Jay Reeves, AP, Herald.com (Miami), Feb. 15
ROANOKE, Ala.-Born with five sewing machines in a plant made of scrap wood, Terry Manufacturing Co. defied the odds in segregation-era Alabama to become one of America’s biggest black-owned businesses.
Over 40 years, the company built a list of clients including the federal government, McDonald’s Corp., the NHL and the 1996 Olympics.
But something went terribly wrong.
Court records show a federal criminal investigation is now focusing on Terry Manufacturing amid claims that $35 million in assets vanished from its books in a two-month span last year.
The company is in bankruptcy, and court officials have located few meaningful business records, documents show. Someone allegedly burglarized the corporate office in a possible bid to steal or destroy what few records the company had.
As fraud allegations swirl, 300 workers who were laid off last summer-mostly black women who ran sewing machines on a crowded manufacturing floor-are still baffled by what happened.
“I worked there for 18 years,” said Kathleen Satterwhite, who was out of work for seven months after the closing. “I was surprised.”
The company’s principals, brothers Roy and Rudolph Terry, have blamed the shutdown on a cash-flow problem linked to its manufacture of camouflage fatigues for the military, according to court documents.
Neither brother has been charged with a crime in Alabama, but Rudolph Terry pleaded guilty last year in Atlanta in a corporate fraud scheme involving false invoices. He was sentenced to eight months in prison and ordered to pay restitution of about $800,000.
Prosecutors in Georgia said there was no direct evidence linking the Atlanta case with the demise of Terry Manufacturing. Von Memory, an attorney for the company, did not return telephone calls from The Associated Press seeking comment.
Terry Manufacturing was started in 1963 by J.A. Terry and his wife, Velma, during a pivotal year in Alabama’s tortuous trip through the civil rights era.
That January, then-Gov. George C. Wallace vowed “segregation forever” in a chilling nod to Jim Crow and white supremacy. But J.A. Terry was respected by both blacks and whites in Roanoke-which is 75 percent white-and people of both races backed his dream of opening an apparel company to provide jobs for poor, rural blacks.
“We wanted to show that black people can promote themselves, that they can be an asset to the town, to the country, to the economy,” Terry said in an interview published 34 years ago.
Just a teenager at the time, Terry’s son William vividly recalls tearing apart an old mansion in a neighboring town to get lumber for Terry Manufacturing’s first plant.
“Me and my brothers helped pull nails out of the used lumber. I remember five-gallon buckets full of nails,” he said.
With backing from a white-owned bank, Terry Manufacturing started out making women’s blouses. By 1969, the business was a huge success: Roanoke celebrated “J.A. Terry Day,” and a mixed-race crowd of 800 filled the town’s armory for a banquet.
Before J.A. Terry began moving toward retirement in the mid-1970s, the company was getting government contracts under a program that set aside work for minority-owned businesses.
J.A. Terry died in 1988; his widow is 84.
William Terry, the younger brother of Roy and Rudolph, left the family business in 1983 and wonders what will become of his brothers, with whom his relations are strained.
“No matter what has happened, it’s still my brothers,” said William Terry, 54.
For years, the company continued its success under the brothers’ leadership, with customers including the '96 Olympics and the U.S. Forest Service, and with Pentagon contracts totaling $58.3 million from 1997 through last year. Black Enterprise magazine listed the company among the nation’s largest black-owned businesses last year, with total sales of $49.5 million.
A red flag appeared in the books about the same time, however, according to documents in its bankruptcy case.
With outstanding loans totaling $18.3 million to SouthTrust Bank and First Bank, Terry Manufacturing was required to provide regular audited statements to lenders. Its accounts receivable and inventory plummeted from more than $37 million to only $2 million from March to May last year, setting off alarms.
As much as $16.5 million of the loans were guaranteed by the U.S. Department of Agriculture-meaning taxpayers are on the hook. The company listed another $32.3 million in debt to 20 unsecured creditors, including $4.2 million each to Roy and Rudolph Terry.
While the Terrys contend the company owes them, attorneys for bankruptcy trustee Les Alexander filed papers accusing Roy Terry of using corporate money to repay personal bank loans around the time the company sought Chapter 11 protection in July.
A week after the company filed for bankruptcy, someone broke into the office in Roanoke and shredded bank statements and took corporate records from locked filing cabinets, according to court documents.
FBI spokesman Ray Zicarelli of Mobile declined comment on any possible investigation of Terry Manufacturing, which a judge ordered shut down.
But documents in the bankruptcy case show attorneys trying to sort out the company’s debts have talked with federal prosecutors in Alabama and Georgia, plus criminal defense attorneys.
In the meantime, Terry’s main factory sits idle. Pieces of military uniforms still rest on sewing machines where they were left last summer when the company closed, and papers are scattered throughout the office.
About 60 former Terry workers are now employed by American Apparel, which opened in January in another building that had been operated by Terry Manufacturing.
Product inspector Linda Bell is glad to be back at work. Roanoke was a depressing place after the shutdown.
“At one time is was like a ghost town,” she said, taking a break from checking military uniforms at American. “You’d go to the bank and there wouldn’t be anybody there.”