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
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
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
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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