ST. LOUIS — The deal sounded almost too good to be true. Some local investors say it was.
Edwin “Chuck” Church Jr., a Chick-fil-A franchisee from South Carolina, was looking for investors to loan money to his son’s company, Old South Trading Co., in the early days of the COVID-19 pandemic. The company planned to sell masks, gloves and other personal protective equipment during a time of major shortage for health care providers.
The return on investment would be 10% each month, Church claimed — a hefty sum in uncertain times.
“My prayer is that we get the masks to hospitals ASAP and put money in the hands of operators where it’s much needed knowing it will be used for good!” he wrote, soliciting investors in a Facebook group for Chick-Fil-A operators on April 8, 2020.
But it didn’t take long for interest payments to plummet, first to 2% then to 1%. Eventually, Old South stopped paying altogether, court filings said. Investors learned the company owed about $5.5 million on a previous arbitration award from South Carolina.
People are also reading…
Now, four investors from the St. Louis area, including three who own Chick-fil-A franchises, want more than $2 million in unpaid interest and fees, plus punitive damages. A lawsuit filed last week by the investors compared Old South to a Ponzi scheme, claiming the Churches used money from new investors to make payments to existing ones.
Matthew Jacober, an attorney for the local owners, said there’s a lesson to be learned: “Be careful how you invest your money.”
Neither Chuck Church nor his son, Brendan Church, returned messages seeking comment. Lawyers who represent them in a South Carolina court case also did not respond. In court filings, Brendan Church and Old South Trading have appealed the $5.5 million arbitration award. That case is still pending.
Old South Trading Co. was incorporated in Tennessee in 2013 and is headquartered in northwest South Carolina, according to business records. Before the pandemic, it exported automobiles to China, but in January 2020 shifted to importing and distributing personal protective equipment, according to an arbitration filing.
In April 2020, a company named Dream Medical Group placed an $11.5 million order for 5 million masks from Old South, but they were not delivered as promised, according to the arbitration filing. The two parties signed an agreement the following month that Old South would refund Dream roughly half the price.
Meanwhile, Chuck Church was posting in the Chick-fil-A Facebook group looking for investors, according to screenshots attached to the lawsuit in St. Louis. He initially advertised 10% returns each month, but a few months later reduced the promised returns to 2% a month, or 24% each year.
In an August 2020 email to investors, Chuck Church attributed the decrease to growing demand and shrinking margins. He emphasized the business was “healthy and thriving.”
“Just wanted to gauge interest on how many would continue loaning money,” he said, according to the email.
Wentzville Chick-fil-A owner Scott Swindler, who was already an investor, inquired about his mother chipping in. Anthony Johnson, who runs a franchise in Ellisville, also invested, as did Dave Bruce, an owner in Des Peres. They invested retirement funds, business accounts and family trust dollars, according to the lawsuit.
Despite the new money, Old South still wasn’t paying the millions it owed to Dream Medical Group, the lawsuit claims, and in January 2022, an arbitration panel confirmed they’d have to pay up. The local investors still didn’t know about the award, according to the lawsuit.
That changed when Dream Medical and its owner, Joseph Agresti, sued Old South Trading and roughly 75 investors, including at least two from the St. Louis area, earlier this year over the unpaid bill. The complaint accused Brendan Church and Old South of using the $11.5 million it received from Dream to make the hefty 10% interest payments to new investors, “analogous to a Ponzi scheme.”
In response, Brendan Church said in an email to investors that his company “vehemently denies” failing to deliver masks and “believes this lawsuit to be frivolous and an attempt by the customer to harass the company.”
Chuck Church then announced in a March 12 email that money from the initial investments was being frozen at the advice of lawyers. He asked for two weeks to figure everything out, and he insisted investors would receive their money back.
“I leave asking for your prayers because I know God is still in control,” he wrote, “even through the storms.”
The lawsuit claims the email and references to a Bible verse were an attempt “to draw on the strong values he knew his fellow Chick-fil-A operators held.”
“He quotes the Bible and makes it sound like the Ponzi scheme he and his son cooked up was a divine calling,” the suit states.
In June, Brendan Church said in an email the company would not pay any more interest to investors.
The St. Louis-area business owners argue they wouldn’t have invested if they’d known the truth about the company’s finances. It is still unclear exactly how many people invested in Old South.
“We’re just trying to litigate and put our clients in the best position to be whole,” said Jacober, the attorney.
Old South, for its part, still advertises personal protective equipment on its website. It has an A+ rating from the Better Business Bureau. The company’s attorneys have also petitioned for the case in South Carolina to be dismissed.
A hearing has not yet been set in the case in St. Louis.