Dump The Pump

[Slojab]

You won't read a more interesting story.

I guarantee it.

http://www.tampabay.com/news/business/corporate/accusations-encircle-rise-fall-and-fight-over-cast-crete-corp/1159959

TAMPA — Thirty years ago, a young auditor poring over the books at a building materials company called Cast-Crete caught the eye of the firm's boss, Ralph Hughes.

The auditor was a former U.S. Army sergeant with a Purple Heart and a Bronze Star for rescuing a downed helicopter pilot in Vietnam. He had an MBA from the University of South Florida and one of the highest scores in the nation among candidates taking the CPA exam.

His name was John Stanton. Hughes quickly hired him.

Stanton rose to become president and a major stockholder of Cast-Crete, and under fine-tuning from Hughes, the Seffner company became one of the top sellers of pre-cast concrete products anywhere. The men rode Florida's housing boom to become millionaires many times over.

Hughes played political power broker, opening his checkbook for small-government, pro-business candidates. His clout helped shape the Hillsborough County Commission, and his ties to then-Commissioner Jim Norman have been in the news recently over a house Hughes bankrolled for Norman's wife.

Stanton supported Hughes' slate of candidates and made a name as a philanthropist. He gave $250,000 to Armwood High and $1.5 million to his son's Independent Day School, a gift the headmaster called "a miracle."

By 2006, as new subdivisions sprouted across Florida, Cast-Crete rang up profits of $1 million a week.

Stanton pushed his cash — and Cast-Crete's capital — into dozens of penny stock ventures: munitions for the American military, research into nano-particles to find a cure for heart disease, Internet radio to bring shock jock Bubba the Love Sponge into local homes.

Hughes, a one-time pro boxer who had done time behind bars, and Stanton, the bright young auditor with the medals for valor, seemed about to conquer the world.

Today, three years after Hughes' death, that world is in shambles.

The IRS has opened a criminal investigation of Stanton involving Cast-Crete's failure to file tax returns from 2003 to 2007, a period in which the company recorded profits of $127 million. Stanton "siphoned" millions to himself while stonewalling tax agents, the IRS says.

A jury in January determined that, following Hughes' death, Stanton improperly tried to take over the company. Jurors said Stanton committed "corporate wrongs" in his attempt to wrest control from its rightful owners, the Hughes family.

The Hughes family also says in court papers that Stanton pilfered the company's assets, pouring as much as $20 million into high-risk business bets that never panned out.

The once-prosperous Cast-Crete is now in survival mode, with an IRS bill looming, the economy bottomed out and nothing to show for the penny-stock investments.

Stanton, 62, the son of a Baptist minister, who formerly lived in an Avila mansion, once parked a Lamborghini and a DeLorean in his garage and put his net worth at $269 million, now says he's broke — his only income a $541-a-month disability check from the VA.

In a contentious divorce begun four years ago, Stanton's wife, Susan, accuses him of hiding assets and shielding income. Stanton spent 15 days in the county jail in November after a judge found him in contempt for failing to disclose his assets.

Mrs. Stanton also says in divorce papers that her husband has channeled money to a series of disreputable individuals, including Domenic L. Massari, a disbarred attorney and convicted felon, who helped Stanton at Cast-Crete.

"It's sort of a rags to riches to rags story, and I hope John will overcome it,'' said Massari, who acknowledges his own mistakes, and says he has done consulting for Stanton, but little involving Cast-Crete.

"He went to the wall for a lot of people. And a lot of it hasn't worked out."

Stanton declined to comment for this story, but his attorney, John E. "Sean" Johnson, pointed out that Stanton guided Cast-Crete through bankruptcy before it became a spectacular success, and says Stanton still believes he can turn around ventures that might now look like losers.

"These are all works in progress," Johnson said.

A few months before his death, Hughes wrote a letter to Stanton demanding answers about his shady associates and what had happened to all the Cast-Crete cash pumped into the penny stocks. It didn't add up, Hughes said indignantly.

Hughes' oldest son, Shea, recalled asking his father about investments Stanton had recommended, and how Hughes would fall silent.

"He'd let out a sigh and slap the air with his hand," Shea Hughes said. "The story got old and painful."

On June 27, 2008, Ralph Hughes and John Stanton met for lunch at the Temple Terrace Country Club. It was the last meeting for two men who had made their fortunes together but never been a guest in each other's homes.

A few hours later, Hughes died at home of an apparent heart attack. He was 77.

The IRS

At one time, Cast-Crete had a diversity of building businesses: a foundry, pre-hung door plants, lumber yards, a construction company, concrete. Then, one day in the early 2000s, Ralph Hughes was examining records, according to one company official, when he looked up and said, "Holy mackerel!" Fifteen percent of company resources — pre-cast concrete products — account for 85 percent of revenue.

Hughes' moved his company full tilt into the manufacture and sale of lintels, sills and parking bumpers just as the housing market was picking up steam.

By 2005, Hughes' pre-cast products were going into more than 100,000 new Florida homes in a year, and gross receipts had climbed past $165 million a year.

But the company wasn't paying federal taxes.

The IRS began a tax examination at the height of the company's profit-making. Agents found that two years' returns had been filed late and others, not at all.

Stanton repeatedly agreed to furnish the returns, but according to IRS records, he never did.

After a criminal investigation began, the IRS determined Cast-Crete had amassed net income from 2003-07 of $127 million.

The IRS also learned that a similar sum had been paid out to Cast-Crete shareholders: $60 million to Ralph Hughes, $55 million to Stanton and his company, Denouement Strategies, $5 million to two other officers.

Shea Hughes said in a court deposition that company records had so many holes, it was "like a big piece of Swiss cheese." He asked Stanton why the taxes weren't paid but "never got a straight answer."

In internal memos, however, IRS agents wrote that Stanton had "intentionally obstructed" the tax exam with false promises, and was "siphoning" income from Cast-Crete to himself and other insiders.

In a deposition involving the IRS in February, Stanton took the Fifth Amendment on dozens of questions.

Johnson, the attorney for Stanton, said that after the IRS began its examination, so many complex issues emerged that it became impossible to file the Cast-Crete tax returns until all issues were resolved.

"This is an incredibly complicated matter,'' Johnson said. "It's not simply an example of someone not filing tax returns because they don't want to."

The attorney for Cast-Crete, B. Gray Gibbs, is now challenging the IRS assessment of $299 million in back taxes, penalties and interest in U.S. Tax Court.

Cast-Crete

In 1997, before the IRS ever began sniffing around Cast-Crete, Ralph Hughes began planning for his own death, writing instructions that his family should inherit Cast-Crete via stock he would place into a family trust. When he died in 2008, shares worth 51 percent of the company were in the trust.

But surprises were ahead for the Hughes family.

There was a secret agreement that changed everything. Stanton said the company was his, not theirs.

Stanton revealed that he and Hughes had entered into an "oral agreement" in which Hughes' stock had been redeemed for cash. More than $63 million was paid for Hughes' shares, and the stock would be revalued at current prices at Hughes' death and a settlement made.

But because the profits at Cast-Crete had fallen dramatically with the economy, the shares' value had also declined, and the Hughes family was told the amount that had been paid to Hughes exceeded the new, lower value of the stock.

The family actually owed Cast-Crete money, Stanton said.

There was another bombshell. Stanton had acted to issue new stock to himself — 33.5-million shares — a move that would dilute the Hughes family's ownership and make him majority stockholder.

The Hughes family took drastic action to hold on to the company.

On July 7, 2009, armed officers in dark suits from a security company called Critical Intervention Services staged a takeover of Cast-Crete. Stanton and other officers were dismissed. The locks were changed, computer data copied, shredders unplugged, bank records moved to a new, secure office.

Shea Hughes sent a memo to Cast-Crete employees saying Stanton was no longer on staff, and new leadership would help the company survive "these tough economic conditions."

John Stanton fired back in court, saying the takeover was illegal and an attempt at "unjust enrichment," because the Hughes family owed $19 million to Cast-Crete as a result of shares in the trust being devalued.

A few days after the takeover, there was a court-ordered truce. John Stanton remained at Cast-Crete, but Shea Hughes was the new CEO.

The court also decreed that Massari, the disbarred attorney working for Stanton, should have no access to Cast-Crete or its company data.

Massari was disbarred in 2002 for stealing $30,000 from a client and forging documents. In 2004, he was sentenced to 12 months in prison on conspiracy charges arising from his part in a scheme by an Ohio businessman to hide millions of dollars from his creditors and the IRS.

In 2009, Massari was back with Stanton, and the Hughes family said the two were "positioning to take Cast-Crete into bankruptcy in an apparent attempt to steal the company from the prior shareholders."

After a judge tossed Massari out and pushed Stanton to the sidelines, the Hughes family said Stanton had purloined company assets, tripling his salary, okaying bonuses to loyal lieutenants and plowing company cash into questionable businesses.

One example was CyberCare. It produced products for the electronic monitoring of patients and delivery of home health care. Boasting that CyberCare would go from a money-loser in 2009 to profits of more than $7 million in 2012, Stanton sought to advance $700,000 to the company and to cancel a million-dollar debt CyberCare owed Cast-Crete.

Yet a consultant who examined CyberCare's books found it had just $3,349 in cash, no accounts receivable and equipment that was "in disarray, in poor condition and unlikely to have value."

There was also the income tax problem. In the civil case seeking control of the company, the Hughes family put the blame squarely on Stanton for failing to pay Cast-Crete's income taxes during its boom years.

After a weeklong trial earlier this year, a jury found for the Hughes family. Jurors decided there was no valid stock redemption agreement between Cast-Crete and Ralph Hughes, so his family trust did own a majority of the company stock.

Trail of money

While profits mounted at Cast-Crete, Stanton pumped a fortune into businesses that looked cutting-edge: bioscience, Internet sales, alternative fuels, weapons delivery. At various times, he was involved in 116 businesses in Florida and had 100 bank accounts at his disposal.

A history buff who used military motifs in the naming of some companies, like Bunker Positioning and Valkyrie Guidance, Stanton has been a quiet supporter of veterans' causes since being wounded in Vietnam. Friends say he often reached into his pocket to help others with money problems. In a divorce hearing, Stanton said he traded an old Mercedes to a friend for a Rolex watch "to help him out."

But some of his business partners claim in court that they've been cheated by Stanton or his companies — even the famed Mayo Clinic in Minnesota says its name was misappropriated. And there appears to have been little return for all that investment.

In a financial disclosure in his divorce case, Stanton ticked off the businesses. Earthfirst: in bankruptcy. Nanobac: no ongoing business operations. I/O Media: operating at a net loss. New Green: no operations.

Stanton's wife, Susan, didn't believe it. She hired a forensic accountant and began following the money.

The trail followed more than $52 million John Stanton had received from Cast-Crete that flowed into his investment companies, Denouement Strategies and Escape Velocity, and then to scores of other companies, investments and individuals.

In court papers, Susan Stanton said the movement of cash was evidence that her husband was trying "to hide his net worth."

With a reference to the shell companies, Denouement (French for "the final resolution of the intricacies of a plot") and Escape Velocity, her attorney told the court, "It means what it says; he plans to escape as quickly as possible with whatever sums are available."

The trail of John Stanton's money, according to court papers, also led to individuals whose backgrounds might trouble investors in Stanton's public companies or the federal agencies with whom some of Stanton's defense companies did business.

According to court documents, the list includes Massari, the disbarred attorney, who got $35,000. Another $20,000 went to a marketing company executive convicted of conspiracy to commit securities fraud for his role in a Ponzi scheme. One of Stanton's companies, National Sourcing, which provides personnel services to the U.S. Departments of Defense and Veterans Affairs, hired a vice president who spent six months in prison for wire fraud. A Valrico man, who was banned from some securities trading after regulators accused him of being the ringleader of a scam to illegally pump up a company's stock price, got $60,000 from Stanton, either personally or to a company in which he had an interest.

"John believes people need second chances," said Johnson, Stanton's attorney, when asked about the background of some of Stanton's associates. "And the long and short of it are that there are a lot of people in his businesses who have no marks against them in their backgrounds."

While Stanton awaits the outcome of tax and divorce matters, he is renting a $1.2 million home in Belleair from the president of Bulova Technologies, a Stanton explosives company with $550 million in contracts with the U.S. government. Stanton lives there with his 30-year-old girlfriend, a $4,000-a-month Bulova employee.

Meanwhile, at Cast-Crete, workers and executives are trying to survive the triple-threat of recession, housing downturn and tax woes.

A few months after Hughes' death, an expert tried to put a value on the Hughes family's stock ownership. Declining revenues and increased debt had driven the value down to $31.6-million, the expert said, but because of the IRS liability, the stock "had no value."

Shea Hughes said in a recent interview that he is waiting for a better day and trying to save the jobs still left at Cast-Crete.

"We're trying to find a way to survive,'' said Hughes. "We hope the IRS doesn't put us out of business. We want to pay the taxes owed, wait for the company to turn around and make up for any mistakes from the past."

John Stanton continues to diversify.

His latest venture involves the transformation of a Nevada company called New Green Technologies into a Texas firm called Spur Ranch.

After several mergers and acquisitions, New Green emerged with plans to developed technology for green energy and biofuel. It never turned a profit, despite huge investments.

Stanton and two partners now say they will abandon that model and head in a new direction. The company will expand into the acquisition and development of real estate related to affordable polo and equestrian communities, reality TV programming of polo and polo merchandising.

"It is the goal of the company to bring polo to the broader market," Spur Ranch said in papers filed last August.

The company's stock, which traded as high as $45.50 a share in March 2010, closed Friday at 4 cents.

Times researcher John Martin contributed to this report. Jeff Testerman can be reached at [e-mail].

IRS investigation

An Internal Revenue Service investigation found that Cast-Crete Corp., of which John Stanton was president, failed to file tax returns from 2003 to 2007 and distributed more than $100 million to shareholders and their companies during that time.

Court order

In January, a jury found that the heirs of Ralph Hughes, and not John Stanton, owned controlling shares in Cast-Crete Corp., and that Stanton wrongfully had tried to take the company.