U.S. District Court Judge has placed a Charlotte based business management consultant company in control of the NASCAR Cup Series team
Ron Devine has lost operating control of BK Racing
BK Racing will now be operated by a trustee following a court ruling on Wednesday.
U.S. District Court Judge J. Craig Whitley has selected Matthew Smith as the trustee. Smith is the managing director of The Finley Group, a business management consultant company based in Charlotte, North Carolina.
“We cannot continue to [have this bankruptcy] operate in an out-of-control manner,” the judge stated in his ruling according to ESPN.
BK Racing will continue to race, at least that’s the plan. The judge encouraged Ron Devine to help guide Smith in the transition. However, at the time of the ruling he was unsure whether he would aid.
“I’m disappointed, obviously,” Devine said after the ruling. “We’ll see. … I don’t know if I will stay involved in it or go in another direction.”
Devine also stated that the team was possibly going to come into a significant investment opportunity with him in control. EarthWater, the teams primary sponsor, who re-signed just ahead of the Daytona 500, is set to go public.
Devine stated that the team was likely to be given stock options, which can be assumed to be a form of sponsorship payments. In earlier court statements, Devine announced that if he wasn’t there, neither would EarthWorks.
According to Devine, the team will need to find a new sponsor for the #23 car.
BK Racing Debt
The judge has requested that all creditors file claims with the court by April 26th. Union Bank & Trust, who requested a trustee, claims it is owed $11.47 million. That is up from the original $8 million claimed in the original November 2017 filing. The increase is due to fees that have been applied.
The US Government is next on the list. The IRS has already filed paperwork claiming that are owed $2,893,499. Again, the majority of that comes due to the fees attached.
In previous court documents, the engine supplier of the team was listed. Amounts of $2,247,611 were due to them, though the Race Engines Plus hasn’t filed an official claim with the courts. However, ahead of the Daytona 500 that number was only $569,539.95.
Next on the list would be the tire and wheel supplier. Beyond that, Champion Tire & Wheel also handled the pit carts for the team. Ahead of the 2018 Daytona 500, it was listed the team owed $94,999.00.
This hearing on whether or not to install a trustee began on Thursday. Devine gave a passionate speech against a trustee last week. This week he made similar statements ahead of the final ruling on Wednesday.
“You’re trying to figure out whether to put [in] a trustee? It’s a disservice,” Devine said in his testimony. “Not only to me and my $35 million that I’ve invested, but to the people sitting out there trying to get paid.”
Devine stated to the courts that employees had been paid and that if he wasn’t there, they would quit. However, an employee of the racing team took to the stand to say that Devine bounced checks to his employees then issues W-2 statements indicating they have been paid in full.
“All they want to do is capture my charter and move it,” the now former team owner Ron Devine stated to the courts.
“It’s a sad day for BK,” Devine said afterward, adding that he would encourage employees to work with the trustee. “It’s come a long way.
“Unfortunately, the enemies or the disputes we have had along the way caught up to us.”
NASCAR / Charter
The NASCAR charter guarantees a starting position for 35 teams. However, NASCAR still has the right to seize the charter. For example, a charter can only be leased for a single year. If the owner of the charter does not bring their own car to the track after the first year of lease then NASCAR will take the charter and put it on the market themselves.
However, this is a unique case given the team has filed for Chapter 11 bankruptcy. In this case, NASCAR wouldn’t be allowed to just seize the charter. They would first need to make a request with the bankruptcy court.
“The goal is to find a way to race as long as they can,” trustee Smith said.
NASCAR was at the hearing on Thursday. Their attorney was there just to make sure that nothing confidential in regards to the sanctioning body was stated during the hearing.
“We have a clear process around charter member governance,” NASCAR said in a statement. “It is incumbent upon charter members to be ready to race and compete at the highest level.”
Gray Gaulding has made all six starts for BK Racing in 2018. His best finish came in the opening round via the Daytona 500. Gaulding crosses the finish line in the 20th position. That tied his best finish from 2017 season which came at Talladega.
Since Daytona is team has netted a 36th (Atlanta), 33rd (Las Vegas), 34th (ISM), 32nd (California) and 36th (Martinsville).
If the team misses more than two consecutive races, NASCAR intends to make an attempt to take control of the charter via the court system.
Related: BK Racing hearing continues (March 24)
Related: Courts allow BK Racing to operate through West Coast swing (February 28)
Related: NASCAR team files for bankruptcy ahead of Daytona 500 (February 15)
Related: Lynch Racing purchases stake in BK Racing (December 2017)
Related: Bank opens lawsuit, seeking charters (November 2017)