State Exchange Finance Company (SEFCO) - 1986

1986 - Feb 17 - Settlement reached in two SEFCO suits

By JOHN WILCOX Tribune Plymouth Bureau

CULVER A settlement has been reached in the two suits against officers and directors of the State Exchange Bank seeking to recover investments from the bankrupt State Exchange Finance Co., NorCen Bank President Eldon Ploetz announced today.

Under the terms of the agreement, the SEFCO investors who filed suit against the bank will receive payment on the notes due as of Dec. 30, 1982, the official date of SEFCOs bankruptcy.

Ploetz said the settlement was completed at 1:30 p.m. Friday in Indianapolis at its attorneys office.

According to Mark Bailey, attorney for the Indianapolis law firm of Wilson and Kehoe, which represented the plaintiffs, the money has been received by the law firm and it is disbursing the money to the plaintiffs. He would not disclose the amount of the settlement.

For NorCen officials, the settlement is the last tie it has to its former finance company. Under negotiation for about the last nine months, the settlement marks the end of NorCen's involvement with its former finance company.

"The settlement... was proposed several months ago, but many of the plaintiffs could not agree to the terms, according to Ploetz, explaining the delay in the agreement. Ploetz said negotiations with several plaintiffs were needed at the last minute to complete the agreement, with the last plaintiff agreeing at 1:30 p.m. Friday. "We can now get back totally to the business of banking", Ploetz said. Ploetz and interim NorCen Chairman Sam Schlosser said they believe the settlement serves both sides well.

It was a very prudent decision for us, Ploetz said, who added attorney fees for the bank have been in excess of $600,000 a year since 1982.

The settlement is in the best interest of both shareholders and depositors and for the community in the long term, according to Schlosser.

SEFCOs demise triggered a series of events leading to creation of NorCen Bank. As SEFCOs demise emerged, State Exchange Bank purchased Farmers State Bank, owned by SEFCO, in order to give SEFCO capital to begin paying off its creditors.

The new bank, called NorCen, merged the two banks under one, management. To further enhance its capital, partly in anticipation of Fridays settlement, NorCen sold its Plymouth branch to the First National Bank of Elkhart in August 1985.

The majority of SEFCO creditors did not join the suit. They are taking part in a SEFCO reorganization plan, estimated to return around 86 cents on the dollar. That plan is about halfway through the three-year reorganization plan. - South Bend Tribune

1986 - Feb 18 - SEFCO settlement eases controversy

By JOHN WILCOX Trib une Plymouth Bureau

CULVER The settlement of two lawsuits involving the bankrupt State Exchange Finance Co. marks the end of a bitter controversy involving SEFCO and some of its creditors.

The suits were filed by about 10 percent of SEFCOs creditors, who took a hard line against State Exchange Bank officials over the banks management of the finance company. Those involved in the suit chose not to participate in a SEFCO reorganization plan calling for an estimated 86 percent return of their invested money over three years.

Under the terms of the settlement, reached Friday afternoon in Indianapolis, the SEFCO creditors who filed suit will receive payment on notes due as of Dec. 30, 1982, the official date of SEFCOs bankruptcy filing.

SEFCO currently is operating under Chapter 11 of the federal bankruptcy code.

For the NorCen Bank, the settlement means an end to any financial liability associated with SEFCO. NorCen Bank, created in 1984 when the State Exchange Bank purchased the Farmers State Bank which was owned by SEFCO, now can operate without the dark cloud of the SEFCO situation hanging over it

NorCen President Eldon Ploetz said he is pleased the SEFCO problem now is behind the bank. We can now get back totally to the business of banking, he said.

Ploetz added that the settlement was a prudent business decision, noting that legal fees associated with the SEFCO case had been in excess of $600,000 a year since 1982.

Ploetz added that some last-minute negotiating with several plaintiffs was needed before the settlement was reached Friday afternoon. Agreement among all 81 plaintiffs in the second suit was needed before the settlement became official. The other suit, involving about 20 creditors, was settled in 1984.

For the plaintiffs in the two suits, settlement means they soon will receive full repayment of their investment notes issued before Dec. 30, 1982, the official date of the bankruptcy.

A question that will remain unanswered at least until 1987 is which group of plaintiffs, because of their seperate court actions, will recover the most money from SEFCO.

Most SEFCO shareholders accepted the reorganization plan, calling for an estimated 86 percent return over three years. The reorganization, calling for the liquidation of SEFCOs assets, was approved first by State Exchange Bank shareholders then by the U.S. Bankruptcy Court in South Bend in July 1984.

SEFCOs largest asset was the Farmers State Bank, purchased by the State Exchange Bank and reorganized as the NorCen Bank. Money from the sale went to SEFCO creditors.

Which group, if any, receives a better recovery from SEFCOs liquidation cannot be determined until the liquidation is complete - South Bend Tribune

1986 - Feb 19 - Suit dismissal applies to all but ex-official

PLYMOUTH - A suit filed by 80 people who had purchased investment notes issued by the State Exchange Finance Co. against officers or former officers of the State Exchange Bank, SEFCO and the Farmers State Bank was dismissed Tuesday in Marshall Circuit Court as the result of an agreement reached between parties in the suit last week.

There was one exception. The suit dismissal does not apply to John J. Deery, a former SEFCO official

The firm representing the defendants also withdrew as attorney for Deery: The motion requesting permission to withdraw said that Deery had refused to sign the settlement agreement and had not cooperated.

Judge Michael D. Cook said the dismissal also affected a suit that had been filed against the estate of Robert Grossman, a former member of the board.

The suit asked more than $2 million in damages, plus $10 million in punitive damages.

The suit claimed that the defendants caused the finance company to engage in numerous unsafe and unsound business practices.

Under the terms of the settlement reached last week, creditors of the finance compnay who filed suit will receive payment on notes due as of Dec. 30, 1982, the date SEFCO filed bankruptcy proceedings.

1986 - Sep 4 - Braje seeks dismissal of SEFCO case

By MATT GALBRAITH Tribune Staff Writer

PLYMOUTH Special prosecutor Craig Braje will seek to have the racketeering charge against State Exchange Finance Co. dismissed Friday morning.

Saying a number of factors led to his decision, Braje wants to drop the criminal case against the company that emanated from a Marshall Circuit" Court grand jury indictment nearly 17 months ago.

A hearing is set for 11 a.m. in Circuit Court

Last month, a federal judge issued a preliminary injunction against the deputy prosecutor of LaPorte County prosecuting the case until SEFCO pays back creditors.

Before that SEFCO attorneys had been granted delays in the proceedings as the company has gone about settling civil suits, liquidating its holdings and paying creditors what it could.

Braje refused to specify his reasons for dismissal, saying only "there's a lot of things that go into it that I will bring to the court, not just the injunction".

SEFCO has operated under Chapter 11 of the federal bankruptcy code since December 1982, when it owed around $26 million to investors. A plan of reorganization was approved several months later. The repayment, expected to take about three years, began with a small distribution.

The company so far has made a 37 percent repayment to creditors, according to Joseph Currens, chairman of the court-appointed Creditors Committee. The most recent distribution was about two weeks ago.

Currens said he had no opinion about Brajes motion to dismiss, except to say, "I was kind of surprised at the charge being filed." He did not know whether the removal of the threat of criminal retribution would mean a quicker or larger repayment

The grand jury found that between Nov. 6, 1982, and Dec. 23, 1982, SEFCO received proceeds indirectly or directly from a pattern of racketeering activities, according to court records.

However, the panel returned an indictment of corrupt business influence against the company, not against individual officers and directors.

Braje said there is a "difference of opinion" over whether a guilty verdict would have meant a fine, since a company cannot be jailed, lowering the amount creditors would be likely to geL

But it appears this was a factor in his asking for the charge to be dismissed as well as time statutes, since the repayment, will be lengthy.

Meanwhile, SEFCO attorneys have attempted in recent weeks to get court approval of an indemnification plan for various people who have worked for the finance company since February 1983.

According to the plan, they would be protected from civil and criminal liability.

The plan states, "The people who serve as directors, officers and employees have continued to serve in good faith and in extremely volatile situations".

It goes on to say that they should be afforded the same protection that other corporations provide their employees under Indiana law. Because without that protection, it is possible that these individuals will resign which would paralyze the liquidation.

Two objections have been filed to the indemnification plan in bankruptcy court. - South Bend Tribune

1988 - Apr. 4 - Buy back to benefit SEFCOs creditors

By JOHN WILCOX Tribune Plymouth Bureau

CULVER Unsecured creditors of the bankrupt State Exchange Finance Co. soon will receive $1.8 million from a preferred-stock buyback by NorCen Bank.

The move will give SEFCOs 900 unsecured creditors some more money and allow NorCen to form a bank holding company. The holding company will be the vehicle for the stock buyback, according to NorCen President Eldon Ploetz. NorCen, SEFCO and the SEFCO , creditors committee agreed for the banks buyback of $1.5 million of preferred stock from SEFCO.

An additional $300,000 in interest earned during the past five years is included in the agreement. NorCen will keep the remaining $105,000 of interest.

SEFCO filed for bankruptcy in Dec. 1982, forcing its parent bank, State Exchange Bank, to cease operation and reorganize as NorCen.

Under its 1985 federal bankruptcy reorganization plan, SEFCO had to give NorCen $1.5 million in SEFCO assets as capital for the new bank.

SEFCO was issued $1.5 million in NorCen preferred stock. NorCen has shown a profit since late last year and now is able to buy back the stock, according to Ploetz.

Joseph L. Currens, chairman of the SEFCO creditors committee, called the settlement fair. "This ends all material relations between NorCen Bank and SEFCO. This is a fair return on SEFCO's investment and will provide funds to disburse to SEFCOs creditors in the near future", he said.

Ken Aemmer, SEFCO chief executive officer, said the agreement hinges on approval by the bankruptcy court, but added they are expediting the process to make the quickest distribution to creditors.

Currens said he and Aemmer still are active and remain in contact at least twice a week.

SEFCO still has unsold assets, including a 1,500-acre farm near Wolcott. Currens said the farm is valued at $1.5 million. Rental of the farmland this year will earn creditors $90,000, he said. - South Bend Tribune

1988 - Apr 18 - SEFCO president offers more hope to its creditors

Aemmer keeps working to sell the remaining assets of the bankrupt State Exchange Finance Crop. Tribune Photo John Wilcox



By JOHN WILCOX Tribune Plymouth Bureau

PLYMOUTH Its taken more than five years to get just half of their money back.

But more money is coming in this summer, and even more is expected during the next five years for the 900 unsecured creditors of the bankrupt State Exchange Finance Corp., according to Ken Aemmer, president and chief executive officer of SEFCO.

Other than a secretary, he works alone in a small two-room office in Plymouth, surrounded by financial records and other journals.

SEFCO filed for Chapter 11 bankruptcy protection at the end of 1982. Since then, Aemmer has worked on selling SEFCOs property and other assets, then turning the income over to the unsecured creditors.

So far, 49.5 percent, or $13.64 million, of the money has been recovered.

Another $1.8 million is expected this summer from the recent preferred stock buy-back by NorCen Bank. That transaction cuts the remaining tie between SEFCO and NorCen. Sale of the stock had helped give NorCen enough capital to open after the State Exchange Bank ceased operations.

When SEFCO sells all of its remaining assets, only about $4.5 million to $6 million 68 to 70 percent of the amount owed ever will be recovered, according to Aemmer.

The original payback estimate was 86 percent. Aemmer defended the lower figures, saying it is much better than the 10 percent most bankruptcies yield to creditors.

But Aemmer also knows the tragic impact the bankruptcy has had on many creditors, especially elderly investors who were longtime State Exchange customers, including his parents.

Every month, Aemmer said, he gets 20 to 25 letters and phone calls from creditors, many of them elderly, whose retirement investments were in SEFCO. Because the bankruptcy froze all money deposited in SEFCO, these creditors haven't been able to get their money when they've needed it for medical expenses or other needs.

"It's a tragic situation for them," Aemmer said. Most of them didn't know the (State Exchange) bank from the finance company.

"Unfortunately, a lot of them view the bank as the problem. We've always encouraged them to support the bank," Aemmer said.

"The (NorCen) bank turned the corner (it showed its first profit last year) because SEFCO creditors waited while the bank took care of its other problems. We needed the bank to heal, then take care of its problems with SEFCO. That's how we got the preferred bank stock in the first place".

"The bank has worked hard to turn things around, but it received a lot of help from SEFCO and its creditors who have tried to support the bank. And the banks going to go on and do a lot of good things", said Aemmer.

Another bitter pill to swallow for the SEFCO creditors was the 100 percent recovery by dissident investors who did not join the bankruptcy agreement and successfully sued to get their money back.

Aemmer said more money is expected during the next few years for the unsecured creditors.

Lawsuits pending against two area businesses, Menser Industries and Fishburn Marina, are moving ahead, and progress was reported on the sale of a 1,500-acre farm valued at $1.5 million.

Those three cases may net most of the estimated $4.5 million to $6 million that is expected to be recovered, Aemmer said.

Other significant holdings are real estate valued between $300,000 and $400,000 in the West Lafayette area and other properties in Hawaii, Florida and Washington.

When those actions are done, SEFCOs day-to-day operations probably will cease. After that, a court-appointed trustee will complete the final sales while remaining under bankruptcy protection, according to Aemmer.

But Aemmer stressed that won't happen until all the major unresolved matters are settled.

"No one is going to be able to wait us out. We want to collect the maximum possible," he said.

Before assuming the presidents and CEOs positions, Aemmer was in charge of State Exchanges and SEFCOs non-earning loans. By May 1983, those totaled $20 million in non-earning farm loans and $3 million in real estate loans.

"I don't think they (creditors) see me as the guy who's left in SEFCO, as the enemy, Aemmer said. "The one reason I want to stay is the confidence the people feel in dealing with the same person. And the gratitude they express when money comes in makes it worth doing".

He described SEFCOs dealings with the NorCen bank after the bankruptcy as a divorce.

"It was a strained relationship at times, but we moved along", he said.

A key player in the SEFCO story is Joe Currens, a Culver resident, business operator and president of SEFCOs creditors committee. He did a lot of the leg work in negotiations with the bank and in the sale of SEFCO assets, Aemmer said. But his status now is uncertain after his hospitalization last week.

"He's worked hours and hours and hours, especially in the last two years", Aemmer said. "And he doesn't get paid and never asked, for any. But hes always been there fighting those battles for us, with us". - South Bend Tribune

1990 - In the Matter of STATE EXCHANGE FINANCE COMPANY, Debtor. Appeal of Alfred E. McCLURE. No. 89-1089. - United States Court of Appeals, Seventh Circuit. - Argued Jan. 30, 1990. - Decided March 5, 1990 - Alfred McClure appeals from a decision by the district court affirming a default judgment in bankruptcy court obtained by State Exchange Finance Company (known as SEFCO), which had filed a complaint in that court on January 27, 1987, to collect a promissory note of $200,000 that McClure had issued to SEFCO...

SEFCO ~~ 1983 ~~ 1984~~ 1985 ~ ~ 1986