Northwest Financial Express Awaits Bankruptcy Settlement

Bankruptcy apparently wasn’t needed or wanted in August 1986 when Northwest Financial Express was forced into that alternative. Since then, a federal judge has questioned whether the money order company should have been ordered to cease business and ruled that the appointed trustee in the case committed fraud.

Greg P. Moldenhauer, who served as the chief financial officer for NWFX, and Larry D. Shaffer, who was the sole shareholder of NWFX and its subsidiary, Gold Financial Express, have gone on to form another Fayetteville-based financial services company, National Financial Resource Group Inc., and are now marketing a prepaid debit card with a multitude of uses. (See story, Page 1.)

Moldenhauer and Shaffer believe their reluctance in the mid-1980s to enter an agreement to sell their money order business to City National Bank in Fort Smith led to the bankruptcy. Officials with City National urged the Arkansas Securities Department to investigate financial activity by NWFX, which later led to suspension of their license and a court order for them to cease business, Shaffer said.

A representative of the Arkansas Securities Commission came to the NWFX office in Fayetteville in 1986 on a surprise audit. Shaffer and Moldenhauer were convinced the auditor was on a mission to close them down when she wouldn’t give them time to prepare for the audit.

With some $4 million in daily transactions, Moldenhauer said it was impossible to get a handle on exactly where all the money was in the middle of the work day. The company had agents all across the country sending in reports, handling transactions, etc. Back then it was impossible to track instantaneously, Moldenhauer said.

“This was a company that had some major value to it,” Shaffer said.

Not long before the company’s forced bankruptcy, it was offered $2.86 million to sell it to a nationally known money order company, but Shaffer declined.

Now, with $400,000 in legal fees spent on the case, Shaffer estimates there’s between $100,000 and $300,000 remaining in the estate. That’s after 100 percent of the claimants were paid.

The fact that all the creditors were paid and there’s still money remaining proves NWFX was solvent and never should have been forced into bankruptcy, Shaffer said.

He won a $275,000 judgment against his former attorneys, Charles A. Wilkes Jr. and James Kreutz of Colorado, but later lost that case on appeal. He claimed in the 1994 lawsuit that the legal team negligently represented him and his corporations in the bankruptcy case.

Shaffer alleged that the bank, which was NWFX’s bank of record at the time of the bankruptcy, jumped the gun on prompting the Arkansas Securities Department to shut down NWFX in 1986. But Shaffer could never pursue legal action because legal “cause” belonged to the estate and Wilkes and Kreutz weren’t able to wrangle legal cause away from the estate. The estate is still tied up awaiting final settlement.

They’re not sure when the case will be settled. The bankruptcy case is over, but the federal judge involved has to release the funds and the corporation.

Moldenhauer said NWFX likely won’t be dissolved, but it will never be the money order company it once was.

“It’s a good corporation,” Moldenhauer said. “We’ve proven that.”

The most recent development in the case was the June ruling by U.S. District Court Judge Jimm Hendren of Fayetteville denying an appeal by the estate’s former trustee.

Former Rose Law Firm lawyer Allen W. Bird served as the bankruptcy estate’s trustee until Hendren affirmed Judge Robert F. Fussell’s July 2001 order that Bird “knowingly committed fraud” while serving as trustee for the $8.5 million Chapter 11 reorganization of NWFX.

Fussell eventually ordered Bird to pay about $199,000 back to the estate for improperly billed fees. Bird also was stuck with his and the prestigious Rose Firm’s $330,000 legal tab to Wright Lindsey & Jennings of Little Rock, which represented him in the appeal.

Fussell wrote in his ruling that Bird had “committed misconduct of the highest order.”

Under the judge’s orders, Bird must return to the NWFX estate $199,000 in trustee fees he was previously awarded, and the Rose Firm was forced to repay $103,000 to the estate for improperly billed fees. The judge also set aside a $20,000 bonus he awarded on May 24, 1993, to Bird for doing “a good job.” He also set aside a $50,000 fee enhancement paid Dec. 8, 1998, to the Rose Firm that also was awarded for good work.

During the bankruptcy, Bird issued 92,240 checks totaling $8 million in disbursement payments to creditors.

A recent court order gives Bird until the first week of November to show cause why his privilege to practice in Arkansas shouldn’t be revoked because of his actions in the case.

About $380,000 was left in the estate before final accounting began. Shaffer, who already has received $250,000 from the bankruptcy estate, stands to collect most of what remains when the money is finally disbursed.

But Shaffer and Moldenhauer aren’t convinced the court will expedite what’s already been a 16-year battle for their company.

“I really hope it will be settled this year,” Moldenhauer said.