July 9, 1995 in Business

Utter, Manager Sink Together Bankruptcy Poses Questions

Rachel Konrad Staff Writer
 

When Utter Infiniti/Utter Motor Co. hit trouble in the early 1990s, the owner reached for a life preserver.

But the lifeline Rick Utter grabbed pulled him under.

Eighteen months after Allan Holms became manager of Utter Motor Co., the Inland Northwest’s first Cadillac dealer filed for bankruptcy reorganization.

Plagued by consumer complaints from Utter car buyers and state investigations of titles and taxes, in May the dealership sold for $1.25 million, not including the value of the property, in a courtroom auction.

Meanwhile, two companies connected to Holms have filed for bankruptcy in the past two weeks. Those bankruptcies come after a 1988 case in which one of Holms’ numerous investment companies filed for Chapter 11.

Documents from that case - which a federal judge threw because it did not meet requirements - paint Holms as a shrewd shell-company operator who shuttled between bankruptcy court and a $600,000 home in one of two Jaguars.

Local dealers and industry officials survey the remains of Utter Motor Co. They wonder how this happened to the 54-year-old dealership, which was nationally renown for its fiercely loyal clientele of Palouse farmers, Spokane doctors, retirees and the landed rich of the Inland Northwest.

“They pushed the concept of customer service and buyer satisfaction well before those became catch phrases in the industry,” said Chris Marr, president of the Spokane New Automobile Dealers Association. Marr likened the end of Utter Motor to Spokane’s loss of the Crescent department store downtown.

“Utter personified certain things about the car business and had an impact on automotive sales, just like the Crescent did for Spokane retailing,” Marr said.

Rick Utter admits that he made mistakes after he inherited the dealership in 1989 from his father, Fred Utter Jr. His decision to add a Japanese luxury line in 1991 proved illfated; Infiniti sales lagged as cars depreciated on the lot.

But it was his decision to hire Holms, a veteran dealer with a winning personality and losing resume, that proved fatal to the business.

Friends at first sight

Utter met Holms in November 1993, when Holms walked into Utter’s downtown dealership and proposed to buy it.

Utter, whose grandfather founded the dealership during World War II, took an “instant, genuine liking” to the Montana dealer. Holms’ affable smile and confident demeanor inspired trust, he said.

“He seemed really nice. I really, really liked Allan,” said Utter, who admitted to making only a cursory check of Holms’ past.

Utter was also eager to sell his dealership, which was losing money in part because of dismal Infiniti sales. He agreed to sell the dealership provided Holms secured Cadillac approval.

One month later, Utter received what amounted to a warning flare from the northwest zone of the Cadillac Motor Car Division. Cadillac denied Holms’ application for the dealership.

Officials at the Fresno, Calif., headquarters based their decision on the poor consumer satisfaction index of Holms’ Great Northern Motor Car Co. in Kalispell. (Holms, who owned Great Northern in Kalispell from December 1992 to December 1994, was also a dealer in Missoula, Helena, Butte and Bismark, N.D.)

Also, the letter stated, Holms did not have enough cash or assets to buy the dealership. Using proposed bank loans and mortgages would have been “excessive and… burdensome” to repay, the letter stated.

But Utter and Holms were determined. Going against Cadillac regulations, they entered a oneyear management agreement during which time Holms could improve his consumer satisfaction index and strengthen his financial reserves. Cadillac officials said management arrangements are uncommon and a violation of the company’s contract with dealers.

According to the agreement, Holms would take 90 percent of the dealership’s profits to Utter’s 10 percent. Holms also promised to absorb 100 percent of any losses. Holms would buy the dealership as soon as Cadillac approved him.

In March 1995, Cadillac rejected Holms again. Utter began to worry. He considered terminating Holms’ management contract.

Arrangement begins to unravel

After Holms managed the dealership for more than one year, sales languished and finances were in shambles. Diminished sales mirrored Cadillac’s nationwide slump, but that didn’t explain Utter’s ravaged bank account.

Consumers complained that the dealership was siphoning thousands of dollars that should have been sent to the state and lending institutions. The money was collected for taxes, titles and licenses, but it was never forwarded, according to consumers and state officials.

“I’m caught in the middle and there’s no way out,” customer Jerry Goertz said in May. The Spokane Valley mechanic paid cash for a 1990 Ford pickup but couldn’t secure a title. Although he and other customers eventually received their titles, many had to spend hours badgering lenders and state officials.

About the same time, federal and state agencies began investigating why the dealership had become delinquent on its taxes. During the first quarter of 1995, the Washington Department of Revenue mailed Utter Infiniti Inc. notices that it owed more than $52,000 in back taxes and penalties.

When Utter approached Holms in April with the tax notices and consumer complaints, Holms denied responsibility. Holms said he offered to help Utter by loaning him $700,000.

As Utter sees it, he ended up borrowing his own money. Before making the loan to Utter, Holms borrowed $668,080 from Farmers & Merchants Bank using the assets of Utter Motor Co./Utter Infiniti Inc. as collateral, according to loan contracts. (John Layman, Holms’ former attorney and president of the Farmers & Merchants’ board of directors, said through his son that he would not comment about how Holms secured the loan.)

The $668,080 didn’t help. In April, taxes and complaints mounted. Utter fired Holms, took over as manager and declared bankruptcy. Now, both say they’re ruined.

While all this was happening, Utter realized Holms wrote checks for as much as $13,500 to pay debts at Great Northern Motor Car Co., the Kalispell dealership Holms sold in 1994. Utter also claims a substantial amount of money vanished without a trace under Holms’ management.

Holms insisted that he is out a job and $1 million in used cars that he brought to Utter’s dealership from Kalispell.

“There is a victim here. I’m it. The bankruptcy devastated me,” Holms said in a June interview.

Although Holms secured the loan on Utter’s assets, he also insisted that the bankruptcy forced him to lose $668,080 of his own money.

“I was a lender. That’s what nobody can seem to get through their heads. It was all my money,” he said.

Utter, on the other side, said the bankruptcy was more devastating to him because his name and assets were on the bottom line of Holms’ loan. The $668,080 will come from Utter Cadillac/ Infiniti assets, he said.

Also, Utter said the bankruptcy cost him $500,000 - his portion of what would have been the $2.2 million sale of his dealership to Holms. He may also have to file for personal bankruptcy when the Barton takeover becomes official, Utter said.

When Utter heard that Holms portrayed himself as the victim, he laughed.

“None of it was his money. He has nothing to lose,” Utter said. “Allan Holms is free and clear.”

Learning some hard lessons

Utter has heard the rumors about how he let a venerable family business fall apart.

He accepts blame, to a degree. He should have checked Holms more carefully. Most important, he never should have cut a deal with him, he said.

In fact, finding out about Holms’ past has become Utter’s raison-d’etre. He and his assistant spend long hours cooped up in a paper-cluttered office digging through files and photocopying documents. He and his family worry that another state agent will knock on the door with new evidence the dealership was late on a payment.

“This whole thing is a mess,” said Denise Utter, Rick’s wife, during a bankruptcy hearing recess.

So why didn’t Utter investigate before handing over the showroom keys?

That’s a question he can’t answer.

“I guess I was stupid, but I couldn’t bite into anything solid,” Utter said.

Utter said he talked to a cadre of local dealers, none of whom said anything overtly critical of Holms. The only negative comments he heard were hearsay.

“In this business, there are so many foul rumors that you try not to believe them. I try not to spread rumors, and I don’t make business decisions based on them,” Utter said.

That may be noble, but auto industry officials say it’s probably not good business sense when the stakes are in the millions. Pervasive rumors and a history of job hopping should be a “red flag” to any dealer, said Paul Thomason, manager for Cadillac’s northwest zone.

More crucially, Holms’ unsatisfactory consumer satisfaction index in Kalispell should have tipped Utter off: Holms’ meager CSI 73 compared to 90 for the average Chevy dealer in the region - gained Great Northern the second worst ranking in the Northwest.

Utter should have been more diligent in interviewing Holms’ co-workers, accountants and and customers, Thomason added.

Utter could have also called the Registrar at the University of Montana - where Holms claimed on his resume to have graduated - to find that he dropped out in 1960.

Or he could have checked with the Eastern Washington District of the U.S. Bankruptcy Court, which has a prodigious, eight-volume file on Holms and several of the now-defunct companies that he ran from 1988 to 1992.

But Thomason said he understood why Utter made Holms manager.

“When you’re in love with somebody, you don’t want to admit their shortcomings,” Thomason said as an analogy. “Rick was sold on Allan’s personality. He didn’t want to look for faults.”

, DataTimes ILLUSTRATION: Color Photo

MEMO: This sidebar appeared with the story: Road to decline Key events in the recent history of Utter Motor Co. 1989 Rick Utter becomes president of Utter Motor Co. when he took the position over from his father, Fred Utter Jr. 1991 Utter Motor Co. acquires the franchise rights to sell Nissan’s luxury line, Infiniti. 1993 November: Allan Holms introduces himself to Rick Utter and proposes to buy the dealership, on the condition that Cadillac approves him to become an authorized dealer. Dec. 22: Cadillac Northwest Zone manager rejects Holms’ application to become an authorized Cadillac dealer, based on low customer satisfaction index. 1995 March 23: Cadillac northwest zone manager rejects Holms’ application to become dealer for the second time, based on Holms’ insufficient funds. April 14: Utter Infiniti Inc. and Utter Motor Co. file for bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Code. Late April: The dealership comes under state investigation as consumers complain that they cannot secure titles, tags or plates for their vehicles. Utter fires Holms and takes over as manager. May 2: Barton Oldsmobile outbids two Northwest rivals to win the right to acquire the assets of Utter Motor Co. and Utter

This sidebar appeared with the story: Road to decline Key events in the recent history of Utter Motor Co. 1989 Rick Utter becomes president of Utter Motor Co. when he took the position over from his father, Fred Utter Jr. 1991 Utter Motor Co. acquires the franchise rights to sell Nissan’s luxury line, Infiniti. 1993 November: Allan Holms introduces himself to Rick Utter and proposes to buy the dealership, on the condition that Cadillac approves him to become an authorized dealer. Dec. 22: Cadillac Northwest Zone manager rejects Holms’ application to become an authorized Cadillac dealer, based on low customer satisfaction index. 1995 March 23: Cadillac northwest zone manager rejects Holms’ application to become dealer for the second time, based on Holms’ insufficient funds. April 14: Utter Infiniti Inc. and Utter Motor Co. file for bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Code. Late April: The dealership comes under state investigation as consumers complain that they cannot secure titles, tags or plates for their vehicles. Utter fires Holms and takes over as manager. May 2: Barton Oldsmobile outbids two Northwest rivals to win the right to acquire the assets of Utter Motor Co. and Utter

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