CEO's financial freefall mirrors Ram Venture's: creditors pursue chief of bankrupt firm, claim financials overstated

Arkansas Business, Dec 18, 2006 by Mark Friedman, John T. Lewis

ON JUNE 30, 2004, JOHN T. LEWIS OF LITTLE Rock claimed a net worth of $17.2 million. Just over a year later, the former CEO of Ram Venture Holdings Corp. was bankrupt.

Lewis' debts were listed at $16.4 million and his assets at less than $1 million in his bankruptcy claim, which was filed in October 2005.

Lewis now is facing scrutiny from creditors who say he didn't provide accurate financial information when he applied for loans for Ram and then personally guaranteed the loans.

Three creditors, including a company led by Gen. Wesley Clark, have sued Lewis in U.S. Bankruptcy Court to prevent their claims, which total $1.82 million, from being discharged. All three say that Lewis misled them about his financial health. Their challenges will be heard in early 2007.

Neither Lewis nor his attorney, Richard Ramsay of Little Rock, returned calls for comment.

At the center of Lewis' financial troubles is the failure of Ram Venture Holdings Corp. of Fort Lauderdale, Fla., which owned Natural Gear, the Little Rock camouflage clothing line. (The company was originally called American Apparel & Accessories Inc. but changed its name after a reverse merger in April 2004.)

Ram Venture filed for Chapter 7 bankruptcy in July.

It listed no assets and debts of $17.04 million. Ram's bankruptcy was closed in September.

Ram Venture's and Lewis' debts were intertwined because Lewis had personally guaranteed several of Ram's loans.

A few creditors have already received something from Lewis. In May 2005, he transferred his 50 percent interest in a company called L&R Inc., which owned oil and gas leases. Lewis' interest, which had a stated value of $7.8 million as of June 30, 2004, was transferred to Boyd Rothwell of Little Rock in exchange for Rothwell's assumption of $1 million of Lewis' debt.

Lewis also transferred his 33 percent interest in DBJ Inc., which owned an airplane valued at $1.2 million, to Rothwell and Bill Thompson, address unknown, in exchange for their assumption of $5 million in debt.

A former investor in American Apparel and Ram, Virgil Hardy of Lexa, said the company made several mistakes tinder Lewis' tenure, which lasted from 1999 to 2005.

"They just tried too many different things," Hardy said.

A Ram Venture subsidiary produced a show for ESPN2 called "Wildlife Quest," which ended its run in 2005.

Ram's management "got into stuff that they didn't know what they were doing," Hardy said. "They should have stuck with the clothing line."

Hardy, who lost $30,000 investing in Natural Gear, said he thought the company failed because of the management's big ego.

"They seen all these other companies that were doing these shows and venturing into other fields," Hardy said. "They wanted to do the same thing. They weren't financially able like some of the other companies were."

Larry Rial of Little Rock, a director of Ram, declined to comment.

He said "that's past history for me" and that he was trying to move on with his life.

Natural Gear still is in operation but is now owned by EFO Holdings, a subsidiary of JBJ Lending Co. of Dallas, which bought the company after Ram defaulted on loans to Delta Trust & Bank of Little Rock in 2005. JBJ was a creditor of Ram's; it listed a claim against the company of $3.2 million.

High Hopes

In 1999, Lewis became chairman and CEO of American Apparel & Accessories Inc. of Little Rock, which specialized in the outdoor industry.

"He saw the outdoors industry as highly fragmented and ripe for future consolidation," according to a Ram news release in April 2004.

One of American Apparel's first moves was buying Natgear LLC of Little Rock, which owned the copyrights on several camouflage patterns and made hunting clothes. Natgear did business as Natural Gear.

To launch Natural Gear, American Apparel spent $15 million.

At shareholders meetings held at Chenal Country Club between 1999 and 2004, Lewis painted a rosy picture for the company, Hardy said.

"Things were going good, I thought," Hardy said. "They were talking about the new products they were coming out with."

In 2002, American Apparel bought the rights to "Wildlife Quest," a hunting show on ESPN2.

In its debut episode, "Wildlife" was the highest-rated show in its segment and continued to be at the top of its ratings through 2004, Ram boasted in an April 2004 news release. ESPN2 said it had a 0.27 household rating, which was considered good for that kind of show.

The program was used as if it were an infomercial for Natural Gear. Natural Gear provided the clothes for the host and guests and promoted its products in the opening and closing commercial spots.

The show reached 800,000 viewers a week.

One of the biggest moves American Apparel made was to license its camouflage patterns. It had six licensees in 2002 but more than 120 in 2004.

"Revenue from a camouflage pattern's license is very profitable since there is virtually no traditional cost of goods sold associated with licensing revenue," Ram said in its 2004 annual report. "Acceptance of the Natural Gear patterns in the marketplace has grown rapidly. The company is now poised to take a significant market share of the licensing revenue in the camouflage business."