Feds seek $14.4M from small-business lender

Tuesday, May 27, 2008 at 2:04am

The U.S. Small Business Administration has secured a $14.4 million judgment against a Nashville firm once nationally hailed for its support of women entrepreneurs.

Two years after it sued in Nashville's federal court to place Capital Across America L.P. in receivership, the SBA on May 16 filed a consent judgment that was agreed to by the company. The agency accused CAA of failing to maintain adequate capital to continue to qualify as a Small Business Investment Company. Once the firm was disqualified, all of the SBA loans it had received immediately came due.

Capital Across America gained attention as an innovator in financial services after former Nashville attorney Whitney Johns founded it in 1998.

“I started a crusade to become the first woman to start a fund that would specifically target women-owned firms for investment,” Johns told Fast Company magazine in 1999.

At various times between 2000 and 2004, company representatives were quoted as saying CAA had between $25 million and $43 million in funds to loan to small businesses. Individual investors from Nashville and several banks reportedly invested in the company along with the SBA.

Johns collected numerous accolades in CAA's first few years. She served as president of the National Association of Women Business Owners, was appointed by President Bill Clinton to a White House panel on small business and received an award from the Southeast region of the SBA.

She also chaired the Nashville board for the Federal Reserve Bank of Atlanta.

Johns married a venture capitalist and moved to Dallas in 2000, while CAA continued operations in Nashville. She now uses the name Whitney Johns Martin. Efforts to reach her for this story were unsuccessful.

The SBA declined to provide details on the legal action. Mike Stamler, director of the agency’s press office in Washington, D.C., stated only that “the receiver is in the midst of working on resolving various claims that have been filed against the receivership estate as part of standard procedure for an SBIC receivership.”

Joel T. Galanter of Adams and Reese LLP is serving as local counsel to the SBA on the matter.

Other cases of note (May 15-21)

United States District Court for Middle Tennessee:

• Farzin Ferdowsi v. Islamic Republic of Iran, et al. Document filed May 19. Prominent Brentwood businessman Ferdowsi and his three brothers, who also live in Brentwood, now have the satisfaction of knowing this lawsuit was served upon the government that murdered their father.

It has taken two years for the paperwork to reach Tehran.

Ferdowsi filed suit in March 2006 against the Iranian regime, two Islamic fundamentalist factions and two individuals accused of kidnapping, torturing and executing Fat'u'llah Ferdowsi in 1981 and 1982. Under the federal Foreign Sovereign Immunities Act, countries designated as state sponsors of terrorism, as Iran is, can be sued in American courts.

The State Department notified the court in Nashville last week that Swiss diplomats, acting on behalf of the United States, had recently presented a diplomatic note containing the legal papers to the Iranian Foreign Ministry. The Iranians promptly sent the papers back to the Swiss Embassy, but under U.S. law, they have officially received service of process. Plaintiff's attorney: William T. Ramsey of Neal & Harwell PLC.

• Frederick P. Clayton Jr. et al. v. Heartland Resources Inc et al. Filed May 19. Numerous investors allege securities fraud by Heartland, which is based in Bowling Green, Ky., and a number of affiliates, some based in Nashville.

The lawsuit says David Allen Stewart Jr. and D. Mark Haynes of Bowling Green controlled the Heartland entities, which sold limited partnership interests in various oil and gas ventures. Stewart is currently serving time in federal prison for income tax evasion.

Plaintiffs claim Kentucky attorney Hunter Durham knew about the fraud when he drew up investment documents. $11 million in damages sought. Plaintiff's attorneys: H. Wynne James III, Joseph A. Woodruff, Rhonda Scott and Rebecca Brinkley of Waller Lansden Dortch & Davis LLP.

Davidson County Chancery Court:

• Deborah J. Gordon and S3 Consulting LLC v. AERC.com Inc and James Beckner. Filed May 20. Nashville entrepreneur Debbie Gordon, founder of the Snappy Auctions eBay sales franchise, went to work for technology recycler AERC and licensed S3’s software to it last fall. The company dismissed her earlier this month.

She claims AERC has violated her rights under the employment and software contracts. She also makes sexual harassment allegations against AERC board member Beckner.

Unspecified amount of damages sought. Plaintiff's attorneys: Russell B. Morgan and Luther Wright Jr. of Boult, Cummings, Conners & Berry PLC.

• Ronnie Milsap Entertainment LLC et al. v. United Airlines Inc. Filed May 19. Country star Milsap lives out the fantasy of beleaguered air travelers everywhere, suing the airline he holds responsible for a travel trauma.

In early February of this year, Ronnie and the band were trying to get from a gig in Burlington, Vt., to one the next afternoon in San Antonio. They say United bounced half the band from the final leg of the trip because the aircraft was overbooked. They flew to Nashville instead, hired a private jet on a moment’s notice (for about $13,900) and flew on to San Antonio.

The show went on as scheduled. Unspecified amount of damages sought. Plaintiff's attorneys: Samuel D. Lipshie and Tara T. Hambrick of the Boult firm.

• Maury Regional Hospital and Williamson Medical Center v. Tennessee Health Services and Development Agency. Filed May 21. Corporate combat over whether HCA Inc. can build a 56-bed hospital in Spring Hill enters its third year, with Davidson Chancery as its latest battlefield. The Halliburtons of this war – law and public relations firms deployed in profusion by all sides – have been the only clear victors so far.

In the current skirmish, HCA’s competitors argue that the HSDA erred in overturning an administrative law judge’s decision last October denying HCA permission to build the hospital. Plaintiffs' attorneys: Dan H. Elrod and G. Brian Jackson of Nashville's Miller & Martin PLLC for Maury Regional; Warren L. Gooch and Charles E. Young Jr. of Kramer Rayson LLP in Knoxville for Williamson Medical.

• Alex Friedmann v. Corrections Corp. of America. Filed May 19. Friedmann's one-man campaign against the private-prison industry in general and Nashville-based CCA in particular has been going on ever since he was held at a CCA facility in the 1990s, doing 20 years for armed robbery and attempted murder.

Now on the outside, as associate editor of Prison Legal News, Friedmann seeks to establish that the Tennessee Public Records Act applies to the records of a private company carrying out a state contract.

He asked CCA for access to information about damages and settlements paid out by the company, as well as governmental audits showing its non-compliance with contract standards. He also wants copies of all contracts between CCA and the state.

Plaintiff's attorneys: Andrew C. Clarke and Scott A. Kramer of Borod & Kramer PLC in Memphis, with Andy L. Allman of Kelly, Kelly & Allman in Hendersonville. Appended to the complaint is a letter from Joseph F. Welborn III of Walker, Tipps & Malone in Nashville that spells out the legal positions behind CCA's refusal to show the requested documents to Friedmann.

• Caterpillar Financial Services Corp. v. Hermitage Developers Inc. and James Dwight Holland. Filed May 16. Nashville-based Cat Financial underwrote the purchase by Hermitage of some impressive-sounding Caterpillar gear last year from Thompson Machinery in La Vergne: A "Caterpillar Hammer," a "Multi-terrain Loader," a couple of "Track-type Tractors," and other earthmoving machines that would no doubt thrill the heart of former Tonka aficionados everywhere.

Cat says the payments aren’t coming in, and it’s repo time. Damages of at least $500,000 sought. Russ Morgan of Boult is also handling this case.

• Clark and Teresa Phillips v. Beacon Homes Inc., Rhino Construction & Mechanical Inc. and J. Varnie Barker. Judgment recorded May 15. Damages, costs and attorney's fees of about $204,000 awarded to a Nashville couple who sued homebuilder Barker and his two companies for breach of contract and fraud. Beacon Homes was exempted for the case because creditors filed an involuntary Chapter 7 bankruptcy case against it last July.

Plaintiff's attorney: Philip Byron Jones of Evans, Jones & Reynolds PC. Defendants’ attorneys: Thomas J. Dement II and J. Paul Brewer of Leitner, Williams, Dooley & Napolitan PLLC.

Davidson County Circuit Court:

• Robert E. and Carolyn J. Meeks v. Jeremy Michael Holmes, Security Express, LLC, Michael J. Nacarato (individually); Joseph R. Nacarato (individually), Nacarato GMC Truck Inc., Nacarato Used Truck Sales LLC. Filed May 15. This one is about a ruined holiday. Robert and Carolyn Meeks of Nashville say they were just pulling into a spot along a public right-of-way to watch the downtown fireworks last July 4 when security guard Jeremy Holmes told them they could not park in front of the Nacarato truck lot at 710 Stanley St.

The plaintiffs say an altercation ensued, with the guard grabbing Robert Meeks and telling him he was under arrest. Their legal claims include gross negligence, assault, battery and false imprisonment. Unspecified amount of damages sought. Plaintiff's attorneys: Jack L. Byrd and Karin J. Kelley of Nashville.

• Terrance L. Holt v. Centerstone Community Mental Health Centers Inc. Filed May 15. Centerstone employees were taking care of Holt, who has Down Syndrome, one day in May 2007. The lawsuit asserts that a counselor asked him to cut the grass with a gas-powered lawnmower even though he had not operated one before. Holt had an accident in which two toes were severed.

Negligence is alleged. Unspecified amount of damages sought. Plaintiff's attorney: Michael Dillon of Stillman & Friedland.

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