Judge: No bankruptcy shield for Wood Construction owner

JOHNSON CITY, Tenn. (WJHL) — Former contractor Joe Wood, who is accused of ripping off dozens of homeowners from his base in Johnson City, won’t be allowed to have his debts discharged through bankruptcy.

South Carolina Bankruptcy Judge Helen Burris ordered Wood and his wife Cameron’s case closed earlier this month. The move comes several months after Joe Wood agreed to a plea deal on federal wire fraud charges that may bring restitution to more than 60 victims and could also see Wood sentenced to up to 10 months in prison.

The Woods originally filed for a Chapter 11 bankruptcy, a business reorganization, last October. They had moved to Indian Land, SC from Johnson City in late 2021, just as fraud complaints against Wood Construction & Remodeling were pouring in from at least two states. The federal criminal case includes 64 eligible victims who lost about $1.2 million, but dozens more don’t fit the category — and Tennessee’s attorney general put estimated losses at over $2 million.

Area attorney Jack Inman said for victims not covered by the federal criminal case, the bankruptcy decision opens the door for going after assets the Woods might have.

“These creditors can still go after the Woods individually because they weren’t granted a discharge in bankruptcy, so they still owe these debts,” Inman said.

That doesn’t mean they’ll have much success, though.

“I don’t think there’s much money left in the pot to go around at this point,” Inman said. “So really, a dismissal of the discharge is not going to be a win for these creditors at this point.”

By the time they filed, Tennessee’s attorney general had sued the Woods, claiming they’d ripped off homeowners on remodeling projects totaling more than $2 million. That lawsuit is still pending.

“There’s a lot of people that are going after the Woods right now … a lot of people that are hungry to get their money back,” Inman said.

“One plaintiff going after them alone may not have much of a shot,” he added. “They’re probably not going to reclaim everything that they lost. That’s a reality that unfortunately they’re probably going to have to accept. But that doesn’t mean that they shouldn’t do what they can to pursue at least some of the money that they’re owed.”

Had the Woods succeeded in having debts discharged through bankruptcy, some of their assets might have been sold and split among creditors, but the documents in their bankruptcy case show their affairs were in such disarray that sorting that out might have been impossible.

A filing that had trouble early on

Nearly from the beginning, bankruptcy trustee Gerard Vetter raised doubts about the legitimacy of their claim and about their participation in the bankruptcy process. Tennessee AG Jonathan Skrmetti also claimed the filing shouldn’t shield them from his claims on homeowners’ behalf, because it had been filed after the lawsuit.

The Woods also refused to answer basic questions or provide necessary information, leading Vetter to suggest their filing was abusing the Chapter 11 process. He successfully asked Burris to transfer it to a Chapter 7 personal liquidation case, which she did early this year.

Then in late July, Vetter filed a complaint asking Burris to throw the case out completely. He noted that the couple had continued to answer the simplest of questions. He wrote that the Woods had failed to “maintain books, documents, records and papers from which their financial condition or business transactions might be ascertained.”

Inman said judges rarely rule that a debtor has defaulted on their claim as happened in this case.

“Generally speaking, if the parties do what they’re supposed to do throughout the bankruptcy and they’re not repeat filers, it’s not quite a rubber stamp, but they’re almost granted a discharge as a matter of right,” Inman said.

While recovering from a bankruptcy takes time, Inman said it’s an important privilege for debtors to get a fresh start by wiping away their debts.

“It’s going to affect their ability to borrow, but it relieves them of the the pressure that they’re under from their immediate debts, and so it’s a great service and a great tool that helps millions of Americans,” Inman said.

Joe and Cameron Woods’ petition wasn’t a garden variety one, though.

“It’s pretty rare that it’s people that are in the upper echelons of income,” Inman said. “In this case, we’re dealing with people who had means. They were wealthy. They were sophisticated. I think I saw they had 14 separate LLCs (Limited Liability Corporations).”

After the transfer to Chapter 7, they continued to approach the process in ways that didn’t sit well with the trustee.

The Woods asserted their Fifth Amendment privilege to all questions and wouldn’t reveal whether anyone owed them money or vice versa, where their assets were or whether they’d moved any assets since their bankruptcy petition, where they were earning income or any details about those 14 LLCs they had interest in.

That led Vetter to “the adverse inference that the Debtors have concealed or failed to maintain books, documents, records, and papers from which their financial condition or business transactions might be ascertained.”

Mac Heavener, the U.S. attorney who led the wire fraud prosecution, wrote that the federal government’s criminal investigation “did not reveal evidence that (Joe Wood) siphoned money from the company for personal gain other than payment for his normal salary and compensation structure.”

However, that plea agreement includes a requirement that Wood disclose fully all assets over which he has full or even partial control, including those help by “a spouse, nominee, or other third party.”

Inman said that leaves open the possibility that more information could be found related to assets, though he added it was “hard to make that judgment sitting on the sidelines.

“But given the alleged fraud which seems to have been occurring, that coupled with this number of LLCs, seems to indicate that maybe there was something going on under the table,” Inman said.

“Possibly using the bankruptcy court system as a way to move past some of the wrongdoings, that certainly could have been going on.”

While involvement in more than a dozen companies about which you’ve refused to provide information doesn’t automatically equate to anything underhanded, Inman called it “one piece in this puzzle that’s starting to take shape.

“We can see what it’s saying just by looking at the trajectory of things and the allegations that are on the table.”

Joe Wood is set for sentencing in his criminal case late this year. Heavener also made clear in the plea agreement that the deal doesn’t absolve Wood of separate liability involving other victims or acts.

What he’s probably trying to get at is saying all is not lost for you all, you all still have a cause of action against the Woods,” Inman said. “He’s sending a message to let them know that just because they weren’t included in the suit doesn’t mean that their rights are extinguished.”

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