Orange County Ironworks to pony up $500K to settle suit
POUGHKEEPSIE — The Orange County Choppers clan's other family business and its leader will pay $500,000 to settle claims that the business ripped off its creditors.
The settlement will be presented Tuesday in U.S. Bankruptcy Court in Poughkeepsie, where O.C. Iron Works' Chapter 7 bankruptcy case has been proceeding since July 2005.
The case is not related to Orange County Choppers, the reality television phenomenon that launched Paul Teutul and his sons to stardom. Instead, it focuses on the steel fabrication and erection business he ran before he began building bikes.
The Rock Tavern business has been passed around among various family members over the years, with Paul Teutul Sr. and two of his sons, Paul Teutul Jr. and Daniel Teutul, serving in ownership and management roles. Trustee Tom Genova's fraud complaint stems from one of those transfers.
According to the complaint, the Teutuls "devised and undertook a scheme" to "hinder, delay and defraud" the iron company's creditors. They systematically moved the equipment, employees, accounts and other assets of O.C. Iron Works to a new company, Orange County Ironworks LLC, in 2004, but the new company didn't pay fair compensation, according to the complaint. The Teutuls then had O.C. Iron Works file for bankruptcy, leaving creditors empty-handed.
The complaint filed in Bankruptcy Court in June 2007 names as defendants Paul Teutul Sr., Paul Teutul Jr., Daniel Teutul and Orange County Ironworks LLC. Only Daniel Teutul and the iron company are named as parties in the settlement.
Calls to Genova and lawyers representing the defendants were not returned Monday. The settlement includes a gag order barring the parties and their lawyers from discussing the settlement or bringing it to the attention of the media.
Genova's complaint suggests the sale was executed to protect the family business from a costly judgment in a lawsuit brought by Turner Construction. In 2003, O.C. Iron Works agreed to supply steel to Turner for a school Turner was building in Queens. According to court papers filed by Turner, O.C. Iron Works notified Turner in November 2003 that it wasn't able to perform the required work.
Turner terminated the contract and sued O.C. Iron Works, claiming breach of contract. The Teutuls then began diverting the assets of O.C. Iron Works to the new company, Orange County Ironworks LLC, according to the complaint. In late 2004, the Teutuls moved the employees of O.C. Iron Works over to the new company, and O.C. Iron Works stopped doing business. The transition was essentially complete.
On June 23, 2005, the New York State Appellate Division sided with Turner in its suit against O.C. Iron Works. Two weeks later, on July 6, O.C. Iron Works filed for bankruptcy. The filing, under Chapter 7 of the U.S. Bankruptcy Code, called for the company's assets to be liquidated and the proceeds distributed to creditors.
But the Teutuls had already cleaned the place out, leaving crumbs for the creditors, according to Genova's complaint. O.C. Iron Works' bankruptcy filing listed $596,520.09 in assets, but that sum consisted almost entirely of accounts receivable — money the company was owed, but hadn't been able to collect.
The company's debts, meanwhile, were roughly $667,000, not counting the eventual $1.3 million judgment owed to Turner.
In his complaint, Genova sought to have the transfers from the old company to the new company judged fraudulent and set aside. He also sought to make the new company liable for the old company's debts.
Under the proposed settlement, Daniel Teutul and the current iron business, Orange County Ironworks LLC, will pay $500,000 to Genova, who can then distribute the money to creditors in the bankruptcy case. Genova, Turner Construction, Orange County Ironworks LLC and Daniel Teutul agree to release each other from liability.
The two Paul Teutuls are conspicuously absent from the body of the settlement documents, although they are listed as defendants at the top of the first page.
