The original dispute between NBN and Sheridan began when NBN claimed Sheridan failed to justify a “secret” methodology for allocating its parent’s corporate overhead to AURN, including a $500,000 annual “salary” of Ronald Davenport Sr (pictured). NBN also claimed Sheridan provided invoices to AURN six to eight weeks after the end of every month but forced AURN to pay at the beginning of each month, “thereby advancing itself funds before incurring any actual expenses for the coming month.”
So NBN claims Sheridan took significantly more money through advances than it accounted for through monthly invoices, and did not account for the monthly advances. In other words, the filing states, Sheridan “regularly failed to credit AURN for the amounts that it previously received from AURN in excess of the purported ‘actual costs’ in its subsequent invoices to AURN. The failures to account for differences and credit AURN for any surpluses paid highlight that the related-party transactions at issue here are wholly unrelated to services that the Debtor allegedly provides to AURN.”
The filing states Sheridan received $4.7 million in payments from AURN in 2012, $3.3 million in 2013 and 2014, and $4.125 million 2015. Of these amounts, at least $5,993,513 was attributable to unjustified G&A allocations. The actual total G&A allocation likely is much more, but NBN has been unable to track G&A allocations after May 2015 because the Debtor stopped issuing invoices to AURN altogether. Even without invoices, however, monthly advances from AURN to the debtor have continued at a rate of $250,000 to $300,000 per month through February 2016.
The filing states that Sheridan’s “extracting such a significant amount of money from AURN has resulted in sharply reduced funds available for distribution and harm to NBN.”