Bankrupt injection molder Venture Holdings Co. LLC and its related manufacturing units have filed a lawsuit against their primary owner, members of his family and business interests, alleging they siphoned hundreds of millions of dollars out of Venture, leading to its bankruptcy.
The 91-page suit was filed April 5 in U.S. Bankruptcy Court in Detroit, which also is handling Venture's Chapter 11 case. The suit maintains that Larry Winget bled off funds through arrangements ranging from excessive rental rates on property and equipment, to payouts to a private golf course Winget owns, for payroll and fringe benefits.
The fund transfers ``had no legitimate business purpose, other than to divert funds from the debtors to each such corporate defendant and Winget affiliate,'' the suit maintains in one count. The variety of payouts caused Venture's insolvency, according to the suit.
Fraser, Mich.-based Venture Holdings and 11 affiliated businesses that make a variety of interior and exterior auto parts filed for Chapter 11 protection in March 2003, 10 months after Venture's European subsidiary, Peguform GmbH, filed for insolvency.
That action in Germany - prompted by European managers concerned by the loss of an insurance policy - cut off the cash from Europe to the parent company. Peguform is continuing to make parts in Europe, guided by a German court system that also is overseeing the sale of its assets.
Winget continues to own Venture, but relinquished day-to-day management shortly after the bankruptcy filing.
In what his lawyers termed an ``initial response,'' Winget's representatives claimed creditors knew of Venture's interrelated business practices before loaning money to the firm, and the suit reflects ``basic misunderstandings of the relationships and the value provided by the related companies.''
Further, lawyers Ralph R. McKee and Nancy Mitchell noted in a written statement, Winget has provided financing from the nondebtor companies on a deferred-payment basis for almost two years to keep the company operating.
``Mr. Winget has made every effort to support Venture and facilitate a restructuring, including providing additional capital, agreeing to subordinate certain payments and working with private equity investors to try to find additional equity investment for the company,'' they said.
``Despite these efforts, Mr. Winget believes that the unrealistic expectations and aggressive tactics employed by the creditors' committee has destroyed the value of the company.''
The suit seeks $314.5 million from Winget alone and other amounts from Winget companies, such as $47.7 million from Venture Industries Australia Pty. Ltd., $12.3 million from Venture Heavy Machinery LLC and $3.9 million from Venture Real Estate Inc.
The creditors also are seeking funds from members of Winget's family who allegedly benefited. His wife, Alicia Winget, is listed for more than $10.5 million, son N. Matthew Winget for $1.5 million, nephew Brian P. Winget at $270,000 and daughters Adelicia Tiganelli and Gwendolyn Cameron for damages to be determined at trial.
In all, the suit takes aim at 17 different companies controlled by Winget or his family that were not part of the Venture Holdings bankruptcy - although some of those operations own actual property or equipment used by Venture Holdings through lease agreements.
The allegations include that:
* Venture Heavy Machinery leased items to debtors Venture Industries Corp., Vemco Inc. and Venture Holdings Corp., with those companies making lease payments since March 29, 1997, of more than $15 million. Fair market value, the suit claims, was $2.6 million.
* One or more of the Venture Holdings companies paid more than $10.5 million between 1997 and the date of the bankruptcy filing to Golf Course Services LLC, a private golf course in Rochester Hills, Mich., operating under the name ``The Wyndgate.'' There was no written agreement for the manufacturing units to pay the funds used for payroll costs, and the production units received no value in exchange for the transfers.
* Deals with real estate companies owned by Winget, his family or a Winget living trust charged rents in excess of market value. Overpayments alleged included nearly $3.4 million for one property and $7.3 million for another.
* Winget Construction Services LLC, owned by Brian Winget, was paid $270,000 a month starting in March 2002 to keep him on call for services - for which debtors said they received no value.
* In 1991, the manufacturing companies entered an agreement with Winget-owned Venture Sales & Engineering, in which they agreed to pay VS&E a 3 percent sales commission. Since 1997, though, the production firms have maintained their own internal sales staff. VS&E's staff included Larry Winget's daughters.
* Matthew Winget owns Linden Creek Enterprises LLC, which was paid $209,732 for engineering services that were not performed and more than $1 million in fixed overhead costs, and the debtors paid $300,000 for a robotic work cell for Linden Creek.