(Missouri Independent) – Unsecured creditors will get less than a nickel on the dollar for debts left by a Moberly economic development project that went bust in 2011 as Missouri lawmakers worked on a plan to finance air freight shipments from China.
A final report pending before U.S. Bankruptcy Judge Dennis Dow describes how $2.1 million will be distributed among parties who made claims totaling $41.5 million from the failed Mamtek project.
The report, filed by bankruptcy trustee Bruce Strauss on Jan. 25, caps 10 years of searching for money. He collected a total of $4.7 million, with administrative costs and other expenses taking $2.6 million of the total.
“This was a very complicated case both to ascertain what happened and to seek recovery from parties all over the country,” Strauss said in an interview with The Independent.
When California businessman Bruce Cole brought the Mamtek project to Missouri in 2010, he portrayed it as a venture funded by the U.S. and Chinese investors that was built on manufacturing processes already in use in China. It was touted as an example of how partnerships between China and Missouri could make both more prosperous and won an award for community impact based on its job promises.
By early September 2011, the project was out of cash, had laid off the four people it had hired and was in default on bonds issued to finance construction. That was the same time the legislature was in special session to work on a tax credit plan that would have financed the Aerotropolis freight hub at Lambert International Airport.
The similarity between the two projects — huge benefits promised to a community willing to finance a deal with Chinese ties – and Moberly suffering huge losses with nothing but the shell of a building and a lower credit rating to show for it stalled the special session.
House and Senate leaders said at the time that revelations about Mamtek made rank-and-file members of both chambers nervous, and one said it was a “flashpoint” for lawmakers concerned about expensive economic development programs.
Attorney General Eric Schmitt’s sponsorship of the Aerotropolis plan while a member of the state Senate has now become an issue in the Republican U.S. Senate primary. A new ad from a PAC supporting former Gov. Eric Greitens, set to run during the broadcast of the opening ceremonies of the 2022 Winter Olympics in Beijing, attacks Schmitt for wanting to build “a cargo hub for airlines owned by the Chinese Communist Party.”
The bulk of the unsecured debt that will be settled if Dow approves Strauss’ report is due to the $39 million borrowed by Moberly through its industrial development authority to finance construction.
Moberly acted on Cole’s promise to employ up to 600 people, as outlined in project documents sent out to communities across the state by the Department of Economic Development. Then-Gov. Jay Nixon joined Cole for a July 2010 announcement to tout the $17.6 million in state incentives for the plant.
The bonds were sold to investors in $5,000 increments and Strauss’ report lists an outstanding balance of $36 million, of which $1.65 million will be paid to the bond trustee, UMB Bank.
“If no objections are filed, the court will look at it, and if it appears all in order, the court will enter an order authorizing me to disperse the funds as set forth in the notice,” Strauss said. “It would be rare for the court to disapprove the final report.”
Other payouts will be as small as $11.08 to Ameren Missouri to settle a $242.16 utility bill and as large as $135,552 to settle a $2.9 million claim from a company that supplied equipment for the factory.
The project failed because the process for making the sweetener was untried, Cole was unable to secure the promised private investment to match Moberly’s bond funds and estimates of construction costs were not based on any finished plan.
But the biggest impediment was Cole’s systematic looting of the bond fund. By submitting phony invoices, he diverted $6.6 million from construction, kept a large portion of the money and distributed the rest to other California friends who played a role in creating Mamtek.
In November 2014, Cole pleaded guilty to theft and securities fraud and was sentenced to seven years in prison. He was released on parole in 2018 and his efforts to overturn the conviction ended in April 2021 when he lost at the Eastern District Court of Appeals.
The Mamtek collapse triggered numerous lawsuits. Investors sued the companies that marketed the bonds, receiving settlements that restored some but not all of their lost funds.
In addition to criminal charges, the Securities and Exchange Commission won a ruling in California ordering Cole and his wife to pay $1 million to disgorge the ill-gotten personal profits from Mamtek. The ruling is currently under appeal.
And Strauss went into court repeatedly as the Coles fought over money from the sale of a Beverly Hills home they rescued from foreclosure with Moberly bond funds.
“This case would not have been as long as it was but for dealing with Bruce Cole,” Strauss said. “He litigated everything.”
Cole could not be reached for comment.
Finally, in 2019, the Coles were given $90,000, a debt to a Kansas City law firm was paid and taxes the Coles owed to California on the sale were paid.
“We reached a settlement that allowed him to take a bit of money,” Strauss said, “but I needed to do that to bring this to a conclusion.”