Bank One / SBA Experience poor experience

November 28, 2001:

From:

RE: Bank One/SBA experience

Gentlemen:

I am providing the attachment in the interest of informing your organization of an experience I had with Bank One NA. The attachment is factual and has been reviewed by my attorney for any potential defammatory content. I wish to shine the light of day on the business practices of Bank One NA and the whole mess, for that matter. Any questions or comments you might have are welcome.

Sincerely,

Clyde E.Steffens

Formal Complaint Against Practices of Bank One, NA Background I am a native Coloradan, born in the plains town of Holyoke in 1946. I grew up on a wheat farm and cattle ranch, moved to Denver in 1964 after graduating from highschool. I worked and went to night school until 1973 when my Boulder employer fell upon hard times in the recession and closed the Boulder facility. My training and work history were completely technical at that point. My work involved many facets of nondestructive testing of materials and included projects for NASA, nuclear power plants, nuclear weapons, helicopter blades, a fetal heart monitor and infrared systems for checking internal bonds in high performance aircraft stress skin honeycomb structures. This infrared technology was later used to do mass screening of women for early detection of breast cancers. The company offered me a job in California, Washington and Connecticut, all of which I declined. I contracted with the company to close the Boulder plant which I did successfully. During the period in which I was closing the Boulder plant, I was looking for a job. I soon learned that I had underestimated the depth of the recession...engineers and technical types were basically unemployable. I had an excellent record and reputation in the metro area and couldn=t even buy a job. Upon comparing notes with one of my ex-coworkers, I learned that he was having the same difficulty. Neither of us had or have ever been on unemployment or welfare. After discussing our situation at length, we decided to start a company and incorporated it as Trienco, Inc. in January of 1973. I shortly found a possible avenue of survival in the American Plywood Association. The APA was looking for someone to develop a device to electronically inspect plywood for internal defects at production rates ( 22 to 26 4X8' sheets a minute) They said that if we could do this, they would buy the first system and haul it around to their member mills and demonstrate and market it. Being motivated by potential starvation and of losing everything, my partner and I developed a totally new technology in three months. The APA kept their word and our corporation was in the black within 12 months.

Our first industry sale was to Georgia Pacific Corporation and following that, we enjoyed a steadily growing business. In 1974, we developed the first truly successful laser thickness gauge which also became an industry standard. We gradually leased larger and larger parts of an industrial building in Broomfield, Colorado until in latter 1976, the owner told us that Storage Tech wanted the building and he wanted to let them have it. As a result of reviewing our options, we decided to relocate out of the metro area due to the price of property and the burgeoning population. We ultimately chose Montrose, Colorado as our new home and bought property there to build our company facility on. At that point, I could show a net worth in excess of $1million.

We built the facility, built homes, hired people and in fact, were the opener in Montrose= success in bringing other companies to town. We pay well and are totally non-polluting. We hire professional people such as engineers, programmers, electronics technicians. I believe that, as of today, our company has accounted for somewhere around $70 million in cash flow in the Montrose community since we moved here in 1977. It should be noted that we have no customers in Colorado, therefore all the revenues are very green indeed. Up to 60 percent of our sales come from outside the United States. In 1980, we developed a machine known now as an edger optimizer for the sawmill industry. The first one went in a greenfield sawmill in Prince George, B.C., the mill could not operate successfully unless it worked as planned. It exceeded design specifications in the first two weeks of operation. The purpose of the device was to scan the raw pieces cut from a log with our laser profile heads, thereby recreating the pieces precisely and three dimensionally in a computer. The pieces, at this point in the process, still have part of the rounded part of the tree, its taper, curves, twists and crook.

The computer would then try to match solutions to the piece. After having determined what could be made from the piece, it would then match the possible solutions to a lookup table of todays market value, select the highest dollar yield solution and then position the piece, the saws and the outfeed belts and automatically produce the selected piece. This product tripled the throughput and increased the recovery (yield) from an average of 67% of theoretical by a human operator to a consistent 98%. We then applied the same technology with different computer algorithms to the trimmer location in the sawmill with about the same success. You cannot make money in a sawmill today without these machines. I believe that our designs and our company probably has the distinction of having saved more trees than any other company in the world. By 1985, the whole forest products industry world had decided that they should be manufacturing these optimization systems, including some of our customers. The machinery companies that produced the trimmer and edger machines that our systems were controlling were particularly aggressive about doing so and although the optimization products they produced were inferior in both accuracy and results, they began to gradually package deal us out and by 1990 a substantial number of sales were lost by us due to not being able to sell the machine center along with the optimization system.

I had, by then, determined that we either had to get out of the optimizer business (irritating since we were one of two forerunners and the only truly successful of the two) or we had to acquire a company that had the ability to produce the machine centers we needed. We decided to look around to see if such a company existed and found one in Vancouver, B.C., a perfect fit for us and it was for sale, basically because it had been unable to compete any longer because it had no ability to produce optimization technology.

At the same time, a recession was grinding along and the Montrose community had an unemployment rate of 26%. It was obvious to me that both our company and I were not sufficiently well heeled to do this deal without some help so I began searching out the possibility of doing this deal as an economic development effort. I quickly found a high level of interest in the community and began putting a financing package together. The First National Bank (our bank at the time ) agreed to do a large part of the deal associated with a SBA loan, Region 10 agreed to provide $250,000 in financing, the local economic development group came up with $20,000, the city of Montrose came up with some property close to our existing facility and I provided a substantial amount of cash and personal guarantees.

When I analyzed the commitments I had, my personal position and the expected cost of the startup and time to breakeven, I determined that the project was $250,000 to $350,000 short of being a safe deal. Realizing this, I looked around for further capital before proceeding. I realized that what really needed to happen was for me to put up these additional funds...which I did not have. After a good deal of thought, I came upon an idea that I believed was fair to all parties and would work. At the time, Montrose County was in the early stages of adding a runway to the County airport. It was determined that this runway would require at least 1.2 million tons of high quality construction rock. I determined that I could supply up to 1.8 million tons off my ranch outside of town. I approached the county commissioners with the possibility of providing the remaining funding for the economic development project by purchasing the needed rock from me at 25% less than the going market price.

After much grunting, groaning and pressure from the local movers and shakers, the movers and shakers presented me with a resolution signed by the chair of the board of commissioners and the chair of the local airport authority board which was represented to me to be a commitment to purchase the rock if I had adequate quality and quantity. I did. This deal was good for the County as it provided rock it had to buy anyway at a substantial discount plus resulted in ongoing tax revenues that would help with their budget for many years to come, it was good for the taxpayer because not only was the rock discounted, the taxpayer would ultimately be paid to use the rock due to the ongoing tax revenues, the taxpayers that were local business owners would realize cash flow from the business and its employees and the taxpayers children would be provided with the opportunity for good jobs with a future. I would retain my market in the sawmill business and make good money as well. It was a win, win, win deal.

Based on the commitments I had, I then proceeded to close the deal on purchasing the machinery company (Powell Machinery Ltd.) which we incorporated in Colorado as Powell Manufacturing Inc. Powell had a reputation for top of the line, high quality, high performance equipment which matched our philosophy perfectly. Our intent was to operate the company in Canada in a rented facility until our facility in Montrose could be completed. We would then maintain a token operation in Canada so we could Alook Canadian@ in that marketplace and move the manufacturing to Montrose. We figured that the Montrose operation would reach 60 employees within 2 years. The employment would be certified welders and fabricators, industrial millwrights, mechanics, mechanical engineers, draftsmen, etc. These jobs would run $18.00 to $22.00 per hour on the average. About two months after the acquisition, when we had Powell in its new temporary home in Langley, B.C. and things were beginning to show a reasonable amount of stability, I decided to check on when the sale of the rock to the County might be taking place. I was ultimately told that the resolution was a Anon-binding commitment@ (the actual words used in writing) and that the rock would be purchased elsewhere. I took the commissioners to task in the newspaper, eventually got one of them recalled and missed a second one by a hairs breadth. The whole thing became a political event and I was made the villain for insisting that they honor their commitment to me. I eventually sued the board of commissioners. The local judge refused me due process and the case was never heard. As time went on, it began to become obvious that my estimate of needing the $250-350k to make the deal safe was correct if not a little short due to the recession lingering longer than anticipated. I eventually bled myself and Trienco, Inc. dry in trying to make it through. The City of Montrose eventually came up with $250,000 in funds to loan me through the local economic development group ( MEDC ). MEDC took the money from the City and then refused to turn it over to me. It was over a year later that I was finally to put enough heat on them that they did loan the money to me. The chair of the MEDC board extorted my signature on a document guaranteeing that I would not sue the commissioners individually as a requisite of making the loan ( the chair, Tyler Erickson, was a county employee). By then, it was too little, too late because the trade accounts of both companies had been ruined, and each had trade credit accounts of around $500,000 each. I exhausted every avenue I knew of. The banks and other sources of funds all ran like scared rabbits when it became obvious that the county was going to renege on the gravel purchase.

In the end, I had to bankrupt Powell Manufacturing, Inc. I was, by then, in trouble with the IRS, with no company credit whatsoever and no way to borrow. I sold off one of Trienco, Inc.=s product lines (Veneer Scanner and Automatic Clipper Control) for $600,000 to appease the IRS and to try to offset some of the lost trade accounts. This, of course, resulted in reduced future revenues. I eventually determined that the attorney that drafted the no sue guarantee that MEDC extorted from me had left me free to sue the commissioners individually if I repaid the loan as agreed. I did so specifically so I could sue the chairperson of the board of commissioners. I sued the chairperson and was again denied due process through summary judgement. All I ever wanted was for them to honor their commitment. What I got was to be the black hatted villain, bad mouthed and maligned and financially ruined. I was followed on numerous occasions and someone even shot at me once as I was driving home. The court does not recognize the possibility of wrongdoing by county officials in the 7th judicial district. As all this was going on, on September 23, 1994, a USAF twin engine jet trainer piloted by a USAF pilot, crashed nose down on my ranch, approximately 150' from my house and exploded, leaving only crumpled aluminum, debris and a contamination blemish on my property. I told the USAF attorney (second person on the site) that all I wanted was for them to clean it up...now because it was the only thing I had left that I could possibly borrow on, and to obtain a certification from EPA certifying it clean so I wouldn=t have a contamination blemish on the property. A year later they got around to letting a contract for Aremediating the property@. After a lengthy battle, they told me that the EPA had told them to take a hike...but that the State of Colorado Department of Health would certify it clean.

A year later I received a copy of a letter from the Colorado Department of Health to the Air Force. The Air Force represented the letter as a clean site certification. It said, translated: Dear Air Force: Based on your representations, we are closing the file on this case. My response was, A where does this absolve me of your potential problems?? A The Air Force response was: That=s all we=re going to do. If that isn=t good enough, you=ll have to sue us. By now I was very angry....and very sick. I did sue the Air Force, taking 5 years to get them to admit that they did, in fact, crash a plane next to my house. At the time the property was worth around $875,000. The federal judge saw fit to award me $60,000 for having an $875,000 property tied up for more than 5 years while I was fighting for my life plus he rendered his opinion that the property was without contamination. As a result of all the foregoing events, I ended up with a deep, clinical depression; a psychiatrist, a counselor, expensive drugs that I=ll probably have to take for the rest of my life. I was in such bad shape that I even went to the Mayo Clinic for diagnosis. A Grand Junction internal medicine doctor named Pacini finally correctly diagnosed the problem. I have made a great deal of progress now, but very, very slowly. I can still only work effectively for around six and a half hours a day, but this is substantially better than the none that I was able to do for awhile. The preceding completes the general background for the following specific detail of the item I am requesting your help with. I apologize for the lengthy dissertation but this is the only way that I can explain where I=m coming from. The actual living of the above details has been much gorier and lengthy than I have presented them. Specific Problem Detail:

As you will recall from the above text, the major part of the Powell project financing was done with the First National Bank of Montrose and SBA. Obviously, as the county rock purchase cratered, both ceased to be a source of help. Also, you will recall that I had to bankrupt Powell and that there were personal guarantees made by me (secured by my ranch). Everyone has long since fled the scene except Region 10, who have been exceptionally good through all this but cannot be of any more assistance and Bank One, who smells stealing some nifty real estate. I hope that I can work with the Region 10 people at some point in the future, and in a manner long past any obligations I have with them. These people have conducted themselves in the manner in which one would expect an economic development organization to operate. As I began to see that I was probably not going to be able to make Powell fly(1994), I discussed the situation with Ted Collin, Senior VP of the First National Bank, advising him that I probably would have to bankrupt Powell. I also indicated that I felt that I could sell the Powell assets to recover most of what was owed to the First National Bank/SBA. We agreed that I should pursue this avenue to see what my options were. I located a buyer in the form of a competitor machinery company in Portland Oregon known as the Coe Manufacturing Company. I negotiated a contract with the president of Coe, which consisted of $425,000 for the Powell assets and $100,000 for the Trienco, Inc. sawmill optimizer technologies and a no compete agreement for 5 years. The contract obviously called for clear title to the assets. There were nearly $100,000 in taxes owing that needed to be paid in order to clear the title. I agreed that the bank could have all the proceeds from the sale of the Powell assets. The Trienco, Inc. $100,000 would go to pay the outstanding taxes and clear the title to the assets. This would leave $125,000 prox owing to clear the Bank/SBA loan for which I had a private source lined up. I, at no time, made any other deal or commitment to Bank One NA.

As I moved through the sale of the Powell assets, I was informed one day that the First National Bank was going to be sold to Bank One and that the First National Bank would be exercising their guarantee from SBA. This would happen before I could complete the sale. I advised Coe of this development. At the same time, our Canadian landlord got wind of what was going on, and attempted to steal the Powell assets by trumping up a bunch of fees, building damage, etc. I bankrupted Powell to protect the assets for the bank and informed the bank, now Bank One of the action I had taken. The president of the local Bank One, Greg Pope, was also given a copy of the negotiated contract and informed that it was ready to close, as agreed. The bankruptcy was not a problem to Coe. I proceeded to close the deal and issued a direction to pay to Coe to pay the outstanding taxes with the Trienco, Inc. portion of the funds to clear the title on the assets in accordance with the negotiated contract. When the bank received the direction to pay instruction, Pope refused to let the deal close, claiming the bank was entitled to the Trienco, Inc. funds as well.

After 6 months of being jerked around the Coe president informed me that he was lowering his offer by $25,000 to offset the cost and effort he had to put into the deal and that if I couldn=t make the bank let the deal close in a week, he was withdrawing his offer completely. The bank had no claim nor interest in the $100,000. Popes response was, Asign off on the $100,000 and it=ll close. There was no other buyer. I finally agreed, figuring that I=d address the matter in court later. My sign off was extorted by Pope. On numerous occasions, I tried to get the SBA to listen to me and help with what was going on. When I would contact the SBA, I would be told that the bank owned the paper and that I had to deal with the bank... when I tried to deal with the bank at a higher level, I was told that the SBA owned the paper and that I would have to deal with them. The bank took my $100,000 and left me to figure out how to deal with some very unpleasant tax people who had been promised payment from the proceeds. I eventually got the taxes paid out of Trienco, Inc. revenues. So, now what should have been a $25, 000 shortfall, was increased to $159,000.00 through the loss of the $25,000 from the buyer, $40,000+ in additional attorneys fees paid out to see if the bank could develop guts enough to steal my $100,000.00, interest on the entire outstanding amount for the six months that Pope refused to let the deal close, plus some expenses that were never supported with documents to me.

The bank then put a lien on all my property so I would have no source whatsoever to finance anything with to support the company=s recovery. The total value of the property they put the liens on was around $1,275,000.00. This inability to raise capital has caused me considerable damage because it has kept me from being able to recover. I again griped to the SBA and was told to deal with the bank...don=t bother me with what our agent is doing. The bank then issued a foreclosure notice on my personal guarantee on my ranch property for around $250,000.00( The $159,000 that I don=t owe plus the interest that I don=t owe on it.) I sued the bank. The judge didn=t hear the case or review the supporting evidence and awarded the bank their demand on summary judgement. We appealed the case...the same judge approved the bank=s request to let the foreclosure run during the appeal process. The property would have gone to sheriffs sale before the appeal was even heard.... again, I have been denied due process in the 7th judicial district. So, as a result of doing business in a clean, up front manner...in trying to help the community and my company; my home, my property and most of what I=ve worked for all my life will soon be gone to satisfy a debt that I shouldn=t owe in the first place. I cannot get Bank One or SBA to deal with this and frankly, I don=t deserve to be treated like I=m being treated. I provided SBA with substantiating documents to no avail. I would not pay the money demanded if I had it, which I don=t. The SBA=s response to my attorney was that I should provide the bank=s attorney, whom I do not trust, with all my financial information and then claim that I am destitute. I would prefer to have settled this matter legally. The probability of this occurring in an unbiased manner is remote as I have offended the fraternity by insisting that the local county commissioners be held accountable for their actions. All has been down hill from there. I have been allowed no recourse at any time.

The foreclosure would have run on October 31, 2001. I took Chapter 11 to avoid the theft of my real estate and home. I still operate a great company with tremendous growth potential. All this took me down to only eight employees at the bottom, I am now up to ten in spite of the current recession. We are a good community member in spite of the hammering my reputation has taken as a result of taking the folks to task that deserved it. We previously had 32 employees here with a payroll of around $1.5 million per annum and 22 employees in Canada at the Powell Operation. I believe this company could grow to annual sales in excess of $120million if we didn=t have to spend all our energies fighting the essence of this document. I have lived the last ten years in what has to be the equivalent of hell. Yes, I have been very vocal and very forceful in my demands to be treated fairly. I am unable to sit quietly by while SBA, through Bank One, uses the court to take my home to satisfy what would have been a $25,000.00 deficit had Bank One /Greg Pope not been so greedy. In my opinion, Pope has a previous, unsavory history with the Federal Land Bank and should be investigated for practices that are, at best, unethical. I would be willing to work with government to the end of preventing the sort of thing I have gone through from happening to others. None of it was justified and in the end, it not only has cost me millions of dollars, but the community many millions as well. I am willing to answer any questions you may have. My office number is 970-249-xxxx, my home number is 970-240-xxxx and my cell is 970-209-xxxx and my e-mail is Email User I have documents to back up my allegations. Sincerely,

Clyde E. Steffens

President

Trienco, Inc.

Powell Manufacturing Inc.

Automation Industries Corporation