Houston Firm Examining Asset Claims in Oklahoma

A Houston company has found Oklahoma to be fertile ground for researching the assets of debtors whom creditors suspect have understated their holdings.

Kimmons Investigative Services, Inc. has two Oklahoma city banks as clients and does work for Texas clients owed money by Oklahoma firms and individuals, said Rob Kimmons, the company’s president. The firm has examined the asset claims of Oklahoma companies, most of them in the energy industry, since February.

Kimmons said a recently completed background check of one small company found substantial undisclosed assets and substantial undisclosed lawsuits. The inquiring client was an out-of-state bank owed $80,000 by the oil firm.

Several local companies do portions of the background check work performed by Kimmons Investigative Services but apparently do not compile such exhaustive reports. Berry Mitchell, estate administrator in U.S. Bankruptcy Court in Oklahoma City, said Kimmons’ estimate that significant assets are not disclosed in 50 percent of his firm’s cases may be high.

But he said some assets belonging to bankruptcy debtors are not reported or detected.

“The bankruptcy court has limited resources,” Mitchell said. “The trustees are caught between a rock and a hard place.”

“They’re just not in a position to make an inquiry without assistance from someone.”

Kimmons’ firm provides that assistance throughout the country, although he said most of its work is in Oklahoma, Louisiana and Texas, Its seven-member staff includes two licensed real estate brokers, a law school student and an author.

Kimmons, 32, bought the firm in bankruptcy court in Houston last December. He said he paid about $25,000 for the company’s assets, primarily its books and completed research, and spent another $50,000 for equipment and other items to begin operations.

Kimmons said the company did business for 18 months under its original owners and failed because of excessive overhead.

Kimmons Investigative Services gathers facts from more than 350 sources in county, state and federal government. It compiles the information into a report that is presented to the client.

Kimmons said the firm does background checks on real estate mortgages, collateral filings, state incorporation records and more obscure documents to determine the extent of a debtors’ assets. He said most clients are lenders or trade creditors who suspect a debtor has more assets than claimed and thus more ability to pay his obligations than claimed.

Other customers are lenders who investigate a prospective borrower’s ability to pay before negotiating a loan.

Kimmons estimates the firm’s research discovers information unknown to the client about 95 percent of the cases, with substantial assets in about half.

Kimmons began operating the company with the former management’s pricing structure – a flat fee of $1,500 plus expenses. He said he abandoned that for an hourly rate of $35 after the flat fee became a money loser on several extensive searches.

Kimmons, a former policeman who also owns a six-investigator detective service, said monthly billings are about $30,00; monthly overhead about $15,000. Clients can place a ceiling on the amount of money they are willing to pay.

Oklahoma City lawyer Ken Spears is on the 13-member trustee panel in the local bankruptcy court. As trustee, he is appointed by the court to administer debtors’ estates.

Spears said the court is principally dependent on the truthfulness of debtors to disclose assets.

“They sign an affidavit that the assets are true and correct,” he said. “They perjure themselves if we learn otherwise.”

Kimmons said one of his more extraordinary cases involved a lender client owed $3 million by a Texas man who was threatening to enter bankruptcy proceedings. The debtor told the lender to accept an amount smaller than its claim or risk recovering less than that amount in bankruptcy.

“We found over $7 million in assets,” Kimmons said. “The day after we gave them the report, the man wrote the lender a check for the entire $3 million on an account at another bank.”

Spears said creditors often tell the court of assets that the debtor did not list. He said the court can then remove its protection from creditor lawsuits by denying the petitioner discharge of debts or seek control of the assets for the benefit of creditors.

Spears estimates that 10 percent of debtors in bankruptcy do not disclose all assets.

Jan Rider, president of B&B Title in Oklahoma City, said hers and similar companies research real estate records, collateral filings and tax liens, primarily for banks inquiring about a prospective borrower, She said she did not know of any local firms that do a systematic search to determine assets.

Mitchell said work such as that done by Kimmons’ company would be deemed a professional service before the court could approve such work in a bankruptcy case. The court frequently approves accountants, financial examiners and other professionals to help in cases.

Because such fees are paid from the estate, Mitchell said the court would have to estimate whether the potential for additional assets would justify the expense. But he said the local court is seeking to increase the financial expertise of the trustee panel, which has been overwhelmed with oil-related cases during the slump in energy exploration since 1982.

Mitchell said work such as that done by Kimmons Investigative Services could prove helpful in some cases.

“I imagine there’s a market for that,” he said. “I’m sure trustees would be interested.

By Kevin Laval, Sept 15, 1985

Posted in Uncategorized.