Less than four months ago, the head of Vertex Rail Corp. said he had created a “strong foundation” for future growth in Vertex Fab & Design, a different company he owns in Massachusetts.
By March 2, CEO of Vertex Rail Don Croteau was signing documents to file for Chapter 7 bankruptcy on behalf of Vertex Fab & Design, according to court records. The voluntary petition, however, was not filed until May 5 with the U.S. Bankruptcy Court in Massachusetts
Biographical information about Croteau that Vertex Rail’s general council Foster Sayers III emailed to the Greater Wilmington Business Journal in February said that Croteau was an employee of Vertex Fab & Design until May 2012, when he purchased the LLC and became “the sole member.” The document also said that as manager, managing director and sole member of Vertex Fab & Design LLC, Croteau “developed a newly acquired business from startup mode to solid multimillion dollar performer in under 12 months.”
The same biographical information said Croteau “created a strong foundation for substantial future growth by the company.”
Croteau characterized Vertex Fab & Design differently Thursday, saying that despite his efforts and desire to save Vertex Fab & Design, he could not do so, even as he amassed $1 million in personal debt during the attempt.
“It was just too badly flawed from the beginning,” he said.
Three weeks after signing the bankruptcy form, however, Croteau spoke about Vertex Fab & Design's work in manufacturing at an appearance in Wilmington.
“One of my other companies makes pressure vessels and vacuum chambers very large. We’ve done work with GE Nuclear, MIT, NASA – companies all over the world making very complex pressure vessels vacuum chambers and storage tanks,” he said about Vertex Fab & Design at the WilmingtonBiz Conference & Expo on March 25, an event held by the Greater Wilmington Business Journal.
Several local officials said Friday that news of Vertex Fab & Design’s bankruptcy filing has not caused them concerns about Croteau’s local venture.
“It does not change my opinion about Vertex Rail nor Don Croteau,” Mayor Bill Saffo said Friday. “It’s one of those things that happens in business from time to time.”
A corporation filing for bankruptcy doesn’t necessarily spell disaster for that corporation’s owner should he decide to start a new business, bankruptcy attorneys said Friday.
“There’s a risk any time someone opens a company that things aren’t going to work out, but that doesn’t mean they can’t in good faith try again at another endeavor,” said Algernon Butler, an attorney with Butler & Butler law firm of Wilmington and a certified bankruptcy specialist.
If someone tried to use the assets of an old company undergoing bankruptcy proceedings to form a new company, that might create a legal issue. “That’s a time when many questions will be asked by the trustee or creditor of the debtor,” said Melissa Jacoby, who studies bankruptcy and is a professor of law at the University of North Carolina at Chapel Hill.
None of Vertex Fab & Design’s assets have been transferred to Vertex Rail, Sayers said Friday.
“Legally, there is no corporate relationship between the entities whatsoever,” he said.
Wilmington City Councilman Kevin O’Grady said Friday that judging from news reports about the bankruptcy filing, “it appears from the perspective of the Vertex owner that it’s a separate company, and frankly, sometimes things like that happen. Remember, we have not been asked for any kind of incentive or anything. They’re a private business. We have supported them by assisting in building a road, but that was not a quid-pro-quo for them coming here.”
The road O’Grady was referring to is the extension of Raleigh Street, where Vertex Rail is located in Wilmington, to River Road. To accommodate Vertex Rail's plans, the city and New Hanover County agreed to contribute $300,000 each to help pay for the extension, with the N.C. Department of Transportation contributing the remaining $900,000 needed.
Councilwoman Laura Padgett said Friday that she doesn't expect the other company's bankruptcy filing to affect Vertex Rail and that even if Vertex Rail were for some reason not to follow through with announced plans, the road funding is still money well-spent. "To improve the roadway over there is a thing that will be there even if Vertex were to go away, which nobody wants to happen," she said.
State transportation crews are expected to begin the road extension work June 5, if a construction funding agreement between Wilmington, New Hanover County and the N.C. DOT is approved by two other state panels, said Mike Kozlosky, executive director of the Wilmington Urban Area Metropolitan Planning Organization.