Brandon Woodrome was a young man in a hurry: out of school early, married early, starting businesses early. He even ran for office before he was old enough to drink.
In 2013, the year he turned 26, his Fort Smith construction company, Behr LLC, generated $10.2 million in revenue, and Woodrome had a number of projects in the pipeline.
But things weren’t what they seemed.
“What happened was our growth outpaced our actual sales,” Woodrome said last week in an interview with Arkansas Business. “And instead of responding to a decline in sales by controlling overhead expenses, I just tried to push through and underbid projects. It compounded the problems.”
On Sept. 22, three days before his 29th birthday, Woodrome waived indictment and plead guilty to one count each of bank fraud and wire fraud in U.S. District Court in the Western District of Arkansas. He admitted to receiving more than $2.1 million from First Western Bank of Booneville and a finance company in Texas by submitting fraudulent invoices, crimes for which he faces years in federal prison.
While cooperating with federal law enforcement agents, Woodrome also was dealing with his own personal bankruptcy and one for Behr.
“It’s really painful,” Woodrome said in describing the bankruptcies. “I left so many people unpaid.”
In addition to interviewing Woodrome, Arkansas Business reviewed several lawsuits against him and Behr and delved into their bankruptcy filings to take a look into what happened to the young developer who grew up fast and quickly self-destructed.
Fast Start
Born in 1987, Woodrome said he didn’t have stable childhood.
“Since I was a kid, I’ve had to take care of myself,” he said. “My mom left when I was in the third grade, and then my dad’s rights were terminated as a parent when I was in my early teens.”
He spent some time in foster care and then was reunited with his mother.
When he was 16, he started working for a Fort Smith construction company. Within three months, he was moved into the front office and began learning about projects. “I was seeing all the different phases of the job,” Woodrome said.
Woodrome graduated from high school early by taking extra classes. He got married at 17, and he and his wife, Heather, now have four children.
Woodrome started his first construction business in 2007, when he was 19. He called it Heatherwood Homes LLC.
He said he obtained construction loans to fund his business model, which was simple: Woodrome would build a duplex and then rent it out until he found an investor to buy it.
He completed two duplexes the first year in business, five the next and 20 the following year.
“And it just kind of grew from there,” Woodrome said.
In early 2008, when he was 20, he sought the Republican nomination to represent Arkansas House District 64, which covered a portion of Fort Smith, but lost to Stephanie Malone by 23 votes.
Woodrome turned to commercial construction projects and created Behr LLC in 2010.
“The business model worked,” he said. “2010 and 2011 were good years, if I’m remembering correctly.” At its height, Behr had 45 employees.
But in the middle of 2012, he noticed a decline in sales, followed by another down year in 2013.
Behr had $10.2 million in revenue in 2013, which would have ranked it No. 26 on Arkansas Business’ list of largest commercial contractors in the state for that year. The next year, though, revenue plummeted to $6.7 million.
“Trouble really came in 2014,” he said.
Joplin Project
Woodrome said the roots of his financial crimes can be traced to a land deal that collapsed in Joplin, Missouri.
“Instead of just building things … I began to purchase property and develop it and try to sell the end product,” he said.
In 2012, Behr spent $370,000 for 6 undeveloped acres in Joplin with a plan to develop it into apartments. He thought he had lined up a buyer for the finished development, Heow Inc. of Sarasota, Florida. Although no contract was signed, it seemed like a done deal, he said.
But there was a glitch. The loan officer he had worked with left the bank, so his construction loan was delayed for several months.
Meanwhile, Woodrome said, Heow backed out of the deal. (No representative of Heow could be reached for comment.)
“That hurt me,” Woodrome said. “I went from (expecting to make) $1 million on an apartment complex to losing quite a bit of money.”
The project remains undeveloped.
He said he should have learned from that failure. “But I did it again,” Woodrome said. “And it didn’t work out, and it compounded some things.”
Fateful Decision
Woodrome said his cash flow would have allowed his business to survive losing money for a few consecutive months. But without a correction, “eventually it comes to a head,” he said.
And that’s what happened in 2014.
“At that point, I should have closed the books on Behr,” Woodrome said. “I should have said, ‘I’m done.’ ”
Instead, he pushed ahead, hoping that in six to eight months he could have his financial problems worked out.
“And there wouldn’t be a bunch of people holding the bag,” Woodrome said. “So that’s when I decided that I was going to do what I did.”
What he did was this:
In October 2014, Behr obtained a $795,000 construction loan from First Western Bank to buy undeveloped land at South 31st Street and Phoenix Avenue in Fort Smith. He was going to build a medical clinic there, according to the information filed by Assistant U.S. Attorney Steven Snyder in the Western District of Arkansas.
Behr started construction the following month. The loan agreement called for Woodrome to submit subcontractors’ invoices to the bank as work was completed. But Woodrome started submitting phony invoices.
Woodrome received more than $300,000 from First Western between November and December 2014 based on fraudulent subcontractor invoices.
And he wasn’t done.
In January 2015, Woodrome created a line of credit with a factoring company, Rioux Capital of Austin, Texas. The arrangement with Rioux allowed him to sell his accounts receivable in exchange for 80 percent of their value.
In February 2015, Behr began building a strip center at 5400 Phoenix Ave. in Fort Smith for a company that owned the undeveloped land. Woodrome, however, submitted invoices to Rioux that were not actually receivables. They were invoices for work that had already been paid for by the landowner.
Between February and July 2015, Woodrome received a total of $7 million from Rioux, with $1.8 million of it coming from fraudulent invoices.
In a Nov. 15 bankruptcy proceeding, a recording of which Arkansas Business reviewed, Woodrome said he used the money to pay bills. And while the influx of money didn’t stop the financial bleeding, Woodrome said he was 60 to 90 days from getting back on track in the middle of 2015.
“At this point, no one knew what was going on,” he said.
Instead, he became suicidal “because what I was doing was in contradiction to what I believed,” he said. “It messed with me a whole lot.”
Woodrome said he decided to confess to Bill Rioux, president at Rioux Capital.
Woodrome took a plane to Texas and met with Rioux in the summer of 2015.
“I confessed to him what I had done,” Woodrome said. “The meeting ended, in my mind, as good as it possibly could have ended. He expressed a willingness to work through this.”
But it wasn’t worked through. Through the first nine and a half months of 2015, Behr’s revenue was just $4.2 million. A year ago this week, Woodrome decided to file for bankruptcy reorganization instead of a liquation.
“Behr was being picked apart by two or three larger or more aggressive creditors to the point that there was going to be nothing left for anyone else,” Woodrome said in the November bankruptcy proceeding. “In the end, [to] provide a distribution of something to more people instead lots to a few, that was the ultimate decision.”
Behr listed $5.7 million in debt and $3.9 million in assets.
Shortly after filing Behr’s bankruptcy, Woodrome confessed to federal agents, who began investigating the case.
Meanwhile, the bankruptcy reorganization didn’t go according to Woodrome’s plans.
In February, the acting trustee, Daniel Casamatta, pushed for Behr’s bankruptcy to be converted to a Chapter 7 liquidation. The company was no longer in operation. It had revenue of a little more than $31,000 between Oct. 14 and Dec. 31 — and about a fourth of that went to pay Woodrome.
“The primary party that benefits from the case remaining in Chapter 11 appears to be Mr. Woodrome,” Casamatta said.
U.S. Bankruptcy Judge Ben Barry agreed and ordered the conversion on March 30.
By that time, Woodrome also had filed for personal bankruptcy. In May, Rioux sued Woodrome to block him from discharging the $2.8 million he owes to the finance company. Rioux alleged in the lawsuit that Woodrome committed fraud to obtain the money. Some of that $2.8 million is legitimate debt that would be able to be discharged. How much that is, though, was unclear as of last week.
Rioux said in the lawsuit that Woodrome, through Behr LLC, provided “documents which he created or altered which established false and inflated proof of accounts receivable in an [unfortunately successful] attempt to secure continued financing from Rioux.
“Woodrome, at all times, was the managing member of Behr and was personally responsible for the creation and alteration of the above-described documents.”
A hearing on that issue is set for Nov. 14 in Judge Barry’s courtroom.
In Woodrome’s personal Chapter 7 filing, he listed debts of $4.2 million and assets of $670,000. He reported a gross income of $93,400 in 2014 and nearly $200,000 in 2015. The biggest asset listed was a six-bedroom, 3,600-SF home with three-car garage on 1.2 acres in Fort Smith.
Woodrome said he initially claimed the house as an exemption. His plan was to eventually sell the house so his wife could use the proceeds while he’s in federal prison.
Then he said he decided to hand the house over for foreclosure to help repay creditors.
“So there’s no cushion for my family,” Woodrome said. “But I guess there never should have been.”
A sentencing date hasn’t been set. He has agreed to pay restitution to his victims, and the terms of his plea agreement suggest the young man in a hurry will likely serve three to four very slow years in prison.