Ernst & Young is also selling Ram Industries assets and the buildings for both businesses as a result of financial trouble
REGINA — The first report of the receiver for Leon Manufacturing and Ram Industries includes allegations of false invoices and little evidence of manufacturing taking place.
The Oct. 11 Ernst & Young report outlines actions taken since the Yorkton, Sask.-based companies entered receivership and illustrates the company’s situation. It has recommended the assets be sold, and a Nov. 8 court date has been set to approve a superior offer for Leon equipment.
As of June 4, Leon owed BMO more than $13 million and Ram owed more than $3.5 million.
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The receiver did not reply to a request for comment.
The report said the receiver took possession of the property on June 11 and upon a walk-through “noticed that the raw materials and work-in-progress appeared minimal to non-existent at both locations.”
After talking to management, the receiver decided to immediately close Leon while allowing Ram to continue operating with minimal staff to complete outstanding projects.
The companies owed large outstanding balances for insurance premiums. When asked for accounts receivable summaries, management did not supply them, leaving the receiver to compile a list from the companies’ servers and previous reports.
“Upon receipt of the initial demand letters, many customers contacted the receiver disputing amounts outstanding and provided detailed information about orders not being fulfilled by the companies, equipment not being shipped and amounts invoiced being incorrect,” the report said.
Several customers contacted the Western Producer earlier this year with their complaints. They included having to pay in full and in advance for equipment they never received or didn’t get for some time.
Some of the complaints were several years old.
Equipment dealers also had difficulty getting products from the companies.
The report noted that several customers filed complaints with local authorities to try to get their money back for equipment that was paid for but not delivered or for refunds they had been told were sent but never received. This included contacting the RCMP.
The document also includes an email from former sales representative Tony Martinez alleging that the company falsified multiple invoices to balance its books.
The report said Ernst & Young continues to investigate those allegations.
It is also looking into the status of a supposed $2 million investment account that may have been liquidated earlier.
Eighty-two employees received Wage Earner Protection Program packages, the report said. The companies owed more than $700,000 in property taxes to the city.
Offers to purchase the Leon assets were due July 31. Those offers are confidential but there were 13 from 10 parties to buy the equipment, remaining raw material, works in progress and intellectual property.
The report identified a proposal from Joiner Sales Corp. as the superior offer. Joiner said it would conduct a public online auction.
There were no satisfactory offers for the buildings, and they are listed with a commercial realtor for $5.5 million.
In late September, Ernst & Young issued a request for offers and proposals for the Ram equipment and tool assets. They were due Oct. 25.
The real estate for that business is also for sale on the receiver website.
