TRUSTEE IN DESIGNLINE BANKRUPTCY SEEKS TO RECOVER $421,000 IN PAY FROM FORMER MAYOR ANTHONY FOXX

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A trustee overseeing the liquidation of a Charlotte bus firm is seeking to recover almost $421,000 in pay from former Charlotte Mayor Anthony Foxx, alleging the mayor received the money despite doing little to no work for his former employer.

Foxx now serves in President Barack Obama’s Cabinet as U.S. secretary of transportation. He was appointed to the post in 2013. Before becoming a Cabinet secretary, Foxx spent four years at DesignLine as deputy general counsel.

DesignLine, which made hybrid electric buses, struggled financially and filed for bankruptcy protection in 2013.

The company paid Foxx almost $421,000 during his time at DesignLine, according to a filing in federal bankruptcy court last week by Elaine Rudisill, the trustee overseeing the company’s liquidation. The filing alleges Foxx didn’t actually do the job he reportedly held at DesignLine.

“Defendant spent little to no time at the Debtors’ facilities during the relevant time period,” the trustee wrote. DesignLine also employed two outside law firms, paying them millions of dollars. In her filing, Rudisill said there is no evidence Foxx communicated with them at all.

“The Debtors’ books and records do not reflect any communications between Defendant and the Outside Firms, nor do they reflect any activities or actions of Defendant in his role as Deputy General Counsel,” Rudisill wrote in the filing. She declined to comment.

Foxx’s private attorney, Mark MacDougall, said the filing was “routine” and one of “many dozens” filed by the trustee.

“It was filed just before the statue of limitations ran out,” MacDougall said. “We are confident it will be resolved in the secretary’s favor.”

The docket shows numerous such filings from Rudisill, often resulting in court-approved settlements. In one of the filings last week, Rudisill is seeking $300,000 from Charlotte businessman Rick Hendrick and the racing company he owns, Hendrick Motorsports, on behalf of DesignLine.

The filing says that in 2010 Hendrick agreed to provide a loan of $800,000 to retired Air Force Lt. Gen Buster Glosson, DesignLine’s former chairman. The loan was to “provide additional capital to fund a DesignLine potential contract.” But the filing alleges the loan offered little to no value to the company, instead benefiting Glosson and other entities.

DesignLine repaid $300,000 to Hendrick, but Rudisill is seeking to recover that amount from Hendrick. A spokesman for Hendrick Motorsports declined to comment.

Glosson said in a statement that the records in possession of the trustee “clearly show that Hendrick provided $800,000 for use” of DesignLine. The funding was critical to the company’s operations, he added.

Regarding Foxx, he said the transportation secretary, in his role as business development and legal adviser to the board, helped the company secure over $7 million in revenue.

Foxx “is a man of impeccable integrity and was underpaid, given the $7,000,000 in revenue he made possible,” he said.

Foxx’s pay

DesignLine once offered Charlotte a promising toehold in a green-energy manufacturing sector. But the bus maker struggled financially for years before filing for bankruptcy in 2013, costing investors millions and leading to layoffs for a workforce that once reached 250.

Foxx joined the company in 2009, and some at the company thought he might help DesignLine win business from the city, a former employee told the Observer in 2013. That extra business, however, never materialized.

In his federal finance disclosure form, filed as part of his vetting for secretary of transportation, Foxx said DesignLine paid him a salary of $88,117. The form was filed in early 2013.

But the records filed by Rudisill show DesignLine paid Foxx $181,217, including overtime, in 2012, the most recent year at the time of the filing. The reason for the discrepancy wasn’t immediately clear.

A schedule of regular payments to Foxx included in the filing show he was paid $3,580.77 every two weeks for much of the time he was employed, as well as overtime payments of nearly the same amount.

Richard Myers, a former federal prosecutor and professor at UNC-Chapel Hill’s law school, said it’s difficult to judge the propriety of Foxx’s employment without knowing more details of what duties he was expected to perform.

“A general counsel’s position can vary widely depending on a corporate structure,” he said, ranging from a salaried, 9-to-5 position to an on-call adviser.

“The bankruptcy administrator, they’re going to do whatever they can to recover money for the company,” Myers said.

According to the filing Tuesday, DesignLine was, in effect, insolvent during the years Foxx worked there. DesignLine had assets that ranged from $19 million to $33 million, and liabilities totaling between $16 million and $65 million.

“At all points in time relevant … the Debtors’ assets never exceeded its liabilities on its audited financial statements,” Rudisill wrote. Auditors expressed concern that the company wouldn’t be able to continue as a going concern each year since 2009 because of its “perilous financial condition.”

Foxx worked on contracts and bids, but he wasn’t involved in the financial side of the company, former DesignLine CEO Joseph Smith told the Observer in 2013. Foxx was hired before Smith arrived at the company in 2012.

“He would tell me what cities were big into green technology,” he said. “He would give me advice here and there. He basically handled contracts and things of that nature.”

When Foxx decided to join DesignLine shortly after being elected mayor, he asked the city attorney for a “conflict of interest advisory opinion,” according to documents obtained by the Observer last year.

In January 2010, then-City Attorney Mac McCarley and then-Senior Deputy City Attorney Bob Hagemann advised Foxx he could continue in his dual roles if he excused himself from City Council matters related to his new employer. Foxx stayed at the company until July 2013, when he became transportation secretary.

Bright beginnings, troubled history

A group led by Glosson and his son, Brad, bought DesignLine in 2006 and moved it to Charlotte from New Zealand. DesignLine attracted high-profile investors such as former Gov. Jim Martin and businessman Cameron Harris.

From a factory off Westinghouse Boulevard, DesignLine made buses for transit agencies in cities such as Baltimore and Denver. But over time, the company faced lawsuits and contract cancellations over late deliveries and performance problems, according to court documents.

Charlotte Douglas International Airport last year auctioned off its 10 DesignLine buses, ending the airport’s use of the locally made vehicles that were plagued by maintenance problems since their first purchase in 2007.

DesignLine’s assets were sold in bankruptcy court in 2013 to a California-based investment group, which restarted the company under the name EPV Corp., short for Environmental Performance Vehicles. Tony Luo, CEO of the company that owns EPV, said the bus maker has offices in Charlotte, California and China.

Source: The Charlotte Observer

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