Unsecured creditors will receive less than a nickel on the dollar for debt left over from a Moberly economic development project that went bankrupt in 2011 as Missouri lawmakers worked on a financing plan air freight shipments from china.
A final report pending before U.S. Bankruptcy Judge Dennis Dow outlines 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 January 25, summarizes 10 years of searching for money. It raised a total of $4.7 million, with administrative and other expenses accounting for $2.6 million of the total.
“It was a very complicated case both to determine what happened and to seek reinstatement of parties across the country,” Strauss said in an interview with The Independent.
When California businessman Bruce Cole brought the Mamtek project to Missouri in 2010, he described it as a venture backed by American and Chinese investors that relied on manufacturing processes already used in China. He was held up as an example of how partnerships between China and Missouri could make the two more prosperous and won an award for his community impact based on his job promises.
By early September 2011, the project had run out of cash, had laid off the four people it had hired, and was in default on bonds issued to fund construction. This was at the same time that the legislature was in special session to work on a tax credit scheme that would have funded the Aerotropolis Cargo Hub at Lambert International Airport.
The similarity between the two projects – huge benefits promised to a community willing to fund 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 blocked the extraordinary session.
House and Senate leaders said at the time that the revelations about Mamtek made rank and file members of both chambers nervousand one said it was a “flash point” for lawmakers worried 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 US Senate primary. A new announcement from a PAC supporting former Governor Eric Greitens, updated aired during the Opening Ceremonies broadcast of the 2022 Winter Olympics in Beijing, attacks Schmitt for wanting to build “a cargo hub for airlines belonging to the Chinese Communist Party”.
Most 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 fund construction.
Moberly delivered on Cole’s promise to employ up to 600 people, as outlined in project documents sent to communities across the state by the Department of Economic Development. Then-Governor. Jay Nixon joined Cole for an announcement in July 2010 touting $17.6 million in state incentives for the plant.
The bonds were sold to investors in $5,000 increments and Strauss’ report shows an outstanding balance of $36 million, of which $1.65 million will be paid to the bond trustee, UMB Bank.
“If no objection is filed, the court will consider it, and if everything appears to be in order, the court will issue an order allowing me to distribute the funds as stated in the notice,” Strauss said. “It would be rare for the court to disapprove of the final report.”
Other payments 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 provided equipment for the plant.
The project failed because the process of making the sweetener had not been tried, Cole was unable to secure the promised private investment to match Moberly’s bond funds and cost estimates from construction were not based on any finished plan.
But the biggest hurdle was Cole’s systematic looting of the bond fund. By submitting fake invoices, he embezzled $6.6 million from the construction, kept much of the money, and distributed the rest to other California friends who were instrumental in establishing Mamtek.
In November 2014, Cole pleaded guilty to theft and securities fraud and was sentenced to seven years in prison. He was paroled in 2018 and his efforts to overturn the conviction ended in April 2021 when he lost in the Eastern District Court of Appeal.
Mamtek’s 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 the criminal charges, the Securities and Exchange Commission won a decision in California ordering Cole and his wife to pay $1 million to return Mamtek’s ill-gotten personal profits. The judgment is currently on appeal.
And Strauss went to court several times as the Coles fought over money from the sale of a Beverly Hills home they had saved from foreclosure with Moberly bond funds.
“This case wouldn’t have been this long without dealing with Bruce Cole,” Strauss said. “He pleaded everything.”
Cole could not be reached for comment.
Finally, in 2019, the Coles received $90,000a debt to a Kansas City law firm was paid, and taxes Coles owed California on the sale were paid.
“We came to a settlement that allowed him to take some money,” Strauss said, “but I had to do it for this to end.”