- The Washington Times - Monday, August 8, 2005

Six years after rebounding from a felony drug-dealing conviction, D.C. businessman Jeffrey N. Jackson in 1993 co-founded a company that won tens of millions of dollars in government contracts to protect some of the country’s most important buildings.

But this year, his family-run Unlimited Security Inc. — which had guarded D.C. government and federal buildings in at least four states — fell into bankruptcy liquidation, the result of a three-year collapse that cost hundreds of workers their jobs.

Bankruptcy and civil court records detail a web of tangled finances that includes a shaky deal with former heavyweight boxing champion Riddick Bowe, questionable spending in Las Vegas and Mexico, and a raid on corporate funds.

In addition, the bankruptcy case has spawned claims to recoup money for creditors against a high-end jewelry store in New York City, an influential D.C. political donor and contractor, and a reputed con artist in Florida.

The FBI has inquired about Unlimited’s finances, but no charges have been filed against the company or Mr. Jackson, 42, who was forced out in 2003. He currently is embroiled in a number of civil actions involving the demise of his security firm and his boxing promotions.

Mr. Jackson declined to comment for this article.

Money was pouring into Unlimited Security prior to 2002, which should have been a banner year for the nine-year-old company, financial records show. Between 1997 and 2001, its annual gross revenues had more than doubled, from $6.4 million to $14.2 million, and it employed as many as 500 workers.

Unlimited guarded buildings for the FBI in South Carolina, the Food and Drug Administration, the Federal Aviation Administration and the District’s City Hall. Mayor Anthony A. Williams’ re-election campaign paid the company $2,822 for its services in 2002.

Behind the scenes, its finances were a mess, and one client — the General Services Administration — was growing frustrated with complaints about guards who lacked uniforms and basic equipment such as flashlights, according to GSA records obtained through the Freedom of Information Act.

What’s more, federal investigators found that Unlimited’s quality-control inspector, Bruce M. Darconte, submitted falsified reports about a GSA contract to guard buildings in New England. He pleaded guilty to a misdemeanor in U.S. District Court in Connecticut.

The GSA moved in March to ban Mr. Jackson from bidding on federal contracts for failing to detect the illegal conduct.

Such a ban is a death knell in government contracting, said a manager at a local security firm that has competed with Unlimited.

“Tight margins are a way of life,” said the manager, who asked not be identified. “You don’t have a lot of money to be messing around with, especially if you’re a small company.”

Enter the champion

In the summer of 1999, a recently fired guard introduced his uncle, Riddick Bowe, to Mr. Jackson at Unlimited’s headquarters on L Street NW.

“His nephew became a situation where he was more a liability … and so he thought that he [could] bring his uncle in to talk to me to get his old job back,” Mr. Jackson recalled last year in a deposition for a civil suit in Prince George’s County.

“After that ended, [Mr. Bowe] asked me, ‘Jeffrey, so how did you get started in your business?’ And I told him how I got started and whatnot, and one thing led to another.”

According to Prince George’s County court records, Mr. Bowe loaned Unlimited approximately $2 million in 2000. Two years later, he signed a document to guarantee up-front cash that Unlimited was getting from a financing company, Commerce Funding Corp. of Vienna, Va.

“Bowe didn’t know what the heck he was signing,” said the fighter’s attorney, Steven Silverman. “It was a bait-and-switch kind of thing.”

Mr. Bowe said he still hasn’t been repaid his $2 million loan.

“I’m in the hole because of this,” the former champion said over an intercom on the doorstep of his Fort Washington home. “It’s a very bad company.”

Commerce Funding has sued Mr. Bowe, seeking more than $2 million for a line of financing on which Unlimited defaulted, according to Fairfax County court records.

“I got burned,” said Mr. Bowe, who faces losing his bank account and his home as a result of the Unlimited deals.

Mr. Silverman said his law firm attempted to trace the money Mr. Bowe loaned to Unlimited. “We made extensive efforts to try to track [money], and we were never able to find the money landing in a corporate account.”

Nonetheless, court records show that Mr. Bowe received some money from Unlimited.

During the months leading up to the company’s Chapter 11 bankruptcy protection filing in March 2002, it paid Mr. Bowe — who was not an employee — more than $70,000.

Courting an investor

“Mr. Bowe wanted to invest in a security business because he wasn’t doing anything,” Mr. Jackson said in his deposition.

“He saw that I had taken a business from five people to over 500 and a revenue from $600,000 to $18 million a year, and he wanted to invest in something.”

In other filings, attorneys for Mr. Jackson said he spent plenty of money on the boxer, including a leather jacket stuffed with $50 bills; diamond jewelry; legal services; trips to Las Vegas, Jamaica and Hawaii; and medical care, such as a $7,000 liposuction operation.

Mr. Silverman disputed Mr. Jackson’s account of his dealings with his client, saying Mr. Jackson swindled Mr. Bowe out of millions. The dispute has turned increasingly personal.

In Prince George’s court filings, attorneys for Mr. Bowe cited Mr. Jackson’s felony drug conviction in the late 1980s in an attempt to nullify a deal in which Mr. Jackson promised to promote the former champion’s fights.

In a response, attorneys for Mr. Jackson said he told Mr. Bowe about his drug conviction “many years” ago and that Mr. Bowe was unfazed.

In his deposition, Mr. Jackson said he was hooked on drugs and he sold a $25 bag of cocaine to an undercover police officer. The then-25-year-old Mr. Jackson pleaded guilty to a felony charge of cocaine distribution in December 1987 and was sentenced in D.C. Superior Court to 90 days imprisonment and 18 months’ probation, court records show.

The cash crash

Unlimited filed to reorganize under Chapter 11 bankruptcy protections in March 2002, a few weeks before Mr. Bowe signed the deal to guarantee cash to the security firm.

The U.S. Justice Department’s Office of the U.S. Trustee oversees bankruptcies to prevent fraud, and Trustee W. Clarkson McDow Jr. oversees such cases in the D.C. area. His office began examining Unlimited’s finances and found some surprising, eleventh-hour expenses.

Unlimited was more than $11 million in debt — owing $7 million to the Internal Revenue Service alone. But its American Express account listed purchases at Victoria’s Secret, the Washington Golf Center, the five-star Pierre Hotel in New York, and Limited Too, a clothing store for young women, court records show.

Though the expenditures totaled less than $15,000, they were enough to alert Mr. McDow’s office. Digging deeper, the office found earlier charges and bills for Saks Fifth Avenue, Nordstrom, Disney World, hotels in Las Vegas and travel to Los Cabos, Mexico.

During this period, Unlimited tried to meet its waning security obligations but had trouble paying its employees, some of whose paychecks bounced, according to court records and interviews with former workers.

Mr. McDow’s office also discovered that Unlimited had bought airline tickets for a round-trip flight from Washington to New York for Mr. Jackson and Mr. Bowe. The purchase showed the entanglement of the activities of Mr. Jackson’s Unlimited Security and his sideline boxing interests.

In July 2000, Mr. Jackson registered World’s Finest Promotions LLC as a business to sponsor boxing matches, signed Mr. Bowe and based the company at Unlimited’s headquarters at 611 L St. NW, according to records.

World’s Finest, owned by Mr. Jackson, was listed among the creditors of Unlimited Security, which was co-owned by Mr. Jackson. According to the bankruptcy filing, the security firm said it owed the boxing promoter about $400,000.

A spokeswoman for Mr. McDow said his office does not comment on active cases, adding that the court records speak for themselves.

Court steps in

By March 2003, Mr. McDow sought the appointment of a trustee to take over Unlimited, citing possible “fraud, dishonesty, incompetence or gross mismanagement.”

U.S. Bankruptcy Court Judge S. Martin Teel Jr. declined to appoint a trustee, but agreed to allow turnaround specialist Stephen Wexler of Vienna-based Marcher Consultants to examine the company’s books.

“The concern is, once a trustee is appointed, that is a clear signal that there is definitely something wrong with the company,” said Todd Zwicki, bankruptcy law professor at George Mason University. “Courts sometimes have a reluctance to appoint a trustee. Even in Enron, they never did that.”

On July 24, 2003, Mr. Wexler learned that $142,000 was missing from a company account earmarked for payroll taxes.

Mr. Wexler confronted Mr. Jackson, who, according to a court pleading filed by Mr. Wexler, “admitted the funds had been removed at his discretion,” but promised to put the money back in 10 days. It never reappeared.

Three weeks later, “additional diversions had occurred” totaling more than $200,000, Mr. Wexler said. And this time, Unlimited couldn’t cover payroll taxes.

On Aug. 15, 2003, Judge Teel signed an order essentially firing Mr. Jackson, saying that only Mr. Wexler “shall have check-writing authority.”

Judge Teel also appointed an independent trustee, lawyer Kevin R. McCarthy.

Mr. Wexler — reporting to Mr. McCarthy — ran Unlimited for more than a year before it fell into liquidation amid a dispute with the Labor Department. Mr. Wexler said officials never learned what happened to the more than $350,000 that records show Mr. Jackson diverted from the bankrupt estate.

However, financial records disclosed in bankruptcy filings list an unauthorized transfer of $110,000 just before Mr. Jackson’s firing to Ernest Mateen in Palm Beach, Fla.

Last year, Mr. Mateen was charged with running a scam in which he posed as a boxer who was set to fight a famous opponent, such as former light-heavyweight champion Roy Jones Jr., but who needed money for training.

When investors signed over a check, Mr. Mateen would cash it and disappear, law-enforcement officials said.

“He’s one of the best cons I’ve seen in 15 years,” said Detective Johnny Ortiz, head of the financial-crimes unit of the Palm Beach County Sheriff’s Office.

“He was slick. He targets CEOs and lawyers — top-line people. And $110,000 is nothing for him. That’s one or two days’ work.”

Protecting creditors

Mr. McCarthy, the court-appointed trustee overseeing Unlimited’s bankruptcy liquidation, eventually placed the liens against Mr. Bowe’s assets to recover more than $70,000 he received from the company for creditors.

He also filed an action against Mimi Jewelry Inc. in New York to recover company money spent on a diamond bracelet just before Unlimited declared bankruptcy, and a $20,000 action against D.C. contractor Jeffrey E. Thompson.

Mr. Thompson, an accountant and big political donor to the mayor and other D.C. officials, referred questions about his ties to Unlimited to an attorney, who did not provide any details.

According to court records, Mr. Thompson received funds “on account of money previously loaned or services previously provided,” including a $5,000 check from Unlimited days before its bankruptcy filing in 2002.

Mr. McCarthy also filed a claim against Mr. Jackson for $357,000, saying the diversion of company funds constituted fraud, embezzlement or larceny. In legal papers, Mr. Jackson denied the accusation.

In October, Mr. Jackson signed a consent order in which he agreed to repay the funds, cooperate with Mr. McCarthy and waive any claims that World’s Finest held in Unlimited.

Four months later, Mr. McCarthy stated in another legal pleading that he “does not expect a substantial recovery from Jeffrey Jackson.”

The last days of Unlimited Security began long after Mr. Jackson left the company in 2003.

The Labor Department in November 2004 sent to the D.C. government a letter ordering the withholding wages owed to several guards.

Despite a repayment timetable to keep the company operating, the Labor Department “without warning” told the District to withhold $237,000 in wages owed to some guards on Jan. 24, according to documents filed by Mr. McCarthy.

Unlimited’s financing company — Commerce Funding Corp. — cut off its advance cash out of fear it would not get repaid. No other financing companies would advance funds.

Two days later, Mr. McCarthy went to Unlimited’s headquarters and told employees the company had ceased operations. Mr. Wexler told supervisors that all guards were being discharged.

“The end result was wrenchingly disappointing,” Mr. McCarthy told Judge Teel.

In the end, “there was too much old baggage — back wages, underpaid insurance premiums and diverted withholding taxes — and resulting distrust between Dept. of Labor and Commerce Funding Corp.,” Mr. McCarthy said in a legal pleading to Judge Teel.

Employees, unaware of what led to Unlimited’s collapse, scrambled to find work with other security contractors.

“I always thought they were getting back on their feet,” said Valeria Jordan, a former Unlimited guard.

“I never did anything wrong,” she said. “I showed up on time, I never cussed them out. I was always there. They put me in a terrible spot.”

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