In the face of a pending lawsuit that made accusations of financial troubles and accounting irregularities, the construction arm of local commercial real estate firm Thalhimer is being put to rest.
MGT Construction is in the process of winding down, Thalhimer CEO Lee Warfield confirmed last week.
“MGT is experiencing financial challenges,” Warfield said in an email statement, emphasizing that the construction company is a subsidiary of Thalhimer, distinct from the company’s brokerage and development arms.
“(MGT is) still operating. They are not pursuing new projects and are working to complete existing projects,” he said.
Warfield said MGT’s troubles are separate from the remaining pieces of Thalhimer, consisting of its Cushman & Wakefield | Thalhimer brokerage and its Thalhimer Realty Partners investment and development subsidiary.
“Thalhimer has been part of the RVA community for over 100 years and that’s not going to change,” Warfield said. “Looking forward to 2018, we are bullish on the region’s business climate and our company’s ability to perform at a high level for our clients.”
Warfield did not disclose further details on MGT’s financial challenges, specifically whether they are related to allegations in a lawsuit filed in October in Richmond federal court by former Thalhimer property management head Steve Brincefield.
Brincefield, who retired from Thalhimer in 2012 after 38 years with the firm, claims several of the company’s top executives had a hand in wrongfully depleting the value of the Thalhimer employee stock plan by millions of dollars in part to allegedly cover up troubles and “accounting schemes” at MGT.
The defendants in the suit are Warfield, chairman and former longtime Thalhimer head Paul Silver; executive vice president Evan Magrill; CFO David Dustin; Jeff Bisger, former head of what’s now Thalhimer Realty Partners; and Lance Studdard, an employee stock plan consultant hired by the company.
The case alleges violations of the federal Employee Retirement Income Security Act, conspiracy, conversion and other counts accusing the defendants of self-dealing and using the stock plan as a “tax-free cash warehouse.”
The suit alleges MGT president Michael Logan “admitted to participating in accounting schemes” to boost bonuses he received from the company.
The suit claims the defendants discovered the scheme in October 2016 and devised a coverup and unwinding plan to fill the financial hole caused by MGT Construction, which the suit says has become a “cash drain” on Thalhimer overall, and to avoid personal liability at the expense of the stock plan.
Thalhimer has declined to comment on the lawsuit and Warfield did not comment last week on whether accounting irregularities were discovered at MGT or Logan’s status with the company going forward.
In court filings made last week, Thalhimer admits that it discovered that at least one unnamed MGT employee had been “engaging in a fraudulent accounting scheme.” That scheme, the company claims, caused inaccuracies in its financial statements that had been relied upon in managing the employee stock plan.
The defendants have yet to file responses to the lawsuit. They have until Jan. 2 to do so and have argued to put the lawsuit on hold until February, claiming the company has formed a “special litigation committee” to investigate the matter.
Court filings last week state the committee is tasked with determining the course of action for Thalhimer as it relates to dealing with Brincefield’s allegations.
The company has hired Norfolk law firm Wilcox & Savage to help with the internal investigation.
Thalhimer is represented in the lawsuit by attorneys Charles Sims and Eve Campbell of law firm O’Hagan Meyer. Silver, Warfield, Magrill, Dustin and Bisger are represented by H. David Gibson of law firm Gentry Locke.
Brincefield’s attorneys, John Craddock and Michele Burke Craddock of Craddock Law, argue against extending the defendant’s time to respond.
MGT, founded in the late ’90s, has been headquartered at 611 Bainbridge St. in Manchester. It has done work around Richmond as well as outside the region. Some of its local projects have included serving as general contractor on Thalhimer Realty Partners developments.