Everyone thought things were running smoothly for Tri-State
by Ted Carter
Published: September 9,2012
Up until 2007, Hilda Henne Abbot and her siblings thought fiscal management of Tri-State Brick & Tile was running as smoothly as the millions of dollars in automated equipment installed at the Forest Avenue brickyard in the previous years.
Within a year, Abbot and brother Robert Henne and sisters Linda Henne and Jodie Henne learned that money going out of the brickyard covered a lot more than company expenses. But even with that discovery, they hardly suspected that insolvency awaited the 66-year-old family owned business.
Before 2007, trouble was nowhere in sight. The Hennes received their preferred shareholder dividend checks regularly and Tri-State seemed to be flourishing as it automated its brick and tile operations and enjoyed the go-go times of the mid-2000s.
Throughout the decade, though, the Hennes’ uncle, the late Robert H. Robinson, and later his widow, Jerry Robinson, relied on Tri-State Brick & Tile revenues to cover a host of personal expenses, court documents charge.
These included what court documents say were expenses totaling $1.7 million to pay for a horse farm and maintain a yacht and pay its captain, about $595,000 in forgiven loans and expenses and nearly $147,000 in credit card debt.
Attending a 2006 Tri-State Christmas party following Robert H. Robinson’s death earlier that spring, Abbott learned the company would not be sold or put into a trust as the Hennes had long thought. The news led the Henne siblings to decide they wanted to know more about the company’s health.
They started with a request for 10 years of balance sheets and permission to inspect annual balance sheets going forward, Abbott said in a recent interview.
“If we are going to keep this company in the family, we want to be in the loop,” Abbott said she and her brother and sisters decided.
As preferred shareholders, the Hennes had no say in setting policy or directing Tri-State’s operation. But the siblings did believe they had a right to inspect the finances of Tri-State and began pressing for that in the spring of 2007.
They encountered a series of delays but after hiring lawyer Walter Boone of Forman Perry Watkins Krutz & Tardy, the Hennes got a look at the books in November 2007.
There they found the extracurricular expenses that Tri-State’s board defended as “constructive dividends” to Jerry Robinson and her two daughters, both of whom were on Tri-State’s payroll as part of the sales staff.
Robinson, who became majority owner after her husband’s death, had the title CEO accompanied by a salary of $300,000 annually, though the board later reduced that amount to $150,000.
“Constructive dividends” are commonly described as any economic benefit conveyed to a shareholder that is not formally declared.
The constructive dividends that went to Jerry Robinson and her family “in reality were disguised dividends” that went undisclosed for a reason, wrote Glenda Glover, a lawyer, CPA and dean of Jackson State University’s College of Business hired by Boone to review Tri-State’s payments to the Robinsons.
“The purpose of the disguised dividend appears to have been to not trigger the provision requiring payment of” extra “dividends to the preferred shareholders,” Glover wrote.
The provision cited by Glover is part of Tri-State’s Amended Articles of Incorporation. It specifies that preferred shareholders are entitled to extra dividend payments equal to any dividends awarded common shareholders above 12 percent of the par value of the common stock.
Glover further claimed in her report that if the personal expense payments to Jerry Robinson and her late husband were indeed “constructive dividends,” the Hennes should get a corresponding dividend from Tri-State. Based on an ownership percentage of 48.11 percent, Glover estimated the Hennes would be entitled to constructive dividends of $4.6 million.
Abbott said she and her family were willing to be paid the money over a period of time “in order not to hurt the company.”
Added Abbott: “We asked for them to make us whole by paying us back what they owed us that they took.”
Tri-State’s board rejected the demand, setting the stage for a suit filed in April 2008 that would go to trial in July 2011 only to be settled on the fourth day of testimony. That settlement has since been put in limbo by the refusal of Jerry Robinson to sign it.
Phone calls to Jerry Robinson’s home for questions about the board’s rejection of the Hennes’ dividend demands were not answered. Her attorney, Charles Griffin of Butler Snow, declined comment, citing pending litigation.
Absent payment of the constructive dividends, Jackson State’s Glover calculated the Tri-State board should pay the Hennes, as minority shareholders, damages of $2.4 million. This amount, Glover said, reflects a 48.12 percent ownership share of the $4.99 million calculated to be the portion of company money that went to Jerry Robinson as “constructive dividends.”
“The majority shareholder should repay the Hennes as minority shareholders their ownership percentage of that amount,” Glower wrote in her pre-trial review.
Her analysis of the spending included a review of a pretrial “Expert Report” by Jackson CPA Greg King titled “Summary of Theft of Corporate Assets from Tri-State.” She said she concluded from King’s report that the Tri-State board showed “reckless disregard for corporate formalities and violated fiduciary duties.”
Meanwhile, Hilda Abbott says she is all but broke from the share of legal fees she has paid seeking to salvage her inheritance from the family business. With Tri-State now foreclosed on by Trustmark National Bank and no money left to keep up the legal fight, Abbott says her hope now is to erase the perception in Jackson that a downturn in the economy caused the family business to go under.
“Tri-State Brick & Tile did not succumb to the economy,” she said. “The common shareholders took money from Tri-State that was not theirs for too many years to count instead of paying the bank.”
>>Read more about Tri-State collapse
To sign up for Mississippi Business Daily Updates, click here.
Top Posts & Pages
- George’s Girls put shopping skills to work
- Justice Department files complaint against tax preparer
- DMR pays accounting firm more than double contract's worth
- Following ruling, Entergy to hand over records to county
- Report: State's emergency care ranks highest in Southeast
- Boyd Gaming reports drop in in-state net revenue
- Union-restricting legislation moves forward
- Chris McDaniel gets a thank you note from Travis Childers
- Mississippi ag aviation plays a critical role in production and profitability