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Dean Guitars parent company facing foreclosure over $4 million bank debt
The troubled Florida guitar brand faces a fresh threat to its existence, as Valley National Bank sues over unpaid loan repayments.
Imaage: Roy Rochlin / Getty
Dean Guitars’ current perilous state following its trademark trial loss to Gibson and embroilment in myriad legal cases seems to have got even worse. Not only is Valley National Bank demanding a judge foreclose the company’s assets due to millions of dollars in unpaid debt, it also faces allegations of widespread financial fraud within the company.
Armadillo is the parent company of Dean Guitars, Luna Guitars and dDrum, while Concordia is the limited liability company that owns Armadillo, and is owned by Pamela Keris-Rubinson, current President & CEO of Armadillo following the ousting of her son and former CEO Evan Rubinson last year amid accusations of embezzlement. Adding to the chaos is the fact that Armadillo, Pamela and Evan are currently involved in a number of other legal cases between each other.
The initial complaint from the bank dates back to December of last year, however on 12 September, Valley National Bank asked permission to file a Second Amended Complaint. The initial complaint, in short, alleges the following:
In June 2020, a company called EPR Investments LC (which also lists Keris-Rubinson as the registered agent) took out a loan with Wachovia bank (which was later purchased by Valley) of $6.2 million – Armadillo and Concordia were listed as guarantors and in exchange the bank was granted a security interest in EPR’s property and business assets. In layman’s terms, they took out a mortgage against EPR Investments’ assets.
On that same day, Armadillo Enterprises established a revolving line of credit to the tune of $4.5 million, this was secured against not just the business assets of Armadillo and Concordia (in this case, Dean’s factory, guitars, machinery etc) but also the company’s intellectual property – presumably the rights to the Dean, Luna and dDrum brands.
However, Valley alleges that Concordia and Armadillo have missed repayments on both the mortgage in November 2022, and the revolving line of credit in December 2022. Valley claims it is owed $4,130,669.07 just on the Armadillo credit.
As a result, Valley is seeking foreclosure on both the physical and IP assets – when something is foreclosed, it’s not repossessed by the bank, but is instead sold to a third party in order to service the unpaid debt.
The amended complaint reiterates the same claims of unpaid debt, but also alleges Armadillo made fraudulent financial reports to both the bank and the IRS about both its income and its overall value.
Valley claims that Armadillo “fraudulently inflated the reported accounts receivable, particularly for the year 2019”, and “prepared and maintained shadow financial records that were separate from its official financial records in an effort to hide its true financial condition from Valley and other interested parties.”
2019, notably, is the year in which Gibson filed its landmark trademark lawsuit against Dean, which it would go on to win. The suit – and the effects of its outcome – are alluded to by the complaint: “Armadillo […] was involved in multiple lawsuits that affected or would affect Armadillo’s financial well-being; however, Armadillo failed to disclose the existence of those lawsuits, as well as Armadillo’s potential exposure to adverse outcomes and substantial legal spend, to Valley.”
We approached Armadillo for comment about the case and the implications of the allegations, particularly in the light of the other financial troubles it faces. However the company’s response instead attacked Valley National Bank. It reads in full:
“These lawsuits are frivolous. There is a reason there has been no progress on the case since Valley National Bank filed suit nearly one year ago in December 2022. The suit was filed in response and retaliation for us confronting the bank about its highly improper business and banking practices.
“Concerned about its own liability, the bank manufactured fictitious defaults under the loan documents and sold a real estate loan to Water49 because it was concerned about our Counterclaim for substantial damages. Remarkably, Valley National Bank continued its history of improper business and banking practices by misrepresenting the existence of defaults to Water49 in order to obtain payment for its sale of the real estate loan before its conduct would be subject to judicial review.
“We will be vigorously defending these suits and are confident we will prevail after the Court is apprised of all the facts and circumstances. Stay tuned.”
Notably, a counterclaim mentioned is above. No such counterclaim appears to have been filed within any of the cases opened by Valley National Bank against Armadillo, nor has Armadillo filed a separate case against Valley. When pressed for details, Armadillo refused to confirm or deny the existence of a counterclaim.
Valley National Bank did not respond to a request for comment on the case as a whole, or Armadillo’s allegations.
This news comes less than a month after YouTuber KDH uncovered information that Pamela Keris-Rubinson and Evan Rubinson were involved in a variety of legal disputes over various family companies and trusts, wherein Evan Rubinson alleged that Armadillo was in “the throes of death”.
Seemingly backing up claims of financial woe is the fact that Dean has still not shipped any of its newest range of guitars – the Vengeance and the Zero select series – since their launch in 2021.
It all paints an increasingly bleak picture of the prospects of Dean Guitars in the wake of its costly and damaging legal battle with Gibson – according to the filing, Valley estimates that the total value of Armadillo and Concordia’s business assets to be around $4.8m, and it’s seeking the outstanding amount listed above plus fees and damages in restitution.