||Last Updated: Mar 31, 2009 - 2:29:20 PM
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VICTOR – In a community where a person’s word is usually good enough, the bankruptcy filing by Victor Plastics could have wide ranging repercussions for local businesses. As the details begin to emerge in the recent filing, questions are beginning to mount for both area businesses and employees.
As designed, Chapter 11 bankruptcy allows a company to remain in operation while a bankruptcy court supervises reorganization of the company’s contractual and debt obligations. The court is able to grant either complete or partial relief from debts or contractual obligations to allow the company to continue operations. A Chapter 11 filing may allow the company to emerge from bankruptcy after a given time.
Statements made by Victor Plastics CEO Mike Tryon, however, suggest the company intends to cease operations by early May, thus laying off approximately 429 employees and leaving creditors in limbo as the bankruptcy filing works through the court.
In the lengthy filing is ‘Exhibit A’, an attachment that lists unsecured creditors and extends for 59 pages. For Victor and surrounding communities, the list of creditors reads much like a chamber of commerce directory. Included on the list are the Village Pharmacy and Flower Connection in Victor, Victor Printers, Rohrer Brothers, Victor Oil, TNT Auto Sales in Guernsey, Charles Capper Auto Center in Marengo, M & N Grain and the Pronto station in Victor, MPC Newspapers in Marengo and NAPA Auto Parts in Brooklyn among others.
Two items in Exhibit A, however, stand out – and are a source of questions in the community.
On the list of creditors is the Victor Plastics 401K Plan – the inclusion of which is, apparently, a cause for concern among some employees in the company.
When asked to speak generally – and not specifically about Victor Plastics - regarding 401K plans and bankruptcy, Victor attorney Fred Stiefel said, “401K plans belong to the individual employee. Only promised contributions by the company, not yet made, would be affected by the bankruptcy filing.”
While the plan and vested amounts are separate from the bankruptcy filing, Stiefel did point out there could still be risk for some employees.
“If employees had invested their 401K money in company stock, then of course, the bankruptcy would affect the stock value, and hence the value of the 401K,” he continued.
Shawn Harden, an attorney and magistrate judge from Independence, Iowa, and a 1996 HLV graduate, expanded upon the 401K concerns.
“Each employee needs to make their own decision based upon their own personal situation and what information they have and can find before determining whether they feel their 401K is safe enough,” Harden said. “If they do not feel secure in what the company is telling them or that their funds are safe, they should contact a tax adviser to determine their best option.”
The second standout item on the list was that of Victor Lumber Company. Exhibit A lists the locally owned business as one of the top 20 creditors with $111,673 owed. According to Steve and Amy Heudepohl of Victor Lumber, however, that amount is nearly 100 times what is actually owed to the business.
Despite the significantly smaller amount, however, the impact of losing nearly $1,200 will be keenly felt by the business.
We haven’t formally been notified of the amount,” Amy said. “I don’t know how they got that number,” Steve added, referring to the larger amount.
“So many businesses here are effected by this,” Amy said. “If people steal from Wal-Mart, they will go to jail.”
At Victor Lumber, customers are greeted like the friends and neighbors they are. The trust works both ways – customers frequently run in to grab items asking that the items be added to their accounts as they run out the door. In this community, a person’s word is often good enough. For some businesses, however, the bankruptcy filing may force them to be more careful – and more guarded.
Family photos decorate the counter area, along with a homemade cake set out for employees and customers alike. The lumber store is a place where people are treated as they expect to be treated. That’s not out of a policy manual but rather because it’s the right thing to do. Indeed, the Heudepohls’ will certainly feel the possible loss of $1,200. It’s simply not something that was expected in this community.
For now, as the details slowly emerge, new questions float to the surface about possible buyers and how the situation at Victor Plastics was able to reach this point. Many people in the community speculate how things would be different if founder Jim Kubu was still at the company.
And things may be different in the future. According to Dr. Leonard Seda, president of the Victor Community Development Association, there is reason to have hope in the form of a buyer.
“We do have a possible buyer or two,” Seda said. “We are hopeful and confident. I was encouraged by what I’ve heard.”
Seda also put things in perspective.
“It looks reasonably good [in terms of a possible buyer],” he said. “Remember, it has only been one week.”
But for some of the local businesses listed on Exhibit A and, more specifically, the employees of Victor Plastics, it has been a long week.
“The sincerity of our workforce is so immense,” Seda said. ‘I really feel for them – in both financial and emotional terms.”
“I think the management has a lot of explaining to do,” Amy Huedepohl said. “I think they owe the people who work there an explanation.”
And yet there are more questions. On the day before the bankruptcy petition was filed, a person by the name of Charles A. Brown filed suit against Victor Plastics in Johnson County. According to the Iowa Secretary of State’s office, a person by the name of Charles A. Brown is listed as the secretary and treasurer of Victor Plastics, Inc. No other details of that lawsuit were available at press time and there is currently no indication that it played a role in the bankruptcy filing.
It is just one more question.
Victor Plastics, contacted through their public relations firm, did not respond to numerous questions posed by the East Iowa Herald.
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