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That loss was minor compared with the tarnish to one of the most-famous family names in North Carolina business. To save face, the Broyhills agreed to cough up $3 million to repay most of the customer deposits — a rare move in a bankruptcy.”

“In its [Broyhill’s Company] Chapter 7 filing, the company listed $7.5 million in liabilities and only $1.7 million in assets. It owed about $3.8 million to 2,900 customers who had placed deposits and about $3.3 million to suppliers. Some employees were owed commissions, salaries and benefits. One who had back surgery right before the bankruptcy was stuck with $12,500 in medical bills because the company was self-insured, according to court documents.”

“Within a few days, Broyhill paid $800,000 to suppliers with whom he had signed personal guarantees. The afternoon of the filing, Hendrick called the court-appointed trustee, Joseph Burns, to find a way to make amends to customers. Eventually, the Broyhill family agreed to pay $3 million to cover the trustee’s costs and to pay back customers up to $1,800 each, enough to cover most claims. But 582 had higher deposits, including an interior decorator from Saudi Arabia who had put down $38,900. They will get about 15 cents on the dollar for what’s left, Burns says.”

“Broyhill insisted on something in return — an agreement that the trustee would not take any civil action against him or other officers. ‘After our investigation, we felt we had certain claims against them we would have pursued but for the settlement,’ says Burns, a partner with Burns, Price & Arneke law firm in Winston-Salem.”

“Where Ed Broyhill had the ‘greatest exposure,’ Burns says, involved the $750,000 in payments the company made to him in the final three years. In 1992, he took out a $2.4 million personal loan from NationsBank and put the money into Edgar B. The company gave him about $23,000 a month to repay the loan. That constitutes ‘preferential payment,’ Burns contends, because the company could have used that money to pay off creditors.”

“After the February court hearing in which the settlement was approved, Broyhill spoke publicly for the first time since the bankruptcy. It was clear the ordeal had taken its toll. His ruddy cheeks and slight pudginess once made him look boyish for his age. Now he just looked swollen and haggard.”

(From NC Business Magazine article “Cushion the Fall”)