TD Bank sues BrandPartners over loan deal

TD Bank N.A. has filed suit against the defunct BrandPartners Group Inc. and its top executives to recover almost $3 million allegedly due under the terms of a loan agreement.The suit, filed Sept. 23 in Strafford County Superior Court, alleges the now-defunct Rochester company owes it about $2.9 million. It also names former chief executive James F. Brooks, Jane Quilliam, the company’s former chief accounting officer, and William Foley, a former executive vice president. It names two guarantors of the loan, BrandPartners subsidiaries Grafico Inc. and Building Partners Inc., as well.The company, which designed bank interiors, shut its doors on April 16, forcing some 40 workers to scramble for other employment. Brooks had previously told NHBR and state officials that the firm has no assets. Nevertheless, the company did not declare bankruptcy. Indeed, it is still listed on the Pink Sheets as a publicly traded company, with a stock price of about a tenth of a penny.The New Hampshire Department of Labor has cited the company for violation of the state Worker Adjustment and Retraining Notification, or WARN, Act, proposing $1.3 million in fines and restitution to the workers. A hearing on the case is expected to be held Nov. 17.While the WARN Act doesn’t allow for personal liability, the Labor Department is seeking $139,000 in restitution from Brooks personally for other alleged labor violations related to the sudden shutdown. A hearing on the case against Brooks has already been held, but the hearing officer had not made a decision by deadline.Brooks did not respond to an e-mail, and his attorney did not return phone calls by deadline, but in the past he has blamed the company’s sudden closure on TD Bank’s decision to pull the plug on the company’s revolving loan. There was no notice of the shutdown, he has said, because TD Bank froze the firm’s bank account.TD Bank’s lawsuit tells a different story.At issue is a $5 million revolving loan, separate and in addition to a high-interest multimillion-dollar loan made to BrandPartners by Kuwaiti lenders nearly a decade ago.The TD Bank revolving loan – first entered into in May 2005 – gave the company a line of credit of up to $5 million, but only under certain conditions, contends the bank in its suit.The balance could not exceed the sum of 70 percent of the qualifying accounts receivable and half of qualifying and yet-to-be-billed revenues, and the bank required monthly updates so that the loan would be adequately collateralized, according to the suit.The suit charges that in February 2010, BrandPartners drew a $867,357 advance on the loan without providing the bank with reports for December 2009 or January 2010. Those reports – which the suit alleges weren’t provided until the end of March, only weeks before the company went under – indicated that the company was entitled to borrow only $588,000 based on December’s report and nothing beyond that based on the subsequent reports.On April 9, BrandPartners convinced the bank to lend it more money in order to make payroll obligations of $180,475, the suit alleges, after the bank received assurances that the company had at least $1.3 million in receivables coming over the next few weeks.The company agreed that all those receivables would go to the bank and that it would maintain all of its checking accounts at the bank, according to the suit.On April 23 – about a week after the company closed it doors – the bank made still another advance, of $50,000, to fund a portion of the payroll for those employees who remained, in exchange for the title to two box trucks, with the same conditions in place as the earlier forbearance agreement, according to the lawsuit.But “it soon became clear that the accounts receivable figures provided by Brooks and Quilliam were not close to being accurate,” and the bank only recovered $30,513 in receivables after April 7, the suit says.In addition, the suit charges that the bank learned that the company maintained accounts outside the bank, and that was where more than $100,000 of the receivables were sent, in violation of the loan agreement.The bank wouldn’t have agreed to keep lending money if it knew that BrandPartners was putting the receivables in other banks, the suit says.As of Oct. 27, there were no replies to the lawsuit.Brooks did not return an e-mail – the way he has communicated with NHBR in the past – and his attorney handling the labor violation charges also did not return a call by deadline. Attempts to reach Quilliam were not successful. Foley referred phone calls to his attorney, Jamie Hage, who said he had just gotten the case.”I’m not in a position to discuss specifics at this time, but we intend to defend it vigorously,” Hage said.Bob Sanders can be reached at bsanders@nhbr.com.