By Camilo Smith
By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
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By December 1993, Blankenship and Borovick believed that they were close to a deal. Borovick had examined Albo's books and insisted on a clause in the sales contract stating that Albo had not made any "illegal political contributions with corporate funds." But Randy DeLay, Tom DeLay's lawyer and brother, notified Borovick that Albo would accept only a cash deal for the company, which effectively killed the negotiations.
On December 14, 1993, when Blankenship showed up for work, he found that the locks had been changed and that a letter firing him, a notice signed by Hutto, had been taped to the door. DeLay and Hutto justified the firing by saying Blankenship had taken a list of Albo's customers home with him, and they feared he would share it with Borovick. But Blankenship, who now feared the company would be sold out from under him, claimed he took the list home at the invitation of Hutto, who had suggested Blankenship sort out the original customers he had brought to the company and go his own way. Not surprisingly, this dispute soon moved to a courtroom.
In January 1994, Blankenship sued his partners. His lawyer, Gerald DeNisco, took an aggressive approach to the litigation, getting a temporary injunction to stop DeLay and Hutto from selling Albo. He also alleged that DeLay and Hutto had wasted the corporation's resources by paying DeLay's personal debts. DeNisco obtained copies of Albo's company records, which DeLay, in a deposition, admitted weren't in very good order.
"In gathering records for the negotiations of selling Albo, it was pointed out to me by my lawyer that our records were not kept up to date and we needed to get them up to date," DeLay said in his deposition. "That's the extent -- I assume they were brought up to date because Darrell [Hutto] was told."
When DeNisco asked DeLay if he personally knew whether the records had been brought up to date, DeLay said, "I was told that they were. I don't know if they were or not. I haven't seen them."
DeLay was deposed by DeNisco on February 5, 1994, as a preliminary to a possible jury trial. DeLay said that since being elected to Congress, he'd had little to do with Albo, and that his longtime associate Hutto handled all the details. He said that "two or three years" before the deposition, he had orally resigned as chairman of Albo in conversation with Hutto. DeLay said the resignation had never been made in writing.
Nevertheless, DeLay certainly gave the appearance of still being in charge of Albo. In his 1991, 1992 and 1993 income filings with the House of Representatives, DeLay stated that he was chairman of Albo's board. And on February 3, 1993, DeLay and Hutto signed a guaranty with Southern National Bank for a loan to consolidate Albo's debts. In his deposition, DeLay also said he read a monthly report on the company's books, occasionally consulted with Hutto on business matters, had discussed with him the sale of Albo and had approved the firing of Blankenship.
At the center of DeNisco's case lay what might be called the balance sheet argument, a disagreement between Hutto and Albo's bookkeeper, Lynn Colby, on how to carry the company's debt on its books and corporate tax returns. In May 1994, when Colby was deposed, he said that it had been his understanding that an item carried on Albo's 1990, 1991 and 1992 corporate tax returns as "loans to stockholders" was the personal debt of Tom DeLay. Copies of the tax returns indicated that in 1990 loans to stockholders were reduced by $3,542; in 1991, they were reduced by $6,990; and in 1992 they were reduced by $9,119.
Colby said when he took over the books in 1986, he found some bank loans on them. Though he wasn't exactly sure what the loans were for, he was under the impression that the corporation was paying DeLay's personal debt, so he carried the item as stockholder loans: that is, they were carried as loans from the corporation that DeLay would be expected to pay back.
When DeNisco asked DeLay about stockholder loans from the corporation, DeLay denied that there were any loans to the stockholders, even though copies of Albo's monthly balance sheets and its corporate tax returns carried such a category. DeLay said he had never seen the corporate tax returns. According to DeLay's deposition, the following exchange between DeNisco and DeLay took place:
"DeNisco: Have you ever personally taken a loan from the company?
"DeNisco: Have you ever personally taken a loan and had the company pay for it?
"DeLay: Well, if you mean the loan that is now with Southern National Bank that was -- that was Albo's before we incorporated and the loan to Bob Barnett [sic], yes. Those -- the company has been paying for those loans."
In his deposition of February 8, 1994, Hutto said that the tax entries for stockholder loans were the result of "an ongoing difference of opinion as to an item on the ... balance sheet between Mr. Colby and Albo." When DeNisco pressed him about why the difference was unresolved on the company's tax returns, Hutto said, "This is what the CPA has put down there, and I just stopped arguing about it."