Wells Fargo Sues Cody Firm Gunwerks, Claims It Owes $2.8 Million
Wells Fargo Bank has sued the Cody-based custom-rifle maker Gunwerks, LLC, for $2.8 million for unpaid loans and wants the company's equipment, according to federal court records filed Wednesday.
Gunwerks, which expanded its facility with a Wyoming Business Council-recommended loan package, also owes $1 million to creditors and and for unpaid sales taxes, according to the complaint by the bank and Wells Fargo Equipment Finance, Inc., through its attorneys at the Casper office of Crowley, Fleck, PLLP.
"These circumstances require the immediate appointment of a receiver to recover, salvage and retain the value of the Collateral," according to a separate motion for a court-appointed receiver.
The collateral includes Gunwerks' equipment, inventory and intellectual property. Gunwerks has signed off on the request, according to the motion for a receiver. "For the reasons specified in the Complaint and summarized in this Motion, the appointment of the Receiver is in the best interest of Wells Fargo, has been agreed upon by the Borrower, and is necessary to preserve the value of the Collateral.
Wells Fargo recommended as receiver Focus Management Group, which has worked with firearms companies.
Besides what the company owes to Wells Fargo, the complaint said Gunwerks financial report in February told the bank that it owes more than $622,000 in past due bills, according to the complaint.
Likewise, the financial officer told the bank that Gunwerks stopped paying sales tax in the third quarter of 2018 and the amount due was $365,000, according to the complaint.
What all this means for the company's future and its employees is unknown.
A Gunwerks' spokesman did not return calls seeking comment.
Gunwerks manufactures custom-made rifles that can, with a few adjustments, shoot accurately 1,000 yards out of the box, CEO Aaron Davidson said in a YouTube promotional video from the Wyoming Business Council. The company also makes optics, ammo and gear.
However, the Wells Fargo filings did not discuss the company's current relationship with the Business Council, which in September 2018 recommended Gunwerks' request for a $3 million grant and a $3 million loan package to expand its manufacturing facility.
In October 2018, the State Loan and Investment Board -- comprised of the state's top five elected officials -- approved the request. The new facility would be owned by Cody economic development organization Forward Cody and leased to the company.
As a result of the anticipated expansion, the company said it would add 52 jobs, according to a report by the Business Council.
In March 2019, the company along with government and business officials broke ground for the new facility, which was expected to be completed by December.
Gunwerks' expansion garned widespread publicity in regional media outlets and national publications including the NRA's American Rifleman and The Gunmag.
Neither Wyoming Business Council CEO Josh Dorrell nor Forward Cody CEO James Klessens returned calls seeking comment.
For its part, Wells Fargo Bank and Wells Fargo Equipment Finance outlined in its complaint the loans they made to Gunwerks, and the SM Group, LLC, whose sole member is Davidson.
The defaulted loans as of Monday total $2,783,757.82, with interest accumulating at more than $20,000 a month plus costs and legal fees, according to the motion for a receiver. Of that total, Gunwerks owes $2,437,524.39 for the operating loan.
After Gunwerks defaulted on the operating loan, the bank asked Gunwerks to provide a list of accounts owed to it plus invoices, but it refused, according to the complaint.
Likewise, Gunwerks refused to transfer back to Wells Fargo money the company transferred to another bank despite its agreement to maintain its deposits at Wells Fargo. Wells Fargo believes those funds were from the sale of its collateral, according to the complaint.
"The Borrower has taken control of Wells Fargo's collateral, refuses to disclose the names and addresses of account obligors for accounts that constitute collateral for Wells Fargo and has removed and refused to remit proceeds of Wells Fargo's collateral to prevent such collateral from being applied to the Borrower's loans," according to the complaint.
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