WILLIAMSBURG — With its finances in shambles and facing mounting pressure from investors, The Mobile Team LLC filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Richmond in March 2010, listing assets of $1.25 million and liabilities of nearly $5.1 million.
The firm's principals, which included former Williamsburg financial adviser Allen H. Whitehead III, sought to save the floundering company through reorganization. It planned to close underperforming stores, restructure its debts and extricate itself from certain contracts and leases.
The company blamed the economic downturn, bad weather that resulted in lost sales and increasing competition from national retailers like Radio Shack and Wal-Mart for its deepening financial troubles.
Entering 2010, The Mobile Team "faced rapidly growing debt to investors, landlords, the IRS and others," according to a bankruptcy filing.
But even as the business was struggling mightily in the year leading up to the filing, Whitehead, CEO Trever Bybee and President Joyce Evans paid themselves a combined $654,632.56 — more than $218,000 each.
"It was very enlightening in a bad way to find how the principals have treated themselves financially," said Sean Allburn, an investment adviser at Davenport and Co., who had put $89,000 into The Mobile Team. "The compensation and salary they were paying themselves was completely out of line and out of proportion with the business at hand."
In the five and a half months the company slogged through its Chapter 11 reorganization, the three principals continued to pay themselves between $27,000 and $40,000 a month combined through August, according to court documents.
At the same time, The Mobile Team was not paying other bills, leading several of its landlords to file motions seeking to evict the company from its properties.
Despite being paid about $9,000 a month, Whitehead fell behind in his spousal and child-support payments to his family.
In July, the Whiteheads officially divorced.
Two months later, the bankruptcy court ordered The Mobile Team's case to be converted to Chapter 7 — liquidation.
Each of the Mobile Team's retail stores and kiosks were closed, though T-Mobile said it plans to re-open six of them under different ownership.
Whitehead and Bybee both filed for personal bankruptcy in July.
As of Oct. 21, Whitehead listed assets of $250,502 and liabilities of nearly $9.75 million. He owes more than $1.3 million to 14 Virginia investors, a majority of whom are from the Williamsburg area.
At least three of those investors have filed suits against Whitehead in three separate courts.
Linda Digges, a Matthews County resident, won a judgment against Whitehead to garnishee funds held in four bank accounts, but received only $3,096.95, according to court records.
Ronald and Neva Lynde of Williamsburg also won a judgment against Whitehead to garnishee his wages, though it's unclear what, if anything, they've received.
A third case, filed by Virginia Beach-based Burton Lumber, is pending.
Other investors said they've all but given up, refusing to throw good money after bad in litigation.
All three bankruptcy cases are still active.
The Chapter 7 trustee in the Whitehead bankruptcy case, Bruce H. Matson, received court orders allowing him to employ both a law firm and an accounting firm to investigate whether Whitehead made any "avoidable transfers" prior to his bankruptcy filing.
A trustee has power to cancel a transfer of money or property made during the months prior to a bankruptcy filing to pay off creditors. Generally, a trustee can force the return of payments or transfers made up to 90 days before the filing.
If the transfers involved business partners or relatives, the trustee can look back up to a year prior to the filing.
In May, as part of his divorce proceedings, Whitehead transferred about $180,000 worth of cash and assets to Kristy Whitehead and his two daughters. It's unclear whether the trustee will seek those assets.
Sometime in late August or early September, Whitehead set sail on his 45-foot, center-cockpit Hunter yacht with his new wife, the former Joyce Evans, and headed south down the Rappahannock River through the Chesapeake Bay and out of Virginia.
In his bankruptcy filing, Whitehead lists his boat as his principal residence and place of business, but public records indicate he lives in an apartment complex on Daniel Island in South Carolina, just northeast of downtown Charleston.
Whitehead claims in his bankruptcy papers that the yacht, which he values at $250,000, is exempt because it is his primary residence, meaning he wants to keep it after the case is complete.
It's the final thorn in the side of his creditors, many of whom expect to get little to nothing back from their initial investments.
"The entire time they were running this thing like they were already king of the hill," said H. Ross Ford, a Williamsburg resident who invested $200,000 into the firm. "And now the rest of us are left just suffering."
Whitehead was attempting to re-establish his license to become an independent insurance agent, according to a September divorce proceeding filing in Williamsburg/James City County Circuit Court. He also was seeking work in professional office and industrial site cleaning, according to the filing.
As of Sept. 15, Whitehead "and his new wife have no income, and he is living off of borrowed money," the filing said. He "needs to borrow money to survive."
No one can pinpoint exactly where things went wrong for The Mobile Team and Allen Whitehead.
Investors are perplexed that a seemingly fool-proof enterprise led by a trusted adviser and friend could collapse under its own weight after two years of operation.
"None of us know exactly what happened. It makes absolutely no sense," said Pressley McCance, a 78-year-old Alcoa retiree who invested $25,000 in The Mobile Team because of his faith in Whitehead. "Maybe it's a lesson learned that the people you think you're dealing with aren't really the people they say they are. Why would somebody do what he did?"
The only person who can answer that question is Allen Whitehead.
A recording on the answering machine attached to both his cellular and land-line phones says, "Hi. This is Allen and Joyce Whitehead. We're away from the phone. Please leave a message and we'll return your call."
The Daily Press left Whitehead several messages on both phones. He never returned the calls.Copyright © 2015, The Baltimore Sun