United falls

The Baton Rouge 30

United falls

Published Sep 17, 2012 at 6:01 pm (Updated Sep 17, 2012)

United Companies Financial Corp. began life in 1947 as a two-man, one-room consumer finance company in the old Lafayette Hotel on Lafayette and Main streets. United grew into a quintessential homegrown success story, employing as many as 3,500 people, including 1,200 locally. From 1991 through 1997, the total value of home loans the company made reportedly surged from $253.6 million to $1.5 billion.

But what was built over five decades crumbled to the ground in only two years. In 1998, the company lost $583.9 million (although they didn't admit it until the following year), laid off a third of its workers and began to sell off buildings in its Essen Lane office park. The company's CEO, Terrell Brown, stepped down as chairman of the board.

Subprime lenders like United were facing increased scrutiny, and Wall Street analysts began questioning the company's accounting methods. The capital that had fueled United's rise dried up almost overnight.

In 1999, United joined several other high-risk lenders and filed for bankruptcy, saying it expected to default on $1.2 billion in debt. Angry shareholders began using the Internet to form alliances and make their voices heard in what might have been the first-ever online stockholder revolt.

By 2000, the company's assets had been sold, and Brown and former CFO Dale Redman were facing multiple lawsuits alleging they had hidden the true financial condition of the company. According to published reports, a federal judge approved a $20 million class action settlement for investors against the company in 2002. Former employees claimed $10 million in a separate settlement.

A June 2003 Business Report cover story wondered if United Companies might be remembered as “Baton Rouge's Enron,” referring to the shady Houston-based energy company whose stock price tumbled from well over $70 a share to zero in 2001. Trustee William G. Hays Jr., who was appointed by a bankruptcy court judge to represent creditors and shareholders, made the Enron comparison in court documents supporting his $685 million fraud suit against Deloitte and Touche, United's auditor. Hays claimed the firm “engaged in fraud, deceit and other misconduct while lining its pockets with millions of dollars in fees.”

According to a Business Report story later that year, what could have been a rather juicy trial quickly fizzled when the trustee and the auditor worked out a secret settlement. A week into the trial, state District Judge Janice Clark thanked the jury, dismissed them, made the settlement official, and adjourned the court. And just like that, the formerly high-flying United Companies disappeared from the headlines for good.