Bankruptcy Threatens Kids.com LLC; Attempt to Sell Child Modeling Agency Assets
John Michael Bagwell of KidModel LLC (Kid Model LLC) aka Kid Models LLC Prospective Buyer
12/04 -The future of the controversial New Jersey–based child modeling agency Kids.com LLC (www.justourkids.com) is looking increasingly bleak. They are racking up huge legal bills.
Court documents recently filed by Alfred Bagwell, the owner of Kids.com, reveal a major legal battle taking place between Kids.com and Jerome Ashfield, who sold National Talent Associates's assets to Kids.com but still has not received all the money owed him.
The struggle revolves around NTA selling their assets to Kids.com and Kids.com trying to sell their assets to a new buyer. Before Kids.com sells its assets, however, Ashfield wants his money. He and related entities filed an involuntary bankruptcy against Kids.com, which Kids.com claims they were ineligible to file.
It all sounds very personal now. A lot of money is being wasted. It is very bitter. Bagwell charges: "Ashfield and his companies are simply attempting to ruin Kids.Com."
A working relationship spanning more than thirty years between Alfred Bagwell and Jerome Ashfield has turned into a bitter feud over money Ashfield is unlikely to receive and it now threatens the very existence of the agency.
Bagwell, a Certified Public Accountant, was Ashfield's accountant for National Talent Associates, through several investigations and lawsuits by the Federal Trade Commission, starting in the 1970s.
Ashfield, once criticized by a government attorney for his "unshakeable obstinance," finally was banned by the FTC in 1999 from doing business in the child modeling industry. As a result he was left holding the baby. He could not continue his business but the company's large mailing list of thousands of parents was a rich asset. So he went looking for a buyer, and the man who saw all the money for thirty years, the accountant, offered to buy the assets. Ashfield then sold his company's assets to Bagwell for $350,000.
These assets became the foundation of Kids.com LLC. Bagwell was aware of the FTC cases against Ashfield and NTA, but he claims he felt he could clean up the company and get approval from both the FTC and the DOJ--even though he continued to charge parents about the same amount of money in non-refundable upfront fees, a clear violation of child modeling industry standards--and NTA's income was based 97% on these upfront fees which exploited parents and their children. Most all the parents lost money--99% did not earn more from modeling jobs than the upfront fee.
Ashfield and Bagwell hammered out a deal which had Kids.com dropping $20,000 in cash at the closing of the deal, and executing a $330,000 note for NTA. The Note had Kids.com paying Ashfield installments over a 5-year period, starting in 1999, ending with a balloon payment due about six months ago, on July 1, 2004. Everything was going fine, payments made on time to NTA every month, until a series of events caused the financial collapse of Kids.com.
Disgruntled former employees struck first, Bagwell alleges, filing complaints against Kids.com with the FTC in 2003. On January 5, 2004, the FTC contacted Kids.com about the complaints. The FTC investigation which followed revealed most if not all complainants were former employees at the Chicago office of Kids.com, whom Bagwell says were fired.
In February 2004, WCCO in Minneapolis, responding to consumer complaints from people who learned about Kids.com on the internet, investigated the complaints and broadcast an aggressive report, then a second, tough follow-up report, which had a devastating effect on the company, Bagwell says, leading to a class action lawsuit.
Depositions were held and the lawsuit was "voluntarily dismissed," meaning the lawyer for the plaintiffs did not know what he was doing, and withdrew from the case, said he could not find evidence, even though he didn't say what kind of evidence he was looking for.
Even though the case was dismissed, er, withdrawn, Bagwell argues, it required all their resources to counter the accusations, and caused cash flow problems. It was distracting. Bottom line: Kids.com was unable to make the final payment of approximately $191,556 to Jerome Ashfield in July 2004. Ashfield was mad!
Discussions followed to refinance the deal, but Ashfield wanted his money, and he wanted it now. Bagwell was unable or refused to take a loan from anyone else to pay back his NTA loan. Ashfield then sued him for his money on August 5, 2004, about a month after the due date had passed. Bagwell wrote:
- As Kids.Com became unable to remit the final payment to NTA and Ashfield would not extend the payout, Kids.Com had no choice but to file a Deed of Assignment for the Benefit of Creditors, pursuant to N.J.S.A. 2A:19-1 et seq., in Essex County on October 8, 2004. . . . the total assets of the company in October 2004 were approximately $19,000.00. The total liabilities of the company at such time exceeded, approximately, $500,000.00.
Kids.com then tried to transfer the assets to Bagwell's son in a "sale" for $25,000. Ashfield evidently hit the roof, thought the Bagwells were trying to pull a fast one on him, evade paying the $191,556--Bagwell senior avoiding having to pay the money, Bagwell junior getting to start over with no financial obligations, no payments to him, free from $500,000.00 in liabilities.
While the sale obviously looked suspicious, from father to son, at such a low price, and Ashfield called it "incestuous," Bagwell counters the company had been appraised for $12,000, "less than half of the $25,000 purchase offer," and the fact his son John Michael Bagwell was an insider had already been disclosed.
Ashfield was not buying it. His companies, NTA and A&S, "filed omnibus objections to the proposed sale of the assets." He claimed lack of full disclosure of the assets. He was unrelenting. He went into overdrive, going after both Alfred Bagwell and John Michael Bagwell with accountants and attorneys, demanding documents and poring over them for several days.
On November 22, 2004, Alfred Bagwell asked the court to grant relief, alleging:
- Ashfield and the Ashfield Companies filed the bankruptcy in bad faith and contrary to the spirit of the bankruptcy laws and should be liable for all damages and expenses that Kids.Com has suffered. The ill-intended and vexatious litigation in both state court and now federal court by them will only serve to deplete Kids.Com of all its assets. This will lead to about 50 people losing their jobs and the closing of the business. This is the true intent of Ashfield.
The proposed sale of the company remains unapproved. Judge Renee Jones Weeks has to decide if Alfred Bagwell is allowed to sell his assets to John Michael Bagwell.
Ashfield, who scammed thousands for decades, may now feel as if he was scammed. Bagwell, who saw him scamming for decades, may think he was scammed. And, unfortunately, none of the 20,000 parents who paid Kids.com and did not get their money back, and think they were scammed, may never see their money again.
Easy Background Check has learned John Michael Bagwell has already registered Kid Models LLC to do business in Chicago, Illinois, and "Kids.com" continues to operate there. But instead of Kids.com LLC doing business as Kids.com LLC, it is Kid Models LLC doing business as "Kids.com," so everything continues, it's business as usual, a seamless transition, a slick move, nobody knows everything else that has been going on with Kids.com LLC drowning in a sea of debt and litigation.
Now, the question remains, is it legal to run an agency without an agency license? Ashfield, when he filed the recent documents, said Kids.com is a Modeling Agency. Which needs a special modeling agency license. Bagwell may have attempted to set up another non-licensed agency. Is the 35-year child modeling scam known as NTA, then Kids.com, finally being laid to rest, so parents across America are spared the manipulation, financial losses, and grief? Or will the scam continue under a new name, under new management?
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