Hertel tells tale of ruin
Developer Ronald W. Hertel said he likely made payments for his planes, a 130-foot yacht, a horse ranch and more than a dozen mortgages from the accounts of Ventura-based R.W. Hertel & Sons.
In January, a group of creditors forced R.W. Hertel & Sons into an involuntary Chapter 7 bankruptcy. Just what R.W. Hertel & Sons’ money paid for is important because a bankruptcy trustee is hunting for assets the company might own so that creditors can be repaid. About $2.8 million in claims have been filed so far.
Since the case was filed, bankruptcy court documents and hearings have revealed that R.W. Hertel & Sons was part of a hydra-headed empire controlled by Hertel and Bob Fowler that racked up as much as $100 million in debts before it collapsed and included five airplanes, at least one boat, a horse ranch and vineyards in addition to the duo’s developments across California. They have contended that most of those assets belonged to companies that they controlled rather than R.W. Hertel & Sons and therefore aren’t fair game for creditors in that firm’s bankruptcy.
“Overall, we were conducting business” before R.W. Hertel & Sons collapsed in June 2008, Hertel said at a bankruptcy court hearing in Santa Barbara on July 24. “We thought we were going to build some units. We thought we were going to build a hotel in Oregon. We thought we were going to do a number of things.”
At the hearing, U.S. Trustee Sandra McBeth grilled Hertel about money flowing into and out of R.W. Hertel & Son’s bank accounts. Some of the transfers were nearly half a million dollars, but Hertel said he and Fowler gave prior approval to large transactions of around $250,000 or more. Hertel and Fowler both said that they pumped money from their own personal accounts to keep the company alive during its last few years and that it technically owes them about $7 million each.
Hertel told the trustee that some of the money going out of R.W. Hertel & Son’s accounts may have gone to the mortgage payments of 13 or 14 homes the duo owned but that any payments were reimbursed. During a question from McBeth about the duo’s two charter flight businesses, Hertel mentioned that some R.W. Hertel & Sons money may have gone to lease payments for the companies’ aircraft.
McBeth stopped him: “Why would they have been paying the lease payments?”
Hertel backtracked and said that the payments were for flights that R.W. Hertel & Sons chartered for company business. “I can’t tell you without looking at the accounts,” Hertel said.
Hertel also said that money for a 130-yacht he tried to purchase might have come from R.W. Hertel & Sons.
“It’s possible. I couldn’t tell you. It’s possible a check has been written by R.W. Hertel & Sons with the expectation that [the yacht’s holding company] would reimburse them,” Hertel said. “It happened occasionally.”
As previously reported in the Business Times, that boat was part of a $4 million civil lawsuit in U.S. District Court in Florida.
“The bank sold it at auction,” Hertel said. “It was never purchased, without getting into the gory details. A total of $4 million was paid,” but not all of it from R.W. Hertel & Sons, Hertel testified.
Hertel also said that his thoroughbred horse farm may have drawn money from his now-bankrupt company. He testified that he sold the horses for about $150,000 two years ago.
“Hertel Farms at one time had thoroughbreds,” Hertel said. “R.W. Hertel & Sons may have paid some of its bills, but I’m sure it was all reimbursed.”
In an interview after the hearing, Hertel said there was nothing unusual about large transfers in and out of R.W. Hertel & Sons’ account without his prior approval.
“Most of these people I have known for 25 years. Bob and I have known each other since 1981,” Hertel said. “We had controls on where the money went and how it was used. After paying our overhead, if anything was missing, we would know.”
Hertel also dismissed rumors that have bubbled up on the Internet that he gave any improper airplane rides to Congressman Kevin McCarthy, R-Bakersfield. Hertel donated $4,200 to McCarthy’s 2006 campaign, and though he says McCarthy may have flown in one of his planes, it would have been part of the company’s normal charter business, which was open to the general public.
“I know Kevin McCarthy. I have donated some money to his campaigns, though I didn’t donate that much,” Hertel said. “If he ever flew in one of our planes, he only did it once.”
In an interview after the hearing, Fowler said all of the five planes he and Hertel’s companies once owned have been sold or taken back by creditors. The money mostly went to pay off the loans for the aircraft, he said.
“Anything that was left over went to us, and we put it back into [R.W. Hertel & Sons],” Fowler said.
Indeed, Fowler and Hertel contended that most of their business empire has been liquidated. Hertel testified that the 20 or so vehicles they owned through a rental company have been paid off or taken back and said he lost a home, lived in part-time, in Ventura.
“It’s foreclosed on and gone,” Hertel said.