As if finishers didn’t have enough to worry about with the economy and regulations, now comes a tale of one of their own scamming a typical “mom and pop” shop out of hundreds of thousands of dollars and sending the owners into bankruptcy.
But Dennis and Judy Barron from Barron Industries in Rockford, Ill., don’t want your sympathy or your stern looks that say, “You should have known better.” What they want to do is educate others about being careful who they bring into their shops, and to remember what Ronald Reagan preached: “Trust, but verify.”
Their nemesis is Jon C. Shain, a finishing industry veteran who turned their lives upside down and was sentenced to two years in a federal prison for bank fraud and money laundering. But we’ll get to him in a minute.
This is about the Barrons, who were doing pretty well for themselves several years ago, working out of a 28,000-sq-ft facility, employing about 50 workers and not owing a dime to anyone. In 2004, the business started by Dennis’ father, Raymond, back in 1969 was told it had to move from its location so a bridge could be built.
That’s when Shain appeared. He impressed them with his career achievements in surface finishing (even authoring a story or two in PF), and told them he had inherited some cash and wanted to invest in real estate with his new powder coating business, Coating Technologies. Shain had master’s degrees in chemical engineering and business administration, and was known by many in the finishing industry.
The Barrons saw a potential business partner in Shain. A local bank told them it was lending Shain’s business close to $1 million for a building and finishing equipment, so they decided to merge Barron Industries with his company to get a new facility up and running.
“His background fit nicely with ours,” Dennis Barron told his local paper. “He was a younger person. The bank spoke highly of him. They loaned him almost $1 million, and his name is on patents for chemical coatings.”
By the start of 2006, the Barrons had merged their assets and liabilities with Shain’s and changed the name of the family business to Barron Finishing Technologies, which Shain, company president and owner of 50 percent of the business, used to get more than $2 million in additional loans to buy more equipment.
“We really thought he could take this and build a larger company, and we could retire,” Dennis Barron said.
By 2009, things started to unravel. Shain was failing to deliver on the equipment he was purchasing with the loans, and all the new customers he said he had lined up for the business—more than $1 million in orders—were not materializing. The bank loans and property taxes could not be paid.
Dennis Barron went to a private investigator to find out who Shain really was. What he discovered eventually led him to the FBI, which quickly found that Shain was creating fake invoices for the bank, saying they were for equipment purchased by Shain’s sham business, Coating Technologies. The invoices were payable to several other fake businesses that Shain had started. The feds say the scheme enabled Shain to collect hundreds of thousands of dollars more than the actual cost of equipment.
In 2010, Shain was charged with 19 counts of bank fraud, making false statements to a financial institution and money laundering. He pled guilty last August to one count of bank fraud and three counts of money laundering, and was sentenced in May.
Meanwhile, the bank liquidated all of the Barron’s assets to pay off their debt. They still owe about $47,000 to creditors and are working now in a building half the old size with just eight employees.
Dennis Barron says he knows that victims of scams are often too ashamed to contact the police, but he is speaking out so others can learn from his mistake. “I was embarrassed,” Barron told his hometown paper. “But I came forward. If I hadn’t, he would have gotten away with all of it.”
The Barrons say most people in the finishing business are great to work with, but they advise others to thoroughly check out those they plan to do business with.
“He presented the face he wanted us to see, and said the things we wanted to hear,” Judy Barron told the newspaper. “You see these types of things on TV, the Madoff and Ponzi schemes, and you think these things will never happen to you. Well, here we are.”