01/11/2007

Associated Press

A former Kentucky finance secretary will pay $2.3 million to settle a debt with the bankruptcy liquidator of ex-Gov. Wallace Wilkinson's bookstore, according to court documents.

The payment will cover the debt "in full and complete satisfaction" of L. Rogers Wells, who served in Wilkinson's cabinet, the court filing said.

The agreement settles one of the last major issues relating to the bankruptcy of Wallace's Bookstores and Wilkinson.

Wilkinson, who died in 2002, filed for bankruptcy protection in February 2001, declaring $418.4 million in debts. Wallace's followed a few weeks later, listing $152.3 million in debts. The debts were mostly high-interest loans he'd received from friends to pay for Wallace's operations and Wilkinson's lifestyle.

Wells, a Glasgow businessman, and Dave Thomas, the founder of Wendy's Restaurants, were among the lenders to the business.

Bankruptcy liquidator Bernard Katz sued Wells in bankruptcy court to get back $5.65 million paid to Wells by Wallace's within 90 days of the Lexington company's bankruptcy. The money was principal and interest on $5 million in loans from 2000.

The key issue in the case was whether Wallace's had shown favoritism to Wells by paying him — and not its other creditors — within 90 days of its bankruptcy filing when its poor financial condition should have been known. If it did, the money had to be returned to be divided among all creditors.

Negotiations led to the settlement.

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Information from: Lexington Herald-Leader, http://www.kentucky.com