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Summit National Files Chapter 11 Bankruptcy by Christopher Menkin April 21, 2005, Summit National, an early leader of leasing equipment software, filed bankruptcy in the Eastern Division of the Northern District of Illinois United States Bankruptcy Court. Signed by President Kenneth E. Duffy, Jr., a list of the top 20 creditors were made, with an estimated note that it may be as high as 49. The estimated assets of Summit were noted at between $10 million to $50 million and its estimated debts from $1 million to $10 million. The assets most likely consist of its proprietary software. A document in the filings claims the company does not have more than $100 cash. It also claims the cause of the bankruptcy was a debt owed to the widow of the previous owner and founder of the company.
Competing succesfully as a lease accounting software vendor demands quality products, flexibility, and a company that understands the special needs of the leasing industry. Summint National, Inc. products and services are designed to accomodate all types of leasing and finance companies in both the equipment and vehicle leasing industries. Summit has been providing lease accounting software solutions for nearly 20 years and is in the singular position of offering five unique back-end systems; a front-end application processor and credit management system; as well as, customized ASP and Outsourcing services, Disaster Recovery, Upgrades & Conversions, Lease Portfolio, Auditing, Customization, and Training. Whether you are a large corporation, a bank, or small leasing company, Summit has a solution for you! Chapter 11 is typically used for business bankruptcies and restructuring. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in Chapter 11, although it does so under the supervision of the Bankruptcy Court and its appointees. The schedule set for motion to dismiss has been reset for June 22, 2005 at 2:00pm before Honorable Jacqueline Cox, United Sates Bankruptcy Judge, in the courtroom usually occupied by her at 291 South Dearborn Street, Chicago, Illinois. Leasing News attempted to reach Mr. Duffy by telephone. All e-mail was returned as being undeliverable. In submitting a description of the operation and company for the Leasing News Leasing Software List “Summit National, Inc. maintains offices in Chicago, IL, Norcross, GA, Toronto, CAN, London, ENG, and representation in Sydney and Melbourne Australia to serve over 350 domestic and international clients/users. “Summit's 350+ client/user base includes 18 of the Monitor 100. Summit also provides software and services for leading small and mid-range banks, leasing companies, and other captives. “The 26 eLeasing software providers listed in your report provide different products for different needs. As such, the 26 vendors could be placed in separate and distinct categories. Of the 26, Summit would put itself in the same category with 3 or 4 of the 26 vendors listed. The others offer different services that are not in direct competition with Summit National, Inc. products and services. Summit's systems are designed to manage lease applications and lease portfolios for its client base.” The company was one of the serious bidders for Decision Systems International, although some in the know, called their anonymous (at the time) bidding the spoiler for Capital Stream's serious take over bid. Ultimately, the price became so high, only the original investor was left ( some say holding the bag, meaning he had to put more money in to chase about “bad money,” the critics said. Certainly there were management changes and new life brought into the company in its fight against the mighty Oracle for survival in the big league arena. In the last two years, there were signs of cash flow problems as the company lost at least one lawsuit, and then seemed not to respond to customers. They called Leasing News to ask what happened. Leasing News received this response:
“Thanks for your emails. Our site was being updated. I'd be happy to “At one time we hosted more than 200 websites for both leasing companies and general business customers. We even hosted a hot dog stand site. We no longer host our own mail nor any of the websites but it sure was fun being on the ground floor. “Regards,” http://www.summitnational.com/ Interesting is the 20 largest Unsecured claims in the bankruptcy include NDSI, $35,000; Healthcare Information Systems, $35,000; McDonnell boehnen, $25,000; David M. Ward, $20,000; Chris Brennan, $20,000; English, McCaughan, O'Brien, $15,000, and Karm, Winnand & Patterson, $10,000. Interesting in the documents of public record is a “Motion to Dismiss” case. It claims the reason for the filing of the Summit bankruptcy. It also brings to record the assets of the company, seems to lead this should be a chapter 7, and also brings the timeline in the company to an “only in the leasing business” story. Please read the document and then the coda at the end, as this can only be shared as it is now “public knowledge:” This is dated May 25, 2005 submitted by DaimlerChrysler Services North America: “Nancy J. Fox, fka Nancy J. McDougal, individually and as Special Administrator of the Estate of Bruce W. McDougal...and Daimler Chrysler Services America, LLC, f/k/a Mercedes Benz Credit Corporation...state as follows: “1. The Court should dismiss this case because Summit has nothing to reorganize and simply seeks to use the court to further litigation strategy. “2. Summit is a defunct leasing corporation with no office and no employees other than its principal, Ken Duffy (and possibly, his son.) “3. Its only assets are $100 in cash, alleged rights in software that Debtor contends are worth “many millions of dollars,” and a lawsuit against DamierChrysler. “4. Summit's only significant creditor (other than Duffy family members) is Mrs. Fox, who holds a security interest in all of the Debtor's assets, including the software and the litigation, to secure her sale of the assets of her deceased husband's business to Summit. “5. Summit has no business associated with the software. Rather, the software is only a vehicle for bringing the lawsuit against DaimlerChrysler and has resulted in a counterclaims by DaimlerChrysler for extortion. “6. Ken Duffy, Sr. is the president and the majority shareholder of Summit. For a short period of time prior to Bruce McDougal's death, Ken Duffy, Sr. worked at Summit National Group,Inc. (“Old Summit”). “7. Mr. McDougal died, and in, 1997, Summit purchased Old Summit's assets from Mr. McDougal's widow, Nancy J. McDougal, now known as Nancy fox. “8. Although Duffy is the majority shareholder of Summit, he paid none of his own cash to finance the purchase of Old Summit's assets. Instead he borrowed $50,000 from his best friend (whom he has never repaid) and gave Ms. Fox a corporate promissory note in the amount of $675,000. The note was secured by an all-assets security interest in Summit's assets, owned and after-acquired. “9. Summit has paid only part of the interest due on the Note. Not a penny of principal has been paid on this Note. Summit is in default of its obligation to Mrs. Fox and owes Ms. Fox more than one million dollars. “10. Over the years, Ms. Fox has inquired many times about payment of the debt. In 1999, following an inquiry regarding payment, Ms. Fox was met with personal attacks on herself and her husband. Summit has not made any payment since April, 2002. “11. Notably, until the last two years, Summit was not without funds as it paid lavish salaries to Duffy, Sr., and his son Duffy, Jr. Despite the fact that the Duffys were receiving lavish salaries, Summit ignored its obligation to pay Ms. Fox. “12. Finally, Ms. Fox gave Notice of Deposition and scheduled and advertised a public sale of Summit's assets on April 22, 2006. Daimler Chrysler ahs agreed to bid at the sale. Having failed to induce Ms. Fox to postpone the sale, Summit filed this bankruptcy petition on April 21, 2005 in bad faith for the sole purpose of hindering or delaying Ms. Fox from selling her collateral. “13. Summit fails directly within the criteria established by this Court for bad-faith filing of a bankruptcy petition. As demonstrated in the Brief in Support of Motion to Dismiss Case filed herewith, Summit cannot establish that it has a legitimate reorganizational objective because it has no real need for business-reorganization bankruptcy relief, and this Court should dismiss Summit's bankruptcy petition.” Coda: The company was started by CPA Bruce W. McDougal and the original officers were composed of Gary A. Grabowski, who did the programming, and Gaylan B. Luke. McDougal also had started an internet provider and web site service in 1994, ahead of his time, and his software was a leader in its time, although all in DOS. It was common knowledge that the person he brought to the many leasing conferences was not his wife, although his good friends knew he was happily married and had a family in Fresno, California, but offices in Chicago and traveled often. What we did not know until he died suddenly and tragically of cancer, the woman he traveled with also was his wife. Ken Duffy, who had recently joined the company, was acting sales manager, and in the startling news and claims, he became the CEO. The difficulty was bring the original software from DOS to Microsoft Windows to meet Y2K requirements for the year 2000. In addition, the small to middle-sized ticket leasing business isn't what it used to be. |
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