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Thursday, October 16, 1997

Stempel officer got money for housing but never moved to Amarillo

AMARILLO, Texas (AP) -- The top officer of an office products manufacturer that filed for bankruptcy after being lured here received $65,000 from taxpayers for housing expenses despite never moving to town, the Amarillo Globe-News reported Wednesday.

The newspaper said in a copyright story that a letter from Stempel Manufacturing showed Hugh Stempel, the 70-year-old majority owner of the company, received tens of thousands of dollars for a cost differential in housing.

Stempel said grant money from the Amarillo Economic Development Corp., which gave the company a multimillion-dollar incentive package to relocate, enabled him to buy a home in Longview -- where his daughter lives -- while his home in Coleman was up for sale.

The residence has since sold, but there was never any agreement to return the $65,000 to the AEDC, Stempel said.

AEDC Executive Director Michael Bourn said the payment to Hugh Stempel was inappropriate and should be returned, but he said an AEDC grant to Stempel Manufacturing contained no stipulations on how the grant could be spent.

The company's former president, Jerry McGuire, was also to receive $85,000 in AEDC grant money to account for a cost differential in housing, the letter said.

McGuire agreed to step down Oct. 10 and become plant manager as part of an agreement between the company and The CIT Group, Stempel Manufacturing's primary lender.

Stempel Manufacturing relocated in February from Coleman, southeast of Abilene, where it was the town's biggest employer, after accepting a $3.85 million incentive package from the AEDC.

Funded through a half-cent sales tax, AEDC gave Stempel Manufacturing an additional $500,000 loan in August, bringing the total incentive package to $4.35 million.

The company filed for Chapter 11 bankruptcy Sept. 19 to reorganize its finances. It shut down temporarily and has since resumed operations after receiving additional funding from CIT.

According to the letter, the remainder of a $1.5 million AEDC grant -- $1.35 million -- would be used to reduce company debt. An AEDC project summary of the Stempel Manufacturing incentives said the $1.5 million grant was to be used for relocation and related expenses.

Bourn said he knew the company planned to use some AEDC money to reduce debt, but not the amount mentioned in the letter. That figure would have raised concerns, he said.

"It was a great deal more -- $1 million more -- than what we expected," Bourn said, adding it was his impression that $300,000 would be paid on Stempel's debt.

McGuire said making a payment on debt was discussed with the AEDC, but said he didn't recall telling AEDC officials that $300,000 would be the amount.

While Bourn said the housing payment to McGuire appears "excessive," McGuire's attorney, John Lewis, said the differentials were "not unlike what large companies like IBM and General Motors do" when they relocate employees.

The payments represent the difference between the estimated selling cost and anticipated replacement costs of the McGuire's and Stempel's homes, he said.

"If there was anything improper about the payments ... CIT certainly would not have approved it, and CIT would have made an issue of it back when it happened."

The payments actually should have been higher, because Stempel realized a greater loss than anticipated on the sale of his home, and McGuire's loss on his home is expected to be greater than anticipated, he said.

McGuire's 4,113-square-foot Coleman home is advertised for $225,000 and has not yet sold.

McGuire said the house originally was listed for $350,000.

He and his wife are building a 5,974-square-foot home in Amarillo that has an estimated 1998 value of $499,443, said Jim Childers, chief appraiser with the Potter-Randall Tax Appraisal District.

The undated letter spelling out the payments is on Stempel company stationery and addressed to Tim Culver, assistant vice president of CIT.

McGuire's name is printed at the bottom but no signature appears.

A handwritten notation near his name on the letter says, "1-2-97. OK. Telephone conversation with Tim. Said he would confirm in writing."

The notation is not signed, but McGuire said the notation was his. He said he never received an answer in writing from Culver.

Culver declined comment Wednesday, citing corporate policy.

 

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