09/14/2007 215 Affidavit of John Todd Wright, filed by U.S. Trustee (RE: related document(s)156 Motion to Appoint Trustee,, filed by U.S. Trustee U.S. Trustee). (Daugherty, John) (Entered: 09/14/2007)
In re:
Plasticon International, Inc.
Case No. 07-50934
Chapter 11
Debtor
Comes John Todd Wright, Declarant who states the following:
Qualifications
1. My Name is John Todd Wright.
2. I have been a Certified Public Accountant since 1988 and am currently in good standing with the Kentucky State Board of Accountancy.
3. I am currently a Bankruptcy Analyst with the Office of the United States Trustee in Lexington.
4. I have held the position of Bankruptcy Analyst since October, 2000.
5. Prior to working for the U.S. Trustee’s office, I was employed as a Trust Officer with Fifth Third Bank of Kentucky, following nine years as Controller of Phoenix Corporation, Debtor in Possession f/k/a Calumet Farm, Inc. Prior to that I spent five years in public practice working for several accounting firms. My primary practice area was financial statement preparation and attestation. I worked on and was the senior accountant for numerous audit engagements for small and medium sized business. As a C.P.A. working primarily on financial statement preparation and attestation I developed an expertise in reading and interpreting financial statements and audit documentation or workpapers. Additionally, in my role as a Bankruptcy Analyst I have developed an expertise in reviewing bankruptcy petitions, schedules, SOFAs, chapter 11 Monthly Operating Reports and other bankruptcy filings.
Plasticon’s Financial Performance
6. An analysis of the Plasticon’s Form 10-KSB filed by Plasticon International, Inc. f/k/a Wicklund Holding Corporation (“Plasticon”) for the year ended December 31, 2003 (Exhibit 1) indicates the following:
a. At December 31, 2003 Plasticon had total assets of $1,371,605 and total liabilities of $12,945,036;
b. Plasticon had no sales during 2003 resulting in revenue of -0-;
c. Plasticon incurred a net loss of $1,146,509 in 2003;
d. James N. Turek, president and sole director of Plasticon, awarded himself a salary of $325,000 and a bonus of $250,000 for 2003;
e. Plasticon had only one full time employee during 2003;
f. Plasticon had approximately 657 shareholders as of December 31, 2003.
7. An analysis of the Debtor’s Form 10-KSB for the year ended December 31, 2004 (Exhibit 1) indicates the following:
a. At December 31, 2004 Plasticon had total assets of $659,549 and total liabilities of $10,665,501; Plasticon had no sales during 2004 resulting in revenue of -0-;
b. Plasticon incurred a net loss of $73,648,555 in 2004;
c. James N. Turek, president and sole director of Plasticon, was awarded a salary of $350,000 and a bonus of $350,000 for 2004;
d. James N. Turek, president and sole director of Plasticon, converted $1,780,130 of debt into 758,833,001 shares of common stock of Plasticon with a par value of $1,708,130, (Plasticon’s stock was not yet being traded therefore no market value was available);
e. During 2004 Plasticon’s shares of common stock outstanding increased from 37,856,600 to 1,440,486,371. There was no corresponding increase in assets or decrease in liabilities which would justify the issuance of these shares. The result is an approximate 3800% dilution of ownership to current shareholders;
f. Plasticon had only two full time employees during 2004.
8. An analysis of the Debtor’s Form 10-KSB for the year ended December 31, 2005 (Exhibit 2) indicates the following:
a. At December 31, 2005 Plasticon had total assets of $6,293,238 and total liabilities of $13,33,414;
b. Plasticon had sales of $65,565 and cost of goods sold of $94,227 resulting in a gross loss of $28,662;
c. Plasticon incurred a net loss of $31,659,904 in 2005;
d. James N. Turek, president and sole director of Plasticon, was awarded a salary of $633,000. Mr. Turek agreed to defer receipt of these funds for an unspecified length of time;
e. James N. Turek, president and sole director of Plasticon, converted $438,043.10 of debt into 438,043,100 shares of common stock of Plasticon with a market value of $6,526,842 on the date of issue;
f. James N. Turek, president and sole director of Plasticon, issued to himself, as compensation, 1,839,210,629 shares of common stock of Plasticon with a market value of $21,139,784 on the date of issue.
9. An analysis of the Debtor’s Form 10-QSB for the quarter ended September 30, 2006 (Exhibit 3) indicates the following:
a. At September 30, 2006 Plasticon had total assets of $8,156,399 and total liabilities of $8,965,473;
b. Plasticon had sales of $4,761,839 and cost of goods sold of $3,703,192 resulting in a gross profit of $1,058,647 for the nine months ended September 30, 2006;
c. Plasticon incurred a net loss of $19,273,492 for the nine months ended September 30, 2006;
d. James N. Turek, president and sole director of Plasticon, issued to himself as compensation 3,603,771,000 shares of common stock of Plasticon with a market value of $14,846,168 on the date of issue;
e. During the fourth quarter of 2006 Plasticon identified $720,000 in debt that was incurred in 2005. Proceeds from the borrowings were deposited with LexReal Co., LLC, which is owned by James N. Turek. The loan proceeds due to Plasticon were offset against amounts owed to LexReal on Plasticon’s books at the loans were incurred in 2005, but the loans themselves were not recorded on Plasticon’s books. The loans were subsequently called requiring Plasticon to provide 270,296,888 of common shares in satisfaction of the notes.
10. To summarize, for the three year nine month period ending September 30, 2006, the period for which Plasticon filed financial reports with the United States Securities and Exchange Commission:
a. Plasticon reported a cumulative net loss of $125,728,460;
b. James N. Turek received as compensation 5,442,981,629 common shares of Plasticon stock with an aggregate market value at the time of issue of $35,985,952. This is in addition to the salary and bonus of $1,908,000 he was awarded during this period;
c. James N. Turek converted $2,146,173 of debt which Plasticon owed to him into 1,196,876,101 shares of Plasticon’s common stock with a value at the time of issue of $8,234,972.
11. In a press release dated June 17, 2005 (Exhibit 4) James N. Turek proclaimed “We are thrilled to announce that Plasticon International is profitable as of the second quarter of 2005”. This statement is contradicted by Plasticon’s subsequent Form 10-QSB for the second quarter of 2005 (Exhibit 5) which shows a loss from operations of $3,346,314 and a total net loss of $3,018,067. This press release trumpeting Plasticon’s profitability was published before the end of the second quarter 2005 and more than a year before Plasticon was able to file its actual results for the second quarter of 2005 with the SEC.
Plasticon’s Post-Petition Conduct
12. An analysis of Plasticon’s Monthly Operating Report (Exhibit 6) for the period May 17, 2007 through July 31, 2007 indicates the following:
a. Plasticon has paid the following pre-petition creditors a total of $14,135.09 in violation of the Debtor’s Operating Order. No authorization allowing these payments is cited
Verizon Wireless $786.75
Windstream $598.34
Internal Revenue Service $12,750
The payments to the Internal Revenue Service are a personal obligation of James N. Turek being paid by Plasticon pursuant to its indemnification agreement with him;
b. Plasticon has employed post-petition Carmine J. Bua III, Esq., Plasticon’s security lawyer, and Mendoza, Berger and Co., LLP, Plasticon’s independent auditors, without Court authorization. Both are also creditors of the estate;
c. As of July 31, 2007 Plasticon has overdrawn its primary bank account by $18,712.28;
d. Plasticon has borrowed money post-petition without authorization of the court. The cash receipts log provided by Plasticon reveals that $102,332.90 has been loaned to the Debtor by James Turek and LexReal Co., LLC;
e. Many of the LexReal loans (Exhibit 7) contain oppressive terms that cannot be justified by any valid business purpose. The loans are all convertible into Plasticon common stock at a rate of $0.0001 per share. In addition to carrying a 10% interest rate, many of the notes require an upfront closing fee of 100% of the loan amount payable in Plasticon common stock again using a rate of $0.0001 per share. Some of the notes even contain a default interest rate of 20% daily.
I declare under penalty of perjury that the foregoing is true and correct.
Executed on September 14, 2007.
/s/ John Todd Wright
John Todd Wright
Bankruptcy Analyst
100 E. Vine St., Suite 500
Lexington, KY 40507
(859) 233-2822
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