Wallace's Bookstores Owner Files Chapter 11
John Mutter -- 2/19/01

Former Kentucky Governor Wallace Wilkinson, owner of Wallace's Bookstores and, filed for Chapter 11 bankruptcy protection over a week ago and has since acknowledged debts of almost $340 million with the figure likely to go even higher. The figures came to light after a group of creditors, in an attempt to force Wilkinson into involuntary bankruptcy, revealed the amounts he owes them. When filing for bankruptcy on his own, Wilkinson listed his top 20 unsecured creditors, some of whom overlap with the group of creditors.

The largest creditor is the United Co. of Bristol, Va., which is owed $106 million. The United Co. also reportedly filed a suit in federal district court against Wallace's Bookstores and Wilkinson's wife, Martha S. Wilkinson, both guarantors of United's loans to Wilkinson. In a separate suit the United Co. said that Wilkinson had pledged large blocks of stock in Wallace's Bookstores and of the bookstore shares and 43% of collateral for its loans.

With headquarters in Bristol, Va., the United Co. is a conglomerate with money management operations, oil and gas subsidiaries and a golfing business. Its CEO is James W. McGlothin--described by the Louisville Courier-Journal as a former coal baron and political supporter of Wilkinson--whose net worth has been estimated at $680 million.

Another creditor is Dave Thomas, founder of Wendy's fast-food chain, who is owed $25.5 million. Other creditors are friends and political supporters of Wilkinson.

Wilkinson's problems first came to light when a group of eight creditors, charging "fraud" and "massive irregularities," filed a petition asking that Wilkinson be forced into Chapter 7 bankruptcy, which would have required him to sell all assets. The creditors charged that Wilkinson owed them at least $234.9 million plus interest and that he had engaged in fraud.

A federal bankruptcy judge gave Wilkinson temporary protection from the creditors and ordered Wilkinson to file a list of his 20 largest unsecured creditors, which he did early last week. He is supposed to file a list of all assets and debts within 15 days, according to the Lexington Herald-Leader.

Robert J. Brown, Wilkinson's lawyer, told the Herald-Leader that he expects "we are going to be able to agree to a workout plan." He added, however, that he will try to extend the amount of time for filing the listing of assets and debts.

Wilkinson's lawyers denied that Wilkinson had engaged in fraud or used any money to maintain "a high lifestyle." The judge has not appointed a trustee to administer Wilkinson's businesses, which may have to be sold. Wilkinson's lawyers blamed part of his financial difficulties on, according to published reports.