First meeting of creditors held in USH bankruptcy

A first meeting of creditors was held July 28 in the Chapter 7 bankruptcy case of Universal Systems House Inc., a computer software and Microsoft Certified Technical Education center.

The company, formerly located at 3534 E. Sunshine, closed its doors and canceled classes in May after disagreements between USH's majority shareholder, Robert Guyer, and minority shareholder Roger Best, about the company's financial condition.

USH filed for protection from its creditors June 30. The company owes approximately $1 million to 142 creditors 50 of which are former USH students whose classes were canceled. According to the bankruptcy file, USH currently has assets of about $75,000, which lists contingent claims of an unknown amount against Best and corporate officers Judy Best and Eric Best for misappropriation and mismanagement of company assets as a personal property asset of the company. Best, who could not be reached for comment, was not present at the creditors' meeting, conducted by U.S. trustee J. Kevin Checkett.

The students' tuition accounts for about $180,000 of USH's liabilities. Michael Gagne is the network administrator for Lowther Johnson law firm and is owed $6,500 for unreimbursed tuition. He attended only two class sessions before USH closed. Gagne said he is already making payments on his loan and has no immediate plans to take classes elsewhere.

"Overall, I was not happy with what we found out," Gagne said. "USH has tax burdens it has to clear, and with as many people who were taken, it doesn't sound like the money the company has is going to go far. At this point, I'm looking at not getting a dime back."

Gagne said he's now leery of paying in advance for training courses.

Guyer said he had disagreements with Best in late 1999 concerning the scheduling and selling of training courses at the beginning of the year. The students' tuition for the courses was not kept in an escrow account, but deposited directly into USH's checking account.

"(Best) was pushing real hard on selling the classes, and I didn't think in the condition the company was in, he should have been doing that," Guyer said.

USH owes nearly $8,000 in unsecured priority claims to the Greene County Collector of Revenue and the Missouri Department of Revenue, and about $994,000 in unsecured, non-priority claims to various creditors for open accounts, prepaid Microsoft software licenses, unreimbursed tuition and rent for the Sunshine facility.

Guyer testified at the meeting that he was never involved in the day-to-day operations of USH and that his primary role with the company was to finance it. He said he had made loans to USH on a regular basis since 1996. According to the file, the company owes him $611,000 for loans to the corporation and unreimbursed expenses, including a Firstar loan in the amount of $98,558. Guyer said the disagreements with Best arose from Best's unwillingness to produce the company's books for Guyer to peruse. Guyer said Best's intention was to acquire Guyer's shares of the company over time, and he wanted to peruse the company's books to determine if Best's goal was feasible.

According to the file, USH lost $256,211 for the 1998 fiscal year and $169,764 for the 1999 fiscal year.

Guyer said he held a stockholders' meeting May 8, which Best did not attend, to discuss the company's financial condition. Guyer delivered a demand letter for the books to Best the same day.

Best and his wife and son, Judy and Eric, resigned from USH May 9. Guyer met with USH employees and closed the company May 10.

"(Closing the business) had been discussed in our family before, and we had already done some research to see if we could keep the business running, even if Roger wasn't there. We had a meeting with the employees May 10, and told them we couldn't go on," Guyer said. "That was a good decision because there were a lot things that we didn't know. The company was in worse condition than we first thought."

Guyer then sold much of the company's equipment, which netted about $50,000. He said he used more than half of the $50,000 to pay for employee health insurance premiums that had not been paid since March, final paychecks for employees and the company's accounting and legal fees.

"When the trustee took over, there was about $23,000 in the account," Guyer said.

According to the file, USH's other assets are $27,000 in accounts receivable, $5,000 in a preference claim paid to creditor Premio Computer in April, $9,000 in the form of a security deposit for the Sunshine facility and about $11,000 in business equipment, furnishings and supplies. Guyer testified Best has a few computers, cellular phones, software and videotapes.

Checkett closed the creditors' meeting by saying he had no definitive answers for USH's creditors, and that it was obvious the bankruptcy estate has a number of claims it could make against various parties. He said the immediate goal of the estate would be to try to collect its receivables and auction its remaining hard assets to pay creditors. Checkett said he would make every effort to not let the case drag on and estimated it would take about six months. He encouraged USH creditors to file claims as soon as possible if they had not already done so.

USH reported 20 employees in February. It specialized in training and network design and implementation for local area networks and wide area networks.

The company was founded by Dave and Judy Wolfe in 1981 as a wholesale distributor of computer books and software. In 1983, it began offering computer technical support, hardware sales and software installation. The Wolfes incorporated in 1990, and the company began installing computer networks the same year.

Guyer bought 50 percent of the business in 1994. The Wolfes sold their shares of the company to Guyer and USH employees Roger Best and Gerould Sims in June 1996. Sims and Best each acquired 15 percent of the company and Guyer acquired an additional 20 percent. Best and Guyer acquired Sims' shares in 1997.