RED OAK, Iowa – Richard Gillman blamed the economy and uncooperative banks when he shut down Republic Windows in December, throwing 300 people out of their jobs and drawing national attention to workers' rights.
Meanwhile, Gillman and an acquaintance embarked on a series of business transactions beginning months earlier that would culminate in the purchase of a smaller plant in Red Oak, Iowa, that made similar windows and would have been cheaper to operate, according to public records and interviews conducted by the Daily News.
Though Gillman arrived in Iowa promising more jobs and an expanded factory, his company's brief time there ended in a way that would seem all too familiar to Republic employees. Workers in Iowa say Gillman sold the plant out from under them.
Now Traco Windows, the original owner of the Red Oak plant, is suing for $1 million. And laid off workers have hired an attorney who is investigating whether Gillman’s company, Echo Windows & Doors, violated federal laws requiring plant owners to provide 60 days notice of closures. Republic faced a lawsuit over similar allegations after it closed.
Meanwhile, the town is grappling with the loss of one of its last manufacturers.
“They were a very good, strong piece of business here and to have them purchased and gutted is unconscionable,” says Sue Senden, the executive director of the local historical society’s museum.
The first public step in the chain of events that led to the Gillman’s involvement in the Iowa plant came Sept. 9, when William Harris Smith created a company called Smithfield Window Manufacturing.
Several former Echo Windows employees independently confirmed that Gillman and Smith had told them the two men had been friends for about 25 years.
“I’ve heard it way more than once from either one of them that they’ve been long, long-time friends,” says Mike Vorhies, the former engineering manager at the Echo plant.
Two months later, on Nov. 18, Smith changed the name of Smithfield Windows to Red Oak Real Estate, according to Illinois Secretary of State records.
That same day, Gillman’s wife, Sharon, created Echo Windows & Doors. Richard Gillman referred to himself as the company's president in news releases.
Smith and Sharon Gillman refused to comment on the Red Oak transaction. Richard Gillman did not return calls seeking comment.
In November, salesmen for Traco’s windows began hearing rumors that something was going to change at the Red Oak plant, managers there say. But they were otherwise completely in the dark about what was happening.
So were city and county officials.
“A community this size, you normally hear little snippets of, ‘This company is coming to town,’ but there was nothing,” says Joni Ernst, the Montgomery County auditor.
A $1 million loan
On Dec. 2, a Tuesday, Gillman told the workers at Republic that they would be laid off at the end of the week. The cost of business was too high, he said at the time, and Bank of America wouldn’t extend his line of credit. There was no mention of Traco.
But the day before, Red Oak Real Estate had pledged to pay Traco $1 million “in partial payment of the aggregate Purchase Price” for the plant in Red Oak, according to a Dec. 1 promissory note filed in court in connection with Traco’s lawsuit.
Under the terms of Red Oak Real Estate’s a mortgage and a promissory note, the company would pay back Traco $1 million, plus interest, paid in installments until late 2010.
Red Oak Real Estate also had other terms it had to meet, according to an affidavit signed last week by Frances Stephen, Traco’s chief financial officer.
Red Oak Real Estate would have to honor warranties for windows Traco had made in the Iowa plant, and if employees were laid off, it would have to “pay vacation and severance pay to such employees.”
Another investor also had a stake in the plant.
A trust in the name of Brian Elias, the president of the Michigan construction supply company Hansons, was to be paid $800,000, according to mortgage documents. Elias did not return a call seeking comment.
The sale became public knowledge when Traco announced in a Dec. 4 news release that Echo Windows would take over the business.
“It was a total shock to everybody in the community because no one even knew Traco was offering its business for sale,” says Ted Schoonover, the mayor of Red Oak.
As the Traco deal was sealed, Republic workers staged a sit-in for six days, demanding two months of severance pay as required under federal law, as well as compensation for their unused vacation time.
Politicians, including then-Gov. Rod Blagojevich, came to Republic and sided with the workers, demanding that Bank of America and Republic pay the employees what they were owed.
Gillman defended his actions at Republic. In a December news release, he said Republic lost millions of dollars before he took it over in 2006.
Even after making a series of cuts, Gillman had difficulty keeping Republic afloat and by October, he was talking with Bank of America about shutting down Republic, according to the news release.
Warning signs at Echo
In some ways, the history of the Red Oak plant mirrored that of Republic Windows. The Iowa plant had been struggling to break even in recent years, managers there say.
Workers were initially afraid they would all be laid off.
But Gillman traveled to Red Oak the day the sale was announced and reassured them.
Business was so good the plant would soon hire more workers. He promised that three truckloads of manufacturing equipment were on their way from the Republic plant, and that more would follow, the plant’s managers and Schoonover say.
Many people embraced the news, coming as it did when other manufacturers in the county were beginning to lay off workers.
“We’re not naïve, but we’re pretty trusting people here,” Schoonover says.
Others were wary.
“You have a sense that something’s going to happen, but you hope” that it won’t, says Kari Edie, the owner of a café on Red Oak’s central square.
Her concern was soon justified.
Twenty temporary workers were released from the plant shortly after Gillman's takeover in December, even though orders were stable, managers say.
The first three truckloads of equipment Gillman promised arrived in Red Oak, but no more equipment came after that, says Nate Lunn, the plant's facilities manager. The equipment that made it to Echo Windows was never used in production.
Orders and bills pile up at Echo
Bills soon mounted at the Echo plant, according to a copy of Echo’s accounts payable spreadsheet from mid-February obtained from a company employee. It shows that as of Feb. 13, Echo owed Wellmark Blue Cross Blue Shield more than $127,000.
Suppliers started calling, seeking money. Red Oak owed three of them a total of nearly $190,000, according to Stephen’s recent affidavit.
The unpaid power bill from Mid American Energy was at least $40,000, according to the spreadsheet. Lunn, responsible for upkeep of the plant’s machinery, says he couldn’t even order a tube of grease because the vendor Echo had been using hadn’t been paid.
Echo also owed Red Oak Real Estate, the owner of the building and land, more than $57,000. In all, the bills totaled more than $1 million by mid-February, according to the spreadsheet.
According to affidavits signed by Vorhies, plant manager Dwayne Adams and human resources director Mary Lou Friedman, Smith told them Red Oak and Echo “were generally not paying their bills and had no intention of paying their bills as they came due in the future.”
Window orders kept coming in, enough to keep the plant running at its normal pace of about 250 windows per day give or take, Lunn says.
Except that as bills mounted, some suppliers stopped shipping products. Pallets of vinyl to make window frames stacked up, but there weren’t any latches and the plant was missing some of the hardware it needed to make windows, Lunn says.
The parts shortages started to cripple the plant’s ability to keep fulfilling orders.
In Red Oak, Vorhies, Echo’s former engineering manager, recalls a dinner he attended at a popular restaurant in town on Friday, Feb. 20. Richard Gillman, the investor Smith, a bank representative and several managers at the Echo plant gathered to discuss the company’s future. As Vorhies recalls it, the decision to close the plant for good hadn’t yet been made.
The next night, the managers got an e-mail that Echo would be closing down for good. The employees got the news the next day, and on Monday, Gillman came to the plant to deliver the word personally.
The economy was bad, he said, and the labor strife and negative media coverage surrounding Republic’s closure made it hard for him to find investors.
But that doesn’t sit right with the plant’s managers.
“The economy has nothing to do with it,” Vorhies says. “The sales are there.”
On the factory floor, Lunn shows the dry-erase board that tracks each week’s orders: almost 1,000 windows in the last three days of the week before the plant closed, and 400 more set to be finished on Monday and Tuesday. All told, those windows would have been worth about $300,000.
Equipment to Tennessee
The day the plant closed, managers say, they received e-mail with a draft of a letter from competing window maker MGM Industries to its customers.
The president of the Hendersonville, Tenn., company wrote, “MGM Industries has entered into an agreement with the management of Echo Windows to purchase inventories and equipment necessary to build the Sienna product line.”
MGM moved some of the Red Oak equipment to its plant in Tennessee last week.
The purchase killed a deal that the city and county had worked out with another investor to buy the plant and everything inside from Gillman, says George Maher, the executive director of Red Oak’s industrial foundation.
The investor would have rehired some of the plant's workers and kept it operating. As an incentive, the city would have put up money from its budget to pay the first few years of interest on the plant, Maher and Schoonover say.
But when news of Gaskins’ purchase reached the investor that person pulled out, Maher says.
Even still, Maher says he doesn’t have any ill will over Gaskins’ purchase.
“I appreciate what he did,” Maher says. “He contacted us and told us he was coming after it.”
On March 6, Traco sued Red Oak Real Estate, saying that the plant’s owner had “abandoned” the factory and its operations. Therefore, Red Oak Real Estate was in breach of its mortgage with Traco, the lawsuit says.
Traco is seeking $1 million and has asked the court to sell the property to raise that money. A company in Des Moines, Iowa, hired by the court, is now overseeing the facility and keeping it secure.
Jamie Cox, an attorney in Council Bluffs, Iowa, says he has been hired by at least one former Echo worker. He is investigating issues related to severance pay for the employees and whether the plant’s shutdown may have violated the federal law that requires employers to give their workers notice when they shut down.
Cox says he is filing a motion to intervene in Traco’s foreclosure case.
“Our purpose for doing that is just to protect the employee records that are in the building,” Cox says.
Schoonover, the mayor, said Thursday he was trying to remain upbeat about the plant’s future.
“We are still hopeful to reopen the plant and re-employee the employees who got laid off,” Schoonover said in e-mail.
‘We have not totally given up’
The trickle-down effects of the lost jobs are starting to mount in Red Oak. The local temporary staffing agency all but shut its doors the day Echo closed down.
“There was no need for a temp agency if you don’t have a viable employer to hire for,” says Schoonover.
Karen Blue, who is on the county's Board of Supervisors, says she's worried that sales tax revenues will dip because laid off workers won't have much to spend. That could create a shortfall in the county's budget.
Maher thinks it's unlikely the Red Oak plant will reopen anytime soon, but he maintains a shred of optimism.
“We have not totally given up,” Maher says. “If a new investor arises, we still think we can get that building back.”