Kar Auctions Services Inc., IPO: A Criminal History or a Money Tree for Three?
Complaint
Super Mg
Country: United States
12/6/2009
BURBAK BEAT
Kar Auctions Services Inc., IPO: A Criminal History or a Money Tree for Three?
New IPO should serve James Hallett, Michael Hockett and John Fuller well.
On November 30, 2009 KAR Auction Services Inc. (KAR) announced the commencement of an Initial Public Offering of 23,000,000 shares of common stock estimated at $15.00 to $17.00 per share.
Just last month, KAR Auctions changed its name from KAR Holdings, Inc., (before that it was ALLETE in 2007). KAR's CEO James Hallett recently said, “This name more accurately reflects the businesses…”
Or, this may be just a better way to hide previous dealings of past companies to confuse investors. Below is an outline of James Hallett and KAR to better illustrate the business model.
Hallett became CEO of ADESA U.S. after leaving ADESA Canada in 1996 to replace ousted David Michael Hockett (a.k.a Mike Hockett or D. Michael Hockett).
Luckily he and two other executives were paid $44 million for leaving, which MP&L later sued to recover when Hockett failed to live up to any of his promises not to compete. Hockett agreed that he would not engage or be interested in (a) the vehicle redistribution business; (b) the vehicle auction business; or (c) the dealer floorplan financing business.
Hockett had his hands in all three before he left ADESA and still does business in each one these. Hockett got MP&L's cake, ate it, and then used a portion of it to start a separate business that cut into MP&L's bakery.
ADESA, AFC
D. Michael Hockett
In 1992 Mike Hockett and Gary Pedigo formed ADESA (Auto Dealers Exchange Services of America) Corp., basing it in Indianapolis. Hockett was named president and CEO. In April 1992 two million shares of stock were sold at $11.50 each. Hockett retained a 56 percent interest.
In 1993, Hockett founded a new auction division: ADESA Canada. He helped merge the salvage industry with the whole car industry by acquiring the Impact Salvage Auction chain.
In January 1994 ADESA acquired Automotive Finance Corporation (AFC). Mike Hockett was also part owner of CITA Inc. with John E. Fuller which was founded in 1987. CITA provided floorplan financing to dealers and was renamed Automotive Finance Corporation in December 1993, a month before being bought by ADESA.
In January 1995 Minnesota Power & Light (MP&L), an electric utility company, bought 80 percent of ADESA's stock for $162 million. ADESA management, who held most of the remainder, would remain in charge.
In August 1996, Minnesota Power and Light Co. instigated a management shakedown at ADESA resulting in the resignation of ADESA founder and CEO Michael Hockett. ADESA executive James Hallett was selected to replace Hockett.
Michael Hockett took a stock buyout, along with two other officials of ADESA $44 million. Under the 1996 Agreement, Hockett specifically agreed that for three years he would not engage or be interested in (a) the vehicle redistribution business; (b) the vehicle auction business; or (c) the dealer floorplan financing business.
Litigation
On 10/15/1996 Minnesota Power & Light sued Michael Hockett, his wife Judy, and his sons Brian Scott Hockett, Jason Hockett and Michael Hockett, Jr. in Indiana Federal Court for breach of contract (IP96-C-1463-D/F).
Minnesota Power alleged that Hockett had engaged in the auto transport business conducted by F & J Auto Transport, Inc., which was a subsidiary of Alphamega, an Alabama corporation, with which Hockett was involved or had financed. F & J allegedly competed with Great Rigs, Inc., an Alabama corporation that was a wholly owned subsidiary of ADESA Corp. Second, Hockett had assisted others in forming Alphamega.
In a separate case with the SEC, Judy Hockett, the wife of ADESA CEO Michael Hockett in 1997 agreed to pay $60,600 to settle Securities and Exchange Commission charges that she tipped off her brother before Minnesota Power & Light bought 80 percent of Adesa for $162 million. By trading on the information, the brother made $25,500 in illegal profits, the SEC said. SECURITIES AND EXCHANGE COMMISSION V. JUDY HOCKETT, GAYLE RAISOR, AND KEVIN
RAISOR, Civil Action No. IP97-870-C-D/F (S.D.In. May 29, 1997).
In 2001, Michael D. Hockett, son of ADESA founder D. Michael Hockett, was sentenced for bribery in a federal court in Virginia. He served five months in jail, 150 days of home detention and was ordered to pay a $20,000 fine. The junior Michael Hockett was one of three men implicated in a bizarre plot to blackmail a Suffolk City, Va., councilor into dropping his opposition to a zoning issue. The scheme involved an attempt to get photos of the councilor with an exotic dancer who showed up at his insurance office. The plot unraveled when the councilor threw the woman out.
Earlier this year BRIAN SCOTT HOCKETT, of Indianapolis, was charged with bank fraud, following an investigation by the FBI. The allegations were that from January 2003 through May 2006, HOCKETT was the owner of Family Management Corp., which did business in the Indianapolis area as Fleetmax, a wholesaler of used motor vehicles. In early 2002, HOCKETT established a line of credit for Fleetmax with National City Bank and Fifth Third Bank to provide working capital for Fleetmax.
HOCKETT concealed his diversion of the line of credit from the banks by falsifying reports he filed with the banks, called “borrowing base certificates,” to show that Fleetmax had more assets securing the line of credit than was actually available. Reports to the banks showed that Fleetmax had approximately $12 million in assets available as security, when in fact there was only $750,000. After the banks discovered the fraud, and all of Fleetmax’s assets were sold, the banks lost approximately $2.4 million as a result of HOCKETT’s fraud.
The elder Mike Hockett is currently founder and CEO of Auction Broadcasting Company, which over the last couple of years has been selling its used car auctions to ADESA’s present CEO James Hallett.
JAMES HALLETT HISTORY
In 1996, James Hallett, the head of Adesa Canada, was named president and CEO of ADESA replacing ousted founder Mike Hockett
In October 2003 the firm's parent, now known as ALLETE, Inc., announced that it would spin off ADESA as a separate entity. One share of ADESA stock would be issued for each share owned in ALLETE. The move was taken to increase shareholder value, as ADESA now accounted for almost two-thirds of ALLETE's revenues.
In December 2003, the SEC initiated an informal inquiry relating to ALLETE’s internal audit function and the internal financial reporting of ALLETE (ADESA’s former parent), ADESA, AFC, a wholly owned subsidiary of ADESA, and the loan loss methodology at AFC.
In June 2004 the spinoff from ALLETE got underway with the sale of 6.25 million shares of stock on the New York Stock Exchange. The remaining 93 percent of the firm's shares were distributed to ALLETE shareholders in September. ADESA had by now also issued $125 million in bonds, as well as securing $525 million in loan commitments from a total of 29 banks.
Sean Hallett, the son of CEO James Hallett, had three separate lines of credit with AFC and an outstanding loan through a related entity. As of December 31, 2004, the total amount owed to AFC was $1.7 million. As of December 31, 2004, Sean Hallett and his related businesses were in default on those obligations. All three credit lines were then closed.
ADESA pursued legal action to collect these amounts. AFC and Automotive Finance Canada, Inc. (the "AFC Entities") filed their Statement of Claim in the Ontario Superior Court of Justice on or about November 8, 2004 wherein it was alleged that Sean Hallett and his related companies (the "Hallett Entities") had defaulted on their outstanding obligations to AFC (Ontario Superior Court of Justice; Case File No. 04-CV-278564CM2).
In December, 2004, Sean Hallett filed his Statement of Defense and Counterclaim against AFC, AFCI, ADESA, Inc., ADESA Canada and ADESA Auctions Canada alleging that there was no outstanding obligation and that the named counterclaim defendants owed approximately $6 million to Hallett in compensatory and punitive damages. On March 4, 2005 the parties met in Toronto, Canada and participated in a mandatory mediation session in an effort to resolve the litigation.
In May 2005 James Hallett was fired by ADESA with new CEO Dave Gartzke taking on Hallett's former duties as president of ADESA. Hallett became president of Columbus Fair Auto Auction, in Columbus, Ohio the same year.
In the summer of 2005, ADESA and AFC sued Dealer Services Corporation ("DSC"), founded by ADESA veterans Mike Hockett and John Fuller. DSC filed a counterclaim against AFC Finance and ADESA Inc. (NYSE: KAR), claiming that AFC engaged in anticompetitive behavior. The counterclaim alleged that AFC engaged in unfair competition and interfered with DSC's business relationships by refusing to enter into a blanket intercompany creditor agreement with DSC, and knowingly filing frivolous, baseless claims against DSC in bad faith. DSC sought $25 million for punitive and other damages. The lawsuits were filed Hamilton Superior Court, Indiana.
HALLET RETURNS TO ADESA in 2007
James Hallett was announced February 1, 2007 as president and CEO of ADESA after being terminated two years ago by new management at ADESA. The private equity firm that is purchasing ADESA is taking the company private (KAR symbol NYSE). Hallett apparently helped orchestrate a new ownership deal consisting of KELSO & Company, GS Capitol Partner (affiliate of Goldman Sachs), ValuACt Capitol and Parthenon Capitol.
James Hallett quickly began buying auctions from former ADESA CEO Mike Hockett. Hallett said he always considered Mike Hockett, CEO of ABC Auctions, to be a visionary, much like himself.
Now James Hallett is ready for KAR AUCTIONS to go public again. In an amended S-1, KAR Holdings (the HoldCo for Adesa) disclosed the details of its upcoming IPO. The company, with Goldman as lead underwriter (with upcoming Buy recommendations to follow the IPO courtesy of 10 co-managers to secure an even better price for Goldman to dump remaining shares), will sell 23 million shares between $15 and $17/share.
MR. JOHN E. FULLER
Not a lot of intelligence on Mr. Fuller. Other than he was a Marine sergeant and got hurt on the job as a fireman, his industry knowledge appears to be riding the coattails of Mike Hockett.
He is the president of Dealer Services Corporation and claims he was the founder. However, in October 2009 Mike Hockett claimed that HE is the founder. Mike Hockett was originally listed in 2005 as a DSC Director on many state filings, yet his name appears to have vanished in all current filings in 2009.
BURBAK BEAT
Kar Auctions Services Inc., IPO: A Criminal History or a Money Tree for Three?
New IPO should serve James Hallett, Michael Hockett and John Fuller well.
On November 30, 2009 KAR Auction Services Inc. (KAR) announced the commencement of an Initial Public Offering of 23,000,000 shares of common stock estimated at $15.00 to $17.00 per share.
Just last month, KAR Auctions changed its name from KAR Holdings, Inc., (before that it was ALLETE in 2007). KAR's CEO James Hallett recently said, “This name more accurately reflects the businesses…”
Or, this may be just a better way to hide previous dealings of past companies to confuse investors. Below is an outline of James Hallett and KAR to better illustrate the business model.
Hallett became CEO of ADESA U.S. after leaving ADESA Canada in 1996 to replace ousted David Michael Hockett (a.k.a Mike Hockett or D. Michael Hockett).
Luckily he and two other executives were paid $44 million for leaving, which MP&L later sued to recover when Hockett failed to live up to any of his promises not to compete. Hockett agreed that he would not engage or be interested in (a) the vehicle redistribution business; (b) the vehicle auction business; or (c) the dealer floorplan financing business.
Hockett had his hands in all three before he left ADESA and still does business in each one these. Hockett got MP&L's cake, ate it, and then used a portion of it to start a separate business that cut into MP&L's bakery.
ADESA, AFC
D. Michael Hockett
In 1992 Mike Hockett and Gary Pedigo formed ADESA (Auto Dealers Exchange Services of America) Corp., basing it in Indianapolis. Hockett was named president and CEO. In April 1992 two million shares of stock were sold at $11.50 each. Hockett retained a 56 percent interest.
In 1993, Hockett founded a new auction division: ADESA Canada. He helped merge the salvage industry with the whole car industry by acquiring the Impact Salvage Auction chain.
In January 1994 ADESA acquired Automotive Finance Corporation (AFC). Mike Hockett was also part owner of CITA Inc. with John E. Fuller which was founded in 1987. CITA provided floorplan financing to dealers and was renamed Automotive Finance Corporation in December 1993, a month before being bought by ADESA.
In January 1995 Minnesota Power & Light (MP&L), an electric utility company, bought 80 percent of ADESA's stock for $162 million. ADESA management, who held most of the remainder, would remain in charge.
In August 1996, Minnesota Power and Light Co. instigated a management shakedown at ADESA resulting in the resignation of ADESA founder and CEO Michael Hockett. ADESA executive James Hallett was selected to replace Hockett.
Michael Hockett took a stock buyout, along with two other officials of ADESA $44 million. Under the 1996 Agreement, Hockett specifically agreed that for three years he would not engage or be interested in (a) the vehicle redistribution business; (b) the vehicle auction business; or (c) the dealer floorplan financing business.
Litigation
On 10/15/1996 Minnesota Power & Light sued Michael Hockett, his wife Judy, and his sons Brian Scott Hockett, Jason Hockett and Michael Hockett, Jr. in Indiana Federal Court for breach of contract (IP96-C-1463-D/F).
Minnesota Power alleged that Hockett had engaged in the auto transport business conducted by F & J Auto Transport, Inc., which was a subsidiary of Alphamega, an Alabama corporation, with which Hockett was involved or had financed. F & J allegedly competed with Great Rigs, Inc., an Alabama corporation that was a wholly owned subsidiary of ADESA Corp. Second, Hockett had assisted others in forming Alphamega.
In a separate case with the SEC, Judy Hockett, the wife of ADESA CEO Michael Hockett in 1997 agreed to pay $60,600 to settle Securities and Exchange Commission charges that she tipped off her brother before Minnesota Power & Light bought 80 percent of Adesa for $162 million. By trading on the information, the brother made $25,500 in illegal profits, the SEC said. SECURITIES AND EXCHANGE COMMISSION V. JUDY HOCKETT, GAYLE RAISOR, AND KEVIN
RAISOR, Civil Action No. IP97-870-C-D/F (S.D.In. May 29, 1997).
In 2001, Michael D. Hockett, son of ADESA founder D. Michael Hockett, was sentenced for bribery in a federal court in Virginia. He served five months in jail, 150 days of home detention and was ordered to pay a $20,000 fine. The junior Michael Hockett was one of three men implicated in a bizarre plot to blackmail a Suffolk City, Va., councilor into dropping his opposition to a zoning issue. The scheme involved an attempt to get photos of the councilor with an exotic dancer who showed up at his insurance office. The plot unraveled when the councilor threw the woman out.
Earlier this year BRIAN SCOTT HOCKETT, of Indianapolis, was charged with bank fraud, following an investigation by the FBI. The allegations were that from January 2003 through May 2006, HOCKETT was the owner of Family Management Corp., which did business in the Indianapolis area as Fleetmax, a wholesaler of used motor vehicles. In early 2002, HOCKETT established a line of credit for Fleetmax with National City Bank and Fifth Third Bank to provide working capital for Fleetmax.
HOCKETT concealed his diversion of the line of credit from the banks by falsifying reports he filed with the banks, called “borrowing base certificates,” to show that Fleetmax had more assets securing the line of credit than was actually available. Reports to the banks showed that Fleetmax had approximately $12 million in assets available as security, when in fact there was only $750,000. After the banks discovered the fraud, and all of Fleetmax’s assets were sold, the banks lost approximately $2.4 million as a result of HOCKETT’s fraud.
The elder Mike Hockett is currently founder and CEO of Auction Broadcasting Company, which over the last couple of years has been selling its used car auctions to ADESA’s present CEO James Hallett.
JAMES HALLETT HISTORY
In 1996, James Hallett, the head of Adesa Canada, was named president and CEO of ADESA replacing ousted founder Mike Hockett
In October 2003 the firm's parent, now known as ALLETE, Inc., announced that it would spin off ADESA as a separate entity. One share of ADESA stock would be issued for each share owned in ALLETE. The move was taken to increase shareholder value, as ADESA now accounted for almost two-thirds of ALLETE's revenues.
In December 2003, the SEC initiated an informal inquiry relating to ALLETE’s internal audit function and the internal financial reporting of ALLETE (ADESA’s former parent), ADESA, AFC, a wholly owned subsidiary of ADESA, and the loan loss methodology at AFC.
In June 2004 the spinoff from ALLETE got underway with the sale of 6.25 million shares of stock on the New York Stock Exchange. The remaining 93 percent of the firm's shares were distributed to ALLETE shareholders in September. ADESA had by now also issued $125 million in bonds, as well as securing $525 million in loan commitments from a total of 29 banks.
Sean Hallett, the son of CEO James Hallett, had three separate lines of credit with AFC and an outstanding loan through a related entity. As of December 31, 2004, the total amount owed to AFC was $1.7 million. As of December 31, 2004, Sean Hallett and his related businesses were in default on those obligations. All three credit lines were then closed.
ADESA pursued legal action to collect these amounts. AFC and Automotive Finance Canada, Inc. (the "AFC Entities") filed their Statement of Claim in the Ontario Superior Court of Justice on or about November 8, 2004 wherein it was alleged that Sean Hallett and his related companies (the "Hallett Entities") had defaulted on their outstanding obligations to AFC (Ontario Superior Court of Justice; Case File No. 04-CV-278564CM2).
In December, 2004, Sean Hallett filed his Statement of Defense and Counterclaim against AFC, AFCI, ADESA, Inc., ADESA Canada and ADESA Auctions Canada alleging that there was no outstanding obligation and that the named counterclaim defendants owed approximately $6 million to Hallett in compensatory and punitive damages. On March 4, 2005 the parties met in Toronto, Canada and participated in a mandatory mediation session in an effort to resolve the litigation.
In May 2005 James Hallett was fired by ADESA with new CEO Dave Gartzke taking on Hallett's former duties as president of ADESA. Hallett became president of Columbus Fair Auto Auction, in Columbus, Ohio the same year.
In the summer of 2005, ADESA and AFC sued Dealer Services Corporation ("DSC"), founded by ADESA veterans Mike Hockett and John Fuller. DSC filed a counterclaim against AFC Finance and ADESA Inc. (NYSE: KAR), claiming that AFC engaged in anticompetitive behavior. The counterclaim alleged that AFC engaged in unfair competition and interfered with DSC's business relationships by refusing to enter into a blanket intercompany creditor agreement with DSC, and knowingly filing frivolous, baseless claims against DSC in bad faith. DSC sought $25 million for punitive and other damages. The lawsuits were filed Hamilton Superior Court, Indiana.
HALLET RETURNS TO ADESA in 2007
James Hallett was announced February 1, 2007 as president and CEO of ADESA after being terminated two years ago by new management at ADESA. The private equity firm that is purchasing ADESA is taking the company private (KAR symbol NYSE). Hallett apparently helped orchestrate a new ownership deal consisting of KELSO & Company, GS Capitol Partner (affiliate of Goldman Sachs), ValuACt Capitol and Parthenon Capitol.
James Hallett quickly began buying auctions from former ADESA CEO Mike Hockett. Hallett said he always considered Mike Hockett, CEO of ABC Auctions, to be a visionary, much like himself.
Now James Hallett is ready for KAR AUCTIONS to go public again. In an amended S-1, KAR Holdings (the HoldCo for Adesa) disclosed the details of its upcoming IPO. The company, with Goldman as lead underwriter (with upcoming Buy recommendations to follow the IPO courtesy of 10 co-managers to secure an even better price for Goldman to dump remaining shares), will sell 23 million shares between $15 and $17/share.
MR. JOHN E. FULLER
Not a lot of intelligence on Mr. Fuller. Other than he was a Marine sergeant and got hurt on the job as a fireman, his industry knowledge appears to be riding the coattails of Mike Hockett.
He is the president of Dealer Services Corporation and claims he was the founder. However, in October 2009 Mike Hockett claimed that HE is the founder. Mike Hockett was originally listed in 2005 as a DSC Director on many state filings, yet his name appears to have vanished in all current filings in 2009.
Comments
By the way KAR has purchased 2 auctions from Auction Broadcasting Co. (ever), they have purchased far more from other independants, so I would say to look elsewhere you bunch of crazies.
Get a life.
Pedigo, Skillman, and Hockett have been tight for years.... I'm sure there are many dirty deals going on under the table!! I'm sure Skillman is protecting something. I know (son) Skillman did a lot of cover up for the Hockett sitting in Jail now for Bank Fraud.
NO Horse'n around.... HA!
Maybe someone should investigate all the vehicles (Ferrari's) brought over from Canada that they kept hidden at Hockett's farm.
They were in trouble for rolling back odometers when he owned ADE... So what happened with all the odometers on the cars from Canada that were sold in the USA??
And the Buick store they just sold to Skillman... Maybe they should investigate the little electrical fire that happened in the showroom after M. Hockett purchased it from Tom Wood. I heard from the horses mouth the showroom needed a face lift!
AND YOU ARE CORRECT.... all of his management had a lovely history too. I think he put them in place so if something did go down the blame could fall to that person with the criminal history. Most of the management had a long history in the car business and abused drugs and alcohol.
MONEY IS THE CREATOR OF ALL EVIL! Maybe he should give more to the church!
I have looked into all the charities and even latest million dollar donation are fake. American Cancer Society does not even show $1.00. donation. Thank you for your tip. I am going to look it up. They owe me money. They
With KAR now public, keep your eye on Automotive Finance Corporation (AFC). After having thousands of dealers in California sign illegal flooring contracts, they bought a license in 2007 and hoped to go unnoticed.
Well, the shoe is about to fall on not only AFC but those loan sharks at Dealer Services Corporation. While AFC & DSC paid off the Dept. of Corporations by using big-gun Morrison-Foerster; they have had a little too much light shined on them (maybe from the Man above).
Big Dog Manheim Auction is in the midst of a class-action case in California where they have been accused of all sorts of unlawful & deceptive practices against dealers.
Scott Hockett "only" stole $2.5 million from a bank when arrested by the F.B.I. Like his older brother Mike Hockett, dozens of letters from supposed “Christians” were mailed to the federal Judge. Justice was served in the name of Jesus Christ as Scott Hockett was sentenced to 18 months in prison.
Scott Hockett used 64 letters from church members, preachers and family members to sway the federal Judge. Scott Hockett claimed his crimes were caused by the “Devil” who made him use booze and drugs and forced him to drive fancy sports cars.
U.S. Attorney Timothy Morrison had negotiated a plea bargain before telling the public that Scott Hockett was charged with bank fraud. The FBI investigated Hockett for three years, 2003 to 2006, yet charges were not filed until 2009 when the plea deal was struck. No time was given for other victims of this criminal to come forward.
Their pants are all on fire....believe in hockett & your pants pockets will be be emptied before you blink. watch out for their in law liers who can't get jobs on their own either. big shots ha-ha. ass lickers. I wish I could feel sorry for their money grubing [***] that are married to those idiots but they love those cheaters so they can cheat themselves. old man hockett you will burn in hell soon for being the biggest fool of them all. your fool sons will burn with you for throwing the lords name in court to try and save themselves. stick your money in your fool churchs [***] and say 20 forgive me's I have sinned again ooppps? bad daddy. you deserve nothing but [***] -f*(&^ing in jail yourself. gray hair son of a [***] devil. days go fast....
I hope while he is serving time he gets a little of what he like to give out... A royal F---- in the A--!
HOW DARE THE JUDGE OTHER!