Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, March 12, 1994 TAG: 9403140232
SECTION: CURRENT PAGE: NRV-1 EDITION: NEW RIVER VALLEY
SOURCE: By KATHY LOAN STAFF WRITER
DATELINE: CHRISTIANSBURG LENGTH: Long
Commonwealth's Attorney Phil Keith is seeking a special prosecutor to oversee an investigation into whether Herbert Alcorn Sr. wrongfully took money from six limited partners of Homestyle Restaurants Associates - investors of the Blacksburg Big Boy - and sank it into his financially troubled Park Realty. Park Realty filed for reorganization under Chapter 11 in U.S. Bankruptcy Court in September 1992.
Alcorn says he has done nothing wrong.
The investigation began after some of the partners made a complaint to Keith's office.
Alcorn is the general partner of Homestyle and president and owner of Park Realty. As general partner, Alcorn managed the project and kept the records and books of the partnership. Limited partners invest money but are not involved in the day-to-day management.
According to bankruptcy records, Alcorn invested $273,500 of the partnership funds and was repaying it at 11 percent interest. When Alcorn filed for bankruptcy, he still owed the Homestyle investors about $125,000.
"We haven't done anything that is not documented," Alcorn said Friday. "We haven't done anything that is not in the [partnership] agreement. It is a civil matter."
But Carroll Atkisson, a Roanoke real estate developer and one of the six limited partners, said last month that he and the other partners only became aware Alcorn was taking money from Homestyle and investing it into Park days before Alcorn filed for bankruptcy protection in September 1992.
"If it hadn't been for the bankruptcy, we would have never known," Atkisson said. "... I felt like I had been used."
The six limited partners - which include Atkisson and Del. Jim Shuler of Blacksburg - had invested $50,000 each into the partnership. The restaurant filed for financial reorganization in U.S. Bankruptcy Court in December 1992. Debt at more than $1 million and assets at less than $1 million were listed.
Keith, the commonwealth's attorney, said a primary reason for asking for a special prosecutor is to avoid any appearance of political motivations behind the investigation. Keith and Shuler are Democrats and Alcorn is a Republican.
According to papers on file in the U.S. Bankruptcy Court, Alcorn, as general partner, "invested partnership funds in his Park Realty Company business and executed interest-bearing promissory notes to evidence the investments. ... The commercial paper notes were fully documented and carried on the partnership's financial statements."
Promissory notes are a written promise to pay or repay a specified amount of money at a stated time or on demand. Commercial paper is a short-term negotiable paper arising from business transactions.
However, Atkisson said that "when we finally got financial statements [they] were just profit and loss statements. ... We did not receive any balance sheets that would have shown commercial paper notes."
Other notes in the bankruptcy file indicate the partners were notified of the loans after the fact.
"I don't think that he had the authority to divert the money from the partnership," Atkisson said.
Whether Alcorn had that authority as general partner has been the focus of the state police investigation and also will be something the special prosecutor will have to decide in weighing whether to pursue criminal charges.
State police filed a search warrant in the Montgomery County Clerk's Office in January, about two weeks after a special agent of the state police "monitored a telephone conversation in which ... Alcorn ... admitted that all the capital converted by him was put into Park Realty."
The search warrant was obtained to search for records at the Hubbard Street Office Building on King Street in Blacksburg where Park Realty is housed.
Police seized a number of records including six checks reflecting repayment of partnership funds.
Don Huffman, a Roanoke lawyer who has represented Alcorn on civil matters, said in January that the matter is more a civil dispute between partners than a criminal matter. He said Alcorn cooperated fully with the terms of the search warrant, providing more than was requested.
The Big Boy franchise was dropped last fall and the restaurant briefly opened as Our House. The restaurant closed before the end of last year. The National Bank of Blacksburg has resumed ownership of the restaurant and land. An auction is set for March 30.
"It was an investment that went bad," Alcorn said Friday.
"I don't think I could continue to go on, not knowing the depth of this thing and if what he did ... was legal," Atkisson said. "... This is not a vendetta, it's just that so many people lost because of this."
Park Realty owns Northview Apartments, University Trailer Park, Hilltop Trailer Park and eight rental units on Lee and Roanoke streets in Blacksburg.
Alcorn also owns majority interest in Hometown Lodging Inc., a management company that operates the Blacksburg Comfort Inn beside the former Big Boy. Hometown Lodging filed for reorganization in December 1992. Alcorn is majority stockholder in Leisure Way Industries Inc., which owns and operates bowling alleys in Christiansburg and Pulaski.
by CNB