The Tennessee Restaurant Association's accountant is accusing the state of failing to act quickly enough to save the association's workers' compensation fund, which has cost restaurants in the state millions and embroiled them in a bitter, costly legal dispute.
The state Department of Commerce and Insurance had information as early as 2003 that the fund, which paid injured restaurant workers' claims, had a $450,000 deficit and probably couldn't stay afloat, according to a court motion filed this month by the accountant, William "Larry" Shores of Orlando, Fla. Shores said the audit, which he wrote, was filed with the state detailing the problems.
The state failed to act until the end of 2005, two years later, when the accountant wrote another audit questioning the fund's ability to continue "as a going concern," Shores said in his motion for summary judgment filed July 9 in Davidson County Chancery Court.
The state Department of Commerce and Insurance said Monday that although the audit questioned the trust's ability to survive, the audit went on to describe actions the trust fund board took that could improve the trust's situation. The 2002 audit wasn't filed with the state until August 2003, and the subsequent audit for the year 2003 showed the trust was in the black.
The state is suing Shores and the administrator of the fund, a company run by the former chief executive officer of the Tennessee Restaurant Association, James "Ronnie" Hart. Hart stepped down earlier this year amid the ruckus. He could not be reached Monday.
The state accused Hart of mismanaging the workers' compensation fund and dipping into reserves without proper approval. Hart has said that he never intended to hurt anyone and that changing business conditions were at fault for the fund's demise.
As for Shores, the state says he miscalculated the extent of the fund's losses. Shores denies those claims.
"The Tennessee Department of Insurance never contacted Shores regarding these matters,'' he said in the court motion filed by attorney Clint Woodfin of Knoxville. "In spite of these warnings, there was no regulatory action taken by the Tennessee Department of Insurance until Shores again questioned the ability of TRA to continue as a going concern sometime in late 2005."
State liquidated fundThe state Department of Commerce and Insurance liquidated the workers' compensation fund in 2005. The state is in the midst of trying to collect more than $6 million from Tennessee restaurants that were members of the trust.
Randy Rayburn, who owns the Sunset Grill and Midtown Cafe in Nashville, said he will have to pay the state about $85,000 to cover his portion of the broke trust fund, not counting attorneys' fees, and all of that comes at a time of declining sales for his restaurants.
"It's quite a burden this year,'' he said.
Rayburn, who is on the Tennessee Restaurant Association board but was not on the board for the trust fund, said association management continued to assure him that everything was fine with the fund as late as early 2006.
"As a purchaser of workers' compensation insurance from the TRA trust, we were never advised in writing or orally by anyone as to the financial challenges of the trust until the trust was shut down in December 2005,'' he said.
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