TransVantage Solutions Bankruptcy

TransVantage Solutions, Inc. Files Chapter 11

Another freight payment company is in trouble. TransVantage Solutions, Inc. of Branchburg, New Jersey filed a voluntary petition for Chapter 11 bankruptcy on May 3, 2013 in the U.S. Bankruptcy Court for the District of New Jersey, case number 13-19753. TransVantage also operated as or used the names Freight Traffic Services, FTS Industries and FTS.

According to the petition, the debtor estimates that funds will be available for distribution to unsecured creditors. Its assets are estimated to be $ 71,260,000.00 while its liabilities are estimated to be $41,319,266.72. However, while the largest unsecured creditor, Johnson Controls, Inc. (“JCI”), is listed as having a claim against TransVantage of some $15,000,000, TransVantage attributes $71,000,000 of its total “assets” to an unspecified claim against JCI. If you do the math, that leaves only $260,000 in actual assets absent the claim against JCI, of which $40,000 is in a bank account, $20,000 is office furnishings, computers, etc., and $200,000 of the assets consists of “receivables (approximate amount, some questionable recovery)”.

While we do not yet know the nature of TransVantage’s claim against JCI listed in the bankruptcy petition, it appears that the bankruptcy filing was in response to a suit filed by JCI against TransVantage and its president, Shirley Sooy by JCI on April 8, 2013 in the Federal District Court for the District of New Jersey.

According to the allegations in JCI’s complaint, it hired TransVantage in the mid-1990s to provide freight auditing and payment services for JCI’s logistics providers, including its trucking and transportation entities. In the beginning of 2013, after JCI found out its transportation providers were not being paid, JCI learned that approximately $17 million of JCI’s funds had not been delivered to its logistics providers by TransVantage.

When an on-site examination of TransVantage was done by Ernst & Young for JCI, “Defendant Sooy admitted to several Ernst & Young employees that a multi-million dollar shortfall or “hole” existed at TransVantage at the time JCI began utilizing TransVantage’s services” (emphasis added). JCI alleges Sooy used JCI funds to try to fill this “hole” in its client fund account from the very beginning, over two decades ago. But rather than decrease the deficit, however, the complaint continues to allege that “In the intervening years, TransVantage continued to both conceal the deficit and, due to additional fraud and mismanagement of client funds, increase the size of the deficit.”

Sooy would “float” the deficit between clients to avoid detection and commingled its clients’ payment funds in a single account. It was only when JCI began requiring TransVantage to use a JCI controlled account that the “float” was no longer effective and Sooy’s scheme fell apart.

Once TransVantage filed its bankruptcy petition, JCI’s court action is automatically stayed.

So, while TransVantage’s Chapter 11 bankruptcy petition states that the “Debtor estimates that funds will be available for distribution to unsecured creditors”, the reality appears to be quite the opposite. In fact, unless there is real substance to the $71 million claim TransVantage lists having against JCI, there will be no money for any unsecured creditors and the Chapter 11 reorganization will likely end up as a Chapter 7 liquidation.