THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, May 20, 1995 TAG: 9505200307
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 98 lines
As Computer Dynamics Inc. crumbles, investors are seeking a court order to let them seize and sell the company's headquarters.
A bankruptcy judge will decide Monday if the investors can foreclose on the company's three-story building near Pembroke Mall.
Meanwhile, the state and federal governments have filed tax liens against the company, totaling $1.4 million, mostly for unpaid 1994 employer withholding taxes.
And just last week, the company lost a $600,000 Army contract in Hawaii. The Army says Computer Dynamics failed to live up to the deal; the company's majority owner says he gave up the contract voluntarily.
Every day, it seems, the Virginia Beach computer company - once the biggest minority-owned business in town - dies a little more.
Three weeks ago, company chief Robert L. Starer announced that Computer Dynamics is dead. He said the company, which once had as many as 600 employees, had gone belly-up.
``As soon as we wind up all our legal obligations, we will file papers of dissolution,'' Starer said Friday.
But the death of Computer Dynamics could be complicated by a recent filing in U.S. Bankruptcy Court in Norfolk. On May 5, four creditors who are owed $47,169 filed a petition to force the company into involuntary Chapter 11 reorganization. The company has not decided whether to fight the petition.
This week, two of the creditors said they filed the petition because they were tired of Starer ignoring them.
Computer Dynamics owes $40,629 to The Whitlock Group for fiber optics equipment. Kevin Thompson, Whitlock's vice president, said he called Computer Dynamics several times, but got no answer.
Patricia Floyd had the same problem when she tried to collect $892 for Tweeds Locksmiths in Portsmouth. ``Mr. Starer would not return our calls. We just couldn't get him to respond to us,'' she said.
On Friday, Starer said he did not know how many creditors Computer Dynamics has, or how much the company owes. The biggest creditor, IBM Credit Corp., is still owed about $7 million, he said.
Starer could be on the hook personally for that money. He guaranteed the loan from IBM to Computer Dynamics. He also controls a company that bought all of Computer Dynamic's assets - including its profitable computer school and a teleconferencing subsidiary - in a foreclosure sale last month.
Starer announced the foreclosure to employees on April 28, in a memo that was also their termination notice. ``As of now,'' Starer said Friday, ``there are no employees.''
In related developments:
An emergency hearing will be held Monday in Bankruptcy Court to determine if investors can foreclose on Computer Dynamics' headquarters.
The investors - two Delaware corporations named Agency Investments I and II - began foreclosure April 28, but they cannot continue while the Bankruptcy Court action is pending.
The investors hold $3 million in development bonds, secured by a deed of trust on Computer Dynamics' building. They say the building is worth between $1.7 million and $2.7 million, and the value is dropping because Computer Dynamics isn't maintaining the building and owes $30,582 in real estate taxes.
Computer Dynamics has not decided whether to fight the foreclosure, Starer said Friday. It is not known if the Chapter 11 creditors will fight. Their lawyer was out of town Friday.
In March and April, the federal government filed three tax liens totaling $1 million against Computer Dynamics. They cover unpaid employer withholding taxes for 1994. Most of it - $752,685 - is for three months ending in September.
Also, the state has filed three tax liens totaling $400,000, most recently on May 1. They cover unpaid sales and employer withholding taxes for March to September 1994.
Starer said the company has repaid about $500,000 of the delinquent taxes. On Friday, the Internal Revenue Service returned five cars and vans it seized April 6 - even though the company has no employees to drive them.
On May 12, the Army canceled a $613,276 contract with Computer Dynamics for computer maintenance and repairs at Fort Shafter in Hawaii. The Army says Computer Dynamics defaulted on the contract.
``They were continually falling behind,'' said John Fairbank, spokesman for the U.S. Army Pacific. ``Several notices of unsatisfactory performance had been issued. Finally, we set a date and issued the notice of termination. Apparently they were having trouble getting parts because they weren't paying for them.''
Starer, however, said the company gave up the contract voluntarily.
``We went to the Army and we said we want to stop doing this work, we've arranged for a subcontractor,'' Starer said. ``They said, it's cleaner for us to terminate it for default.''
Starer said the company has voluntarily given up about a dozen government contracts as it goes out of business. This was the only contract terminated for default, he said. ILLUSTRATION: Color photo
Robert L. Starer
KEYWORDS: CDI BANKRUPTCY by CNB