Former Montgomery CEO convicted of using bankrupt company to pay for gambling

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A federal jury in Montgomery convicted an Auburn man on two counts of bankruptcy fraud for concealing his company’s assets from bankruptcy court and his creditors.

Kennon W. Whaley, 51, was sentenced in federal court on Tuesday, said George Beck Jr., US attorney for the Middle District of Alabama. Whaley has been President and CEO of Southeastern Stud & Components since its inception in 1999. Southeastern Stud was located in Montgomery and manufactured lightweight steel framing components for commercial and industrial construction.

At its peak in 2005, Southeastern Stud grossed more than $ 34 million, had 125 full-time employees and distributed steel to customers across the country, Beck said.

“By 2009 the company’s revenue had declined significantly, so Whaley, on behalf of Southeastern Stud, filed for Chapter 11 bankruptcy in March of that year and the company remained bankrupt until October. 2011. Because Southeastern Stud was allowed to sue his during bankruptcy, Whaley was required by law to disclose all of the company’s assets and property to bankruptcy court on a monthly basis, ”the US attorney’s office said in a statement. Press release.

Prosecutors said evidence at trial showed that despite this demand, Whaley diverted the proceeds from a $ 260,000 insurance payment to the company in 2010 to pay off personal gambling debt. Evidence showed that he visited Wynn Las Vegas in January 2010 and incurred a gambling debt of $ 100,000 during a four-day trip.

Evidence also showed that the casino began to “pressure” Whaley to pay the debt starting in February 2010. Wynn Las Vegas casino records and bank statements for the account where the proceeds were from the insurance was filed, showed that Whaley used the company’s insurance money to pay off his gambling debt and paid himself over $ 30,000 in cash.

Whaley never disclosed these transactions to bankruptcy court as required, Beck said.

Casino records also showed that after his debt was paid off in October 2010, Whaley returned to Wynn Las Vegas and spent over $ 20,000 at the casino and sent a limo to pick up his wife from the airport. At that time, Southeastern Stud was still bankrupt and around 70 percent of its employees had lost their jobs.

The case was investigated by the FBI after receiving a tip from one of Whaley’s former employees.

“Our bankruptcy laws are designed to provide financial protection to both creditors and debtors,” Beck said. “When debtors try to illegally thwart the very laws that protect them and profit from this fraud in bankruptcy court, they will be punished.”

Whaley faces a maximum sentence of five years in prison on each count of bankruptcy fraud.

The case was continued by Deputy U.S. Attorneys Brandon Essig and John Geer.


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