published Thursday, August 12th, 2010

McKenzie takes on former partner, attorneys

Troubled businessman Toby McKenzie and his bankruptcy trustee have joined forces to file lawsuits in two courts against McKenzie’s former business partner and attorneys.

McKenzie and C. Kenneth Still, U.S. bankruptcy trustee, on Friday sued Nelson Bowers II, John Anderson and the firm Grant, Konvalinka and Harrison in both Bradley County Chancery Court and U.S. Bankruptcy Court. The Chancery Court lawsuit seeks $75 million, and the Bankruptcy Court suit seeks at least $45 million.

According to the suit in Bradley County Chancery Court, Bowers and Anderson took advantage of McKenzie while he suffered a mentally debilitating illness to obtain his signature signing away 60 acres of valuable property and a 50 percent interest in Tennessee Interstate Properties.

The 60 acres is valued at $15 million, according to the claim.

Additionally, the suit claims Bowers owes McKenzie $1 million for the sale of property that became the site of Toyota of Cleveland.

“Defendant Anderson and Grant, Konvalinka and Harrison along with defendant Bowers conspired to take from McKenzie valuable property by fraud,” according to the lawsuit filed by Richard Banks for McKenzie and Scott LeRoy, lawyer for the bankruptcy trustee.

The second suit, filed in Bankruptcy Court, called the transfer “fraudulent and avoidable.”

“The defendants Bowers, Anderson and GKH (Grant, Konvalinka & Harrison) had actual knowledge of the pending bankruptcy and their actions constituted a flagrant willful and deliberate violation of the order of this (Bankruptcy) Court,” it states.

In the bankruptcy proceedings, McKenzie’s assets were frozen pending the trustee’s and court’s allocation of them to creditors.

Bowers could not be reached and did not return messages seeking comment. Requests for comment from Grant Konvalinka & Harrison were referred to Anderson, who could not be reached and did not respond to messages seeking comment.

Banks said the two suits, which also seek to void the property transfers, were made possible when U.S. Bankruptcy Judge Shelley Rucker in June allowed Still to also employ Banks to recover McKenzie’s assets “for the benefits of creditors.”

Still could not be reached for comment Wednesday.

Banks said McKenzie actually had very little debt, and most was in the form of personal guarantees.

The dispute

The suit claims McKenzie was admitted to Athens Community Hospital on Dec. 9, 2008, a couple of weeks after an involuntary Chapter 7 bankruptcy had been filed against him. At the hospital, he was found to have elevated ammonia in his bloodstream, a condition affecting his cognitive and mental abilities, the suit states. Later that day, he left the hospital against doctors’ advice and went home where he was confined to bed rest, according to the suit.

The next day, Bowers — his partner in an auto mall venture — and others (not including McKenzie) formed a new corporation to include the 60 acres and auto mall that became the Toyota of Cleveland dealership site. Attorney John Anderson, McKenzie’s attorney, prepared the legal documents, though not at McKenzie’s request or with his knowledge, according to the lawsuits.

W.H. Grant, a partner in Anderson’s law firm — Grant, Konvalinka & Harrison P.C. — was designated the registered agent of the new corporation, Exit 20 Auto Mall, LLC.

On the same day, Bowers visited McKenzie and convinced him to leave his bedroom and come with him on a drive, the suit states.

During that 30-minute drive, “Bowers obtained McKenzie’s signature on a deed conveying McKenzie’s interest in the 60 acres to the newly formed corporation owned by Bowers and others,” the suit states. The deed was prepared by Anderson.

“McKenzie has no recollection of signing the deed in question,” and later that evening again sought medical attention. He was found again to have a critically high level of ammonia in his blood, the suit states.

Continue reading by following these links to related stories:

Article: $7 million property sale under review in McKenzie bankruptcy case

Article: McKenzies frustrated with bankruptcy

Article: McKenzie seeks to cancel land sale

about Pam Sohn...

Pam Sohn has been reporting or editing Chattanooga news for 25 years. A Walden’s Ridge native, she began her journalism career with a 10-year stint at the Anniston (Ala.) Star. She came to the Chattanooga Times Free Press in 1999 after working at the Chattanooga Times for 14 years. She has been a city editor, Sunday editor, wire editor, projects team leader and assistant lifestyle editor. As a reporter, she also has covered the police, ...

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CowWhisperer said...

The previous linked stories say the sale was carried out by the bankruptcy trustee and approved by the bankruptcy court. This story does not explain the importance of McKenzie signing off on the deal, but even if he had, why didn't the ones managing his estate stop it if it were so unfair. McKenzie's attorney said he didn't owe much money, just personal guaranties. Excuse me, but those are debts, especially when all your companies have gone under as well, as his did.

The previous stories said he owed $150 million. If so, it makes perfect sense he would try to protect his former business partner from the bankruptcy process by signing over jointly held property for a low price. If he sold it for $7 million, or his half for $3.5 million, he would not get a penny, his creditors would simply get $0.17 on the dollar. Almost any sane person in that situation, if they thought they could do so legally, would say to their partner, here take it before they do.

August 13, 2010 at 6:17 p.m.
hypeboy said...

HAHA! right now he is fighting back, I mean Toby is fighting back. hmm I didn't knew about that he has some kinda $1 million sale of toyota parts property issue. I have known this lately, this article is nice it has complete info.

Banks filed the action against McKenzie’s former business partner, Nelson Bowers.. Banks claimed then that Still’s office sold McKenzie’s equity interest of the corporation in November 2009 for $2,500 to settle a claim submitted by Citizens National Bank of Athens in the amount of $817,106.

Read more: Cleveland Daily Banner - 75M claim filed against ex McKenzie partner lawyers


August 17, 2011 at 1:59 a.m.
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