, Alvamar Golf Course and its related operations – collected and kept $2.088 million in fees paid from 1999 to 2005 by five limited liability companies that had been formed by Billings, on behalf of Alvamar, with the purpose of buying and developing area real estate. While the partnership’s founding documents include no mention of paying management fees to anyone, the suit alleges, Alvamar Development collected such fees. Alvamar Development’s sole owner was Bob Billings.

¢ Financial records did not properly account for deficits at Alvamar Racquet Club, a money-losing operation that, by 1999, had received more than $6.5 million in advances from Alvamar Inc. to cover operating deficits. By 2002, the club was consolidated into Alvamar Inc., then sold to Bishop Seabury Academy for $2.1 million, and Alvamar’s statements were not adjusted to show the writeoff.

¢ Bob Billings granted more than 300 complimentary memberships to Alvamar, costing Alvamar Inc. more than $1 million a year. Many of the free memberships were given to investors in Dubs Dread, a golf and real estate development in Wyandotte County that had been managed by Alvamar Development and was owned in part by Bob and Beverly Smith Billings. Bob Billings gave investors memberships at Alvamar after deteriorating finances forced the sale of the Dubs Dread course.

Jeff Nelson, an attorney for Alvamar Development Corp., said that he and his clients “would disagree with virtually everything” included in Alvamar Inc.’s court filing.

In fact, he said, the filing does not mention the more than $500,000 that Alvamar owes to Alvamar Development Corp. for management services, a debt that is being carried on Alvamar Inc.’s own books as an account payable.

“It’ll be over $800,000 in principal and interest that we’ll be seeking to recover in our counterclaim,” said Nelson, a partner for Shook, Hardy & Bacon in Kansas City, Mo.