Published: March 21, 2008 07:40 pm         

Spears has high bid on Somerset Refinery

Somerset — A United States Bankruptcy Court judge in London has ruled that Somerset Refinery’s auction sale earlier this week to Sonoma Capital Partners, Ltd., be approved.

The officer representing Sonoma is none other than William Burnside Spears — the man whose company owned the refinery and filed its bankruptcy in the first place.

“Basically a sale has been approved from Bill Spears, who put the refinery into bankruptcy, back to Bill Spears,” said Lexington attorney John Morgan, who represents the interests of former Somerset Refinery owners Roy Shirley and Frank Lynch. “A bankruptcy trustee was appointed because of (Spears’) bad acts, such as not paying his employees. Yet Sonoma’s high bid was approved — and Sonoma is a corporation put together by Spears.”

The total purchase price for the refinery is $8.4 million, which was the high bid received by Chapter 11 Bankruptcy Trustee William D. Bishop. Spears put an additional $2 million into the floundering refinery during the bankruptcy process. The closing is set no later than April 4.

“I think the trustee tried to auction the refinery. ... No one has any issues with the procedure,” Morgan said. “But Spears’ emergence as the winning bidder is certainly interesting.”

Shortly after taking possession of Somerset Refinery and other companies in the PHS Group from Lynch and Shirley last year, Spears and associates filed for bankruptcy protection in Kentucky’s Eastern District U.S. Bankruptcy Court in London — a move which cost them about $350,000 according to court records. (PHS Group, Inc. — the parent corporation of Somerset Refinery and affiliates — derives its name in part from the old “Phoenix Holdings” corporation which was once the umbrella corporation for the group under previous ownership. PHS has no legal connection to Phoenix.)

Lynch and Shirley then filed a lawsuit in Pulaski Circuit Court to regain control of the refinery. Lynch and Shirley contended they were defrauded in a deal coordinated by Spears and USA Energy Corporation. In their original lawsuit, Lynch and Shirley contended that they are victims of a fraudulent “stock exchange” for worthless shares in a phantom “corporation.”

“Basically, (Lynch and Shirley) are right where they were a year ago,” Morgan said. “They received worthless stock — and it’s still worthless.”

Late last year, Pulaski Circuit Judge David A. Tapp ordered a stay of all further proceedings concerning the civil lawsuit before his court. The ruling appeared to be in deference to parallel proceedings in U.S. Bankruptcy Court at London.

A spokesperson at Somer-set Refinery said Spears was out of town and unavailable for comment.

     

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