SCAM TIME LINE IOWA PATHETIC AND THE STUPID HAT MAN
Author: Ed the Turd
Date: 05-20-2020 - 11:55

THIS IS FROM THE BANKRUTCY COURT TRUSEE THAT IS ALL COOKED DOWN TO SHOW HOW ED THE TURD WAS ABLE TO COMBINE MONEY FROM SEVERAL COMPANIES AND ACCOUNTS TO SCREW UP THE BOOKS!

THE FULL FILING WAS FROM THE TRUSTEE TO THE BORROWER BIG SHOULDERS BUT IT DOES TELL THE TAIL OF THE SCAM MAN ED THE TURD.

MY COMMENTS ARE IN THE TURD NOTES.

The SLRG owns and operates a railroad that is approximately 150 miles long and primarily supports the transportation of grain, minerals, specialty rock products, and produce in Colorado.

The SLRG is wholly owned by Permian Basin Railways, Inc. (“Permian”), which itself is wholly owned by Iowa Pacific Holdings, LLC (“Iowa Pacific”). Iowa Pacific is the ultimate parent of many subsidiary companies (collectively, the “Iowa Pacific Companies”), of which at least five were operating railroads in 2017 (including the SLRG).

As of February 27, 2017, the Iowa Pacific Companies were insolvent on a consolidated basis. Per Iowa Pacific Companies’ audited balance sheets as of December 31, 2016, Iowa Pacific Companies’ liabilities exceeded their assets by $25,476,847. Also, as of January 1, 2017, per the Iowa Pacific Companies’ internal records, the SLRG was also insolvent on a balance sheet basis as the value of its liabilities exceeded the value of its assets by $37,267,398.
TURD NOTES-THIS SAYS IOWAS PATHETIC ASSETS (LAND, EQUIPMENT AND CASH) WERE $37 MILLLION LESS THAN WHAT THEY OWED IN DEBT!

The financial situation for the Iowa Pacific Companies and the SLRG did not materially change from December 31, 2016 through September 30, 2019. As of September 30, 2019, the value of the SLRG’s liabilities exceeded its assets by $36,020,097. Likewise, on a consolidated basis as of September 30, 2019, the Iowa Pacific Companies’ liabilities exceeded the value of their assets by $48,224,560.

The Iowa Pacific Companies’ independent audit report for the fiscal years ending December 31, 2015 and December 31, 2016 was dated January 23, 2019. At that time the auditor determined that it could not opine that the Iowa Pacific Companies would be able to continue as a going concern:

[T]he Company has incurred successive years with losses from continuing operations, working capital deficits, and net equity deficiency and was not able to make complete scheduled principal and interest payments on long-term debt during the year ended December 31, 2016. These conditions raise substantial doubts about the Company’s ability to continue as a going concern. . . .
Subsequent to December 31, 2016, the Company discontinued several of its wholly owned railroads and their related operations, including the August 2018 sale of 100% ownership interest of Grenada Railroad, LLC, a wholly owned subsidiary. Our opinion is not modified with respect to that matter.
TURD NOTES-EVEN OUR ACCOUNTANTS SAID WE WERE BROKE! BUT OLD ED THE TURD WAS ABLE TO HORNSNAGGLE THE INVESTORS WHILE HE WORE HIS STUPID HAT AND PISSED AWAY MONEY ON CONCERTS AT WHICH HE WOULD SING TO FEED HIS EGO.

Notwithstanding the fact that the Iowa Pacific Companies were collectively insolvent and the SLRG was itself insolvent, on February 27, 2017, the SLRG, Iowa Pacific, Chicago Terminal Railroad Company, Heritage Rail Leasing, Mt. Hood Railroad Company, Permian, and Saratoga and North Creek Railway, (collectively referred to herein as “Borrowers”) and Big Shoulders entered into a Loan and Security Agreement dated February 27, 2017 (as amended, the “Loan Agreement”), wherein Big Shoulders agreed to make a loan in the original principal amount of Three Million Three Hundred Thousand and 00/100 ($3,300,000.00) to the Borrowers (as amended, the “Loan”).

Pursuant to the Loan Agreement, and upon information and belief, the entire amount of the $3,000,000 loan was funded on the closing date by either crediting or wiring the funds from Big Shoulders directly to Iowa Pacific.

The SLRG did not receive reasonably equivalent value in exchange for the indebtedness as the SLRG did not receive a direct quantifiable benefit in exchange for encumbering its real and personal property to secure the Loan. The maturity date for the Loan under the Loan Agreement was September 18, 2018.

The Borrowers and Big Shoulders amended the Loan Agreement to specifically provide as follows: WHEREAS, the Borrower has made application to the Lender for credit facilities in the
principal amount of up to Three Million Seven Hundred Thousand and 00/100 Dollars
($3,700,000.00), the proceeds of which will be used, among other things, for general corporate purposes of [the SLRG], in each case as permitted in accordance with [the SLRG's] Organizational Documents and this Agreement, and for other purposes mutually agreed by the Borrower and the Lender.

April 13, 2017, the Borrowers and Big Shoulders amended the Loan Agreement to increase the principal amount to be borrowed thereunder to $5,000,000.
TURD NOTES-HERE IS WEAR I SCAMMED BIG SHOLDERS AND TOOK MONEY INTENDED FOR SLRG AND ONCE ABAIN PISSED IT AWAY!

Notwithstanding the fact that the Loan Agreement specifically required (unless agreed to by Big Shoulders) that the proceeds of the Loan be used for the SLRG’s general corporate purposes, the proceeds were used not by the SLRG.

April 13, 2017, $1,185,000 in proceeds from the Loan were disbursed directly to Iowa Pacific’s bank account and not the SLRG’s, and upon information and belief, the proceeds did not provide a direct quantifiable benefit to the SLRG.

January 28, 2018, SLRG entered into an Equity Purchase Agreement with RailUSA LLC to sell the equity interests in its wholly owned subsidiary Grenada Railroad, LLC (“Grenada”). The majority of the purchase price was used to pay off debt that had been incurred by Grenada; however, upon information and belief, over $3.2 million of the proceeds were used to pay the SLRG’s debts to the IRS.

February 2, 2018, the Borrowers and Big Shoulders entered into a Forbearance Agreement {TURD COMENT-THIS MEANS BOTH PARTIES AGREED TO PUSH BACK THE DUE DATE FOR REPAYMENT OF THE LOAN

April 20, 2018, the Borrowers and Big Shoulders entered into the Second Forbearance Agreement. Under the Second Forbearance Agreement, Borrowers were required to provide
to Big Shoulder a copy of the Equity Purchase Agreement with RailUSA LLC along with a
written detailed proposed uses of the cash from the sale.

June 29, 2018, the Borrowers and Big Shoulders entered into the Third Forbearance Agreement, as amended. Borrower agreed that all collections and receivables would be remitted to a lock box controlled by Big Shoulders. Big Shoulders would then cash fifty percent (50%) of the collections to be remitted to Big Shoulders to be applied to pay the obligations under the Loan Agreement. Big Shoulders also then required that the Borrowers engage a “turnaround consultant” to be chosen by Big Shoulders to provide an “evaluation of strategic alternatives” to the Borrowers.
TURD COMENT-RATHER THAN HIRE ATURNAROUND CONSULTANT, I WROTE AND SANG A SONG ABOUT THE RAILROAD, CALLING MYSELF A “TURD AROUND” CONSULTANT.

July 12, 2018, the Borrowers and Big Shoulders entered into the Fourth Forbearance Agreement. SLRG granted a security interest to Big Shoulders in approximately 79 pieces of railway equipment (the “Equipment Collateral Transfer”). Despite the fact that all of the Borrowers were
allegedly in default, of the 85 pieces of equipment which were included as “additional collateral”
to Big Shoulders, 79 were owned by the SLRG.
TURD COMENT-RATHER THAN HIRE ATURNAROUND CONSULTANT, I WROTE AND SANG A SONG ABOUT THE RAILROAD, CALLING MYSELF A “TURD AROUND” CONSULTANT.

August 23, 2018, the Borrowers and Big Shoulders entered into the Fifth Forbearance Agreement, which required that all collections by the Borrowers be remitted to an account controlled by Big Shoulders.
TURD COMENT-big shoulders didn’t trust me with my own cash-

Notwithstanding the fact that the Loan Agreement had matured pursuant to its terms and notwithstanding the fact that the Forbearance Termination Date had occurred, Big Shoulders began transferring monies directly to the SLRG. In September 2018, Big Shoulders began transferring funds directly into the SLRG’s account with 1St SouthWest Bank in Alamosa, Colorado; Acct Ending in 3752. However, instead of the funds being used by the SLRG for its general corporate purposes, every dollar deposited within the SLRG’s account was immediately transferred to an affiliated entity: High Iron.
TURD COMENT-I NEEDED TO TRANSFER THE MONEY SO I COULD APPEAR ON STAGE AND RUN PASSENGER TRAINS IN 2019.

In other words, from September 2018 to February 2019, Big Shoulders putatively provided the SLRG $1,273,540.60; however, those funds were immediately swept from the SLRG’s account into that of High Iron. Upon information and belief, the purpose of the “sweep” was to hinder, delay or defraud the SLRG’s creditors in that the funds would be hidden from any potential collection action by the SLRG’s creditors other than Big Shoulders.

Upon information and belief, Big Shoulders was aware and knew that the SLRG was transferring its funds immediately from the SLRG’s account to High Iron’s account. At this time, Big Shoulders had control over the SLRG’s, the Borrowers’ and High Iron’s accounts and collections pursuant to the terms of the Fifth Forbearance Agreement and the Remittance Direction Agreement.

January 15, 2019, Big Shoulders and the Borrowers entered into the Sixth Forbearance Agreement. Big Shoulders alleged that the Borrowers were in default due to the fact that …..real estate taxes had not been paid by the SLRG.
TURD COMENT-BUT MY PASSENGER TRAINS WERE A COMMUNITY SERVICE. I EVEN OFFERED TO HAVE A BENEFIT CONCERT TO RAISE FUNDS FOR MYSEF.

In the Sixth Forbearance Agreement, Big Shoulders required the Borrowers to agree to (i) on or before January 31, 2019, to engage an investment banker acceptable to Big Shoulders; and (ii) by March 15, 2019, to provide to Big Shoulders an executed letter of intent in form and substance acceptable to Big Shoulders for the sale of substantially all of the assets of the Borrowers.

April 16, 2019, Big Shoulders and the Borrowers entered into the Seventh Forbearance Agreement which required the Borrowers to submit a confidential information memorandum in form and substance acceptable to Big Shoulders for the sale of substantially all of the asset of the SLRG. By May 13, 2019, the Borrowers were to provide to Big Shoulders a list of potential purchasers of the SLRG; by June 13, 2019, Big Shoulders was to have received an executed letter of intent regarding the sale of the SLRG. The sale of the SLRG was to close by July 15, 2019.
TURD COMENT-SELL THE RAILROAD IN THE MIDDLE OF CONSERT AND PASSENGER TRAIN SEASON? HOW DARE YOU.

September 9, 2019, Big Shoulders commenced a receivership action against the SLRG and Mt. Hood Railroad Company (“Mt. Hood”).

September 11, 2019, Big Shoulders and the Borrower entered into the Eighth Forbearance Agreement.

September 12, 2019, the District Court entered an order appointing Novo Advisors, as receiver (the “Receiver”) over the assets of the SLRG and Mt. Hood (the “Receiver Order”). The Receiver Order provided that the Receiver was authorized to take possession, custody and control of all “Receivership Assets” which included, but was not limited to boats, accounts, receivables, art, jewelry TURD COMENT-MY WIFE WAS PISSED OFF THAT HER JEWLRY WAS GONE!

Importantly, under the Receiver Order, Receivership Assets did not include any railroad tracks and equipment used in connection therewith, real estate assets and fixtures, including buildings, bridges, and other improvements.

October 11, 2019, Big Shoulders entered into a Receivership Administration Agreement pursuant to which it agreed that the SLRG would be jointly and severally liable for each and every liability of the Iowa Pacific Companies incurred under the Internal Revenue Code as if each were the taxpayer of that liability (the “Assumed Tax Debt”). Big Shoulders also agreed that the Internal Revenue Service (“IRS”) would be granted post-receivership liens on the
SLRG’s assets in order to secure the Assumed Tax Debt. Per the Receiver, the Assumed Tax
Debt equaled approximately $ 13.3 million. The SLRG’s own liability to the IRS was less than
$1 million. The Receivership Administration Agreement also provided that the SLRG’s assets
would be sold in in a sale to close by December 31, 2009.
TURD COMENT-YOUE ARE SAYING I NEED TO PAY TAXES?

October 16, 2019, a Chapter 11 Involuntary Petition was filed against San Luis & Rio Grande Railroad, Inc. (the “SLRG”) by three unsecured creditors.

October 18, 2019, the District Court entered its Amended Order Appointing Receiver in which the District Court expanded the entities whose assets were under control of the Receiver to include, among others, High Iron Travel Corporation (“High Iron”), an affiliate of the SLRG, whose assets were not subject to Lender’s security interest. Mass Coastal was not included in the Amended Order.

December 23, 2019, the District Court ordered that the assets of Mass Coastal also be subject to the Receivership Case. Mass Coastal operates independently from other entities in the Receivership Case. Mass Coastal became jointly and severally liable for the $13.3 million debt owed to the IRS. Mass Coastal’s own liability to the IRS was approximately $3 million.

Mass Coastal received approximately $1.67 million in annual revenue from CSX Corporation (“CSX”) for moving freight from certain CSX junctions. However, Mass Coastal has been required to transfer the entire $1.67 million revenue stream on a monthly basis to an affiliated entity, High Iron (the “Affiliate Transfers”).

The SLRG and the SLRG’s estate did not receive reasonably equivalent value in return for the Receivership Advances. Only a fraction of the Receivership Advances were used on behalf of the SLRG; only a fraction of the Receivership Advances provided a direct quantifiable benefit to the SLRG.

January 30, 2020, Big Shoulders asserted that as of January 23, 2020, the total amount of prepetition indebtedness due and owing to it under the Loan Documents (exclusive of
unpaid legal fees and expenses) was not less than $7,418,772.87.

February 28, 2020, the Receiver filed its final report with the Receivership Court that purports to show that the SLRG had a cash deficit of $495,055.00 from operations during the Receivership Case.

COUNT II: AVOIDANCE OF FRAUDULENT TRANSFERS AND OBLIGATIONS
PURSUANT TO 11 U.S.C. § 544, C.R.S. § 38-8-105 AND 740 ILCS 160/5
The Trustee realleges and incorporates herein by reference each of the preceding allegations as if set forth completely herein.

At the time of the incurrence of the Big Shoulders’ debt, the SLRG was insolvent as its balance sheet had a negative balance of $37,267,398.

The SLRG did not receive reasonably value in exchange for incurring the debt in connection with the Big Shoulders Loan because it received little or no benefit from the proceeds of the Big Shoulders Loan.

The SLRG’s assets did not increase as a result of the Big Shoulders Loan, but its liabilities increased by at least $5 million.

At the time the SLRG incurred the debt in connection with the Big Shoulders Loan, the SLRG (i) was engaged or was about to engage in business or a transaction for which its remaining assets were unreasonably small in relation to its business or transaction; or (ii) intended to incur or believed or reasonably believed that it would incur, debt beyond its ability to pay as they came due.



Subject Written By Date/Time (PST)
  SCAM TIME LINE IOWA PATHETIC AND THE STUPID HAT MAN Ed the Turd 05-20-2020 - 11:55
  Piercing the corporate veil The Pike 05-20-2020 - 15:12
  If corporations are people... Pdxrailtransit 05-20-2020 - 16:00
  Re: Train to Christmastown PEGGY ELLIS 05-20-2020 - 17:16
  Re: Train to Christmastown Not an IPH fan 05-20-2020 - 18:09
  Re: SCAM TIME LINE IOWA PATHETIC AND THE STUPID HAT MAN The Unprofessional Iconoclast 05-21-2020 - 15:02
  Re: SCAM TIME LINE IOWA PATHETIC AND THE STUPID HAT MAN Ed the Turd 05-22-2020 - 11:35
  Re: SCAM TIME LINE IOWA PATHETIC AND THE STUPID HAT MAN Not an IPH fan 05-22-2020 - 15:22
  Re: SCAM TIME LINE IOWA PATHETIC AND THE STUPID HAT MAN Hot Water 05-22-2020 - 16:47


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