GHOST TRAIN: Federal lawsuit, corporate shell game, massive losses haunt CoMo dinner train

Another tax incentive goes bust 

COLUMBIA, Mo 5/11/15 (Beat Byte) -- Columbia City Hall could probably learn something from Florida residents John and Matthew Dent.

The father-son investment duo has been fighting the Columbia Star Dinner Train's parent company -- TBG Holdings -- in Federal court.   Among their claims, the Dents allege breach of contract and fraud by a company hemorrhaging money.   

City officials are likewise considering legal action against the dinner train -- suddenly shuttered last October -- to collect $12,000 in unpaid rent and utilities.   After IBM's layoffs, it is City Hall's second tax incentive failure in as many months.    

Led by deputy city manager Tony St. Romaine, city government gave the train's first owner -- Mark Vaughn and Central States Rail -- $45,000 in public money five years ago.  The city also reconstructed a passenger loading ramp on space it leased to Central States.  The moves prompted the ire of disability advocates because the rail cars did not comply with ADA requirements.  

Despite one of the brightest red flags in business -- changing hands multiple times in a short period -- St. Romaine's office neglected to keep tabs on the enterprise, which he sold to taxpayers as an "investment" in tourism. 

The Dent lawsuit details complex, paper-only transactions -- stock splits, reverse splits, debt conversions, equity reductions, and so forth -- common with penny stocks:  lightly-regulated shares that trade for pennies, often backed by few or no hard assets.   The locomotive and rail cars now sitting idle in the city-owned COLT rail station appear to be the defendants' only hard assets.  

Vaughn sold the dinner train to B. Allen Brown and Railmark Holdings in Nov. 2013.  Brown quickly formed a new company, Train Travel, Inc., which just as quickly sold the dinner train to Florida-based TBG Holdings -- the third new owner in just over a year.  

Calling his company a "financial and business advisory consulting firm," TBG Holdings CEO Neil Swartz claimed in press releases TBG was a recent entrant into the railroad space, first "acquiring" a shell corporation called" Monkey Rock Group" in Feb. 2013. 

John Dent was Monkey Rock's CEO. 

Swartz renamed Monkey Rock -- a "non-operational entity" -- "Continental Rail Corp.", a press release explains, firing Dent and adding a new CFO, Tim Hart.   Less than a year later, in Jan. 2014 Dent and son Matthew filed a 26-page lawsuit against TBG, Swartz, Hart and other parties involved in the Monkey Rock transaction.

Swartz and TBG, meanwhile, completed their second railroad-related acquisition:  Columbia's dinner train.  In April 2014, they formed a new company, Train Travel Holdings, Inc. from another empty shell corporation known as "Vanell".

Operated until Jan. 2014 by Francisco Magana, Vanell "was a private El Salvadoran company that provided consulting services in commercial cultivation and processing of coffee in El Salvador," according to EDGAR filings with the U.S. Securities and Exchange Commission (SEC). 

After what Swartz and TBG called a "reverse merger," Vanell the El Salvadoran coffee bean distributor became Train Travel Holdings, with only one hard asset, according to EDGAR:  the Columbia Star Dinner Train.   

"In its first run after Train Travel Holdings took control, The Columbia Star Dinner Train had a successful weekend," an April 29, 2014 press release announced.   "Both the new and existing staff worked together to bring this off," said Swartz.

To celebrate, the new owners held a reception that included their public relations director.  "I was extremely pleased to be able to attend this weekend's train trips in person, and to document the operations of this important first entertainment train operation for Train Travel Holdings," said Sharon Ford, Director of Media for Train Travel Holdings, Inc.   "It was wonderful to watch."

Not so wonderful:  the company's deplorable financial condition.  

In its first EDGAR filing (Jan. 2013), Vanell/Train Travel Holdings showed $2,400 in total revenue; $951 in profits; but an astonishing 2.7 million shares of stock outstanding.   In a Nov. 2014 filing after dumping the Vanell name, Train Travel Holdings showed over $1 million in losses, on this sour note: 

"For the three and nine months ended September 30, 2014, the Company wrote off $169,494 of Other Receivables from Columbia Star Dinner Train, which were deemed uncollectable.   As a result of our net loss from operations, net cash used in operations, deficit accumulated as of September 30, 2014, our ability to continue as a going concern is in substantial doubt." 

The Columbia Star Dinner Train's last run was Oct. 19, coinciding with another oddball incident in its short but turbulent life.   TBG sought to "unwind" the dinner train acquisition, an Oct. 31 press release explains. 

"We are assessing our options over the next few days," TBG's Swartz said, calling the months-old acquisition "null and void."