Settlement could bring close to Mamtek saga

Bruce Cole
Posted: Jan. 21, 2019 5:26 pm

The long legal saga of Mamtek, the failed effort to build an artificial sweetener factory in Moberly, seems to be nearing its conclusion with the filing of a settlement that will free more than $800,000 to pay creditors of the bankrupt company.

The settlement, between bankruptcy trustee Bruce Strauss and former Mamtek CEO Bruce Cole and his wife Nanette Cole, will grant the Coles $100,000 from the sale of their Beverly Hills home while denying them the $630,000 they sought to pay taxes due on that sale.

In exchange, Strauss will free the Coles from an obligation to pay a the entirety of a $1.25 million judgment to recover money illegally taken from a $39 million fund set up by Moberly to finance construction.

“The underlying bankruptcy case has been pending for eight years,” attorney Victor Weber wrote in the motion filed last Tuesday with U.S. Bankruptcy Judge Dennis Dow asking him to approve the settlement. “This settlement will permit the trustee to pay creditors and close the case very quickly. In the absence of this settlement, creditors might have to wait several more years for their claims to be paid.”

If the claim is approved, Strauss said in a telephone interview Monday, the case could be wrapped up in six months.

“I have to review the claims, I have to file an application for fees and costs and a few tax returns,” Strauss said.

The Coles did not respond to an email seeking comment.

Bruce Cole spent 43 months of a seven-year sentence in a Missouri prison after pleading guilty in 2014 to theft and securities fraud. He was released on parole in June and returned to his home state of California. A case seeking to overturn his conviction has been pending since 2015 in St. Charles County Circuit Court, where Cole pleaded guilty after a change of venue from Randolph County. A hearing was set for Feb. 15 but Cole late last week sought a continuance.

Bruce Cole first came to Missouri in 2010, selling a plan to build a factory making sucralose, a low-calorie artificial sweetener. He promised 600 or more jobs paying high wages when fully operational. The Missouri Department of Economic Development worked to find communities interested in hosting the factory and Moberly responded by offering to issue $39 million in industrial development bonds to finance construction.

Corey Mehaffy, president of the Moberly Area Economic Development Corporation and a key player in the effort to land Mamtek for Moberly, resigned that post in December to take a similar job with the Northeast Missouri Economic Development Council in Hannibal.

The plan was announced with great fanfare by Cole and then-Gov. Jay Nixon, who promised $17.6 million in state tax credits and other incentives. Cole promised to provide about $8 million private equity funding, which never materialized.

Construction halted in early September 2011. Creditors forced the company into bankruptcy late that year. After the project stalled, the Moberly City Council refused to repay the bonds, causing a sharp drop in the city’s credit rating.

A Tribune investigation of the project found that Cole submitted phony invoice with the name of a fake company to obtain $6.6 million of the money borrowed by Moberly, including $4.06 million just days after the money became available. Some went to other California investors, but the portion sought by Strauss was put in the Coles' personal bank accounts and a large payment saved their home, valued at $6 million, from foreclosure.

The home was later sold and an order from Dow placed $906,895, the money remaining after the mortgage was repaid, in escrow. That is the funds that are the subject of the settlement agreement filed with Dow.

While Dow had ordered the Coles to repay more than $1.25 million, there is no chance of obtaining that amount from them, Weber wrote in the court filing.

“The only source he (Strauss) thinks it at all likely to obtain payment of this judgment is the proceeds,” Weber wrote. “The trustee has been trying to uncover assets against which he can collect this judgment for years and has been unsuccessful.”

After the project failed, numerous lawsuits were filed by bondholders and unpaid contractors. In all, $47.3 million in claims were filed by creditors in the bankruptcy case but many of the large bondholders recovered all or a portion of their investment through separate lawsuits.

Any money recovered in other venues will be credited against bankruptcy claims, Strauss said Monday. He is holding just under $3 million in two accounts to pay out after his fees and expenses are deducted, Strauss said.

As part of the settlement agreement, Strauss will not oppose the Coles in their attempt to set aside a $1 million judgment won by the Securities and Exchange Commission in a civil enforcement action for securities fraud. A California court entered the judgment in February 2017 and an appeal by the Coles is pending in the Ninth Circuit Court of Appeals.

The Coles sought a statement supporting them in setting aside the SEC judgment but he declined, Strauss aid.


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