BALCONES

Balcones Distilling founder Chip Tate is embroiled in a legal battle with the company’s board of managers.

The president and head distiller of the award-winning Balcones Distilling has fired back at the company’s board of managers, as the ongoing fissure between them threatens to widen and evolve into a battle for control of Balcones.

The Balcones Distilling board of managers suspended President Charles “Chip” Tate for 90 days last month and obtained a temporary restraining order to prevent him from entering the company he founded in Waco six years ago.

Two hearings, including one set for Thursday in Waco’s 170th State District Court, have been postponed as Tate has replaced his attorney and the sides continue to squabble in court filings. Another hearing tentatively has been set for Oct. 7, said Waco attorney Jeffrey A. Armstrong, who represents Balcones Distilling.

“Mr. Tate has changed attorneys again and has requested a continuance and an extension of the TRO. Therefore, since this matter is still pending, it wouldn’t be appropriate for me to comment on the underlying facts,” Armstrong said.

In obtaining the TRO, the board of managers is seeking a temporary injunction and alleges that Tate, a minority interest holder in the company, “has engaged in acts harmful to Balcones.” They charge that Tate threatened the life of board Chairman Greg Allen, said he would rather see the facility burn to the ground than to be run by someone other than himself and missed important meetings.

In his answer to the lawsuit, filed by his new attorney, David R. Clouston, of Dallas, Tate denies the allegations and says the board has tried to portray the disagreement as a mere “employee dispute.”

“This is not an employee dispute,” his answer states. “Quite the contrary. This is an attempt to purloin the plump, ripe peach that is Balcones from the founder, Chip, who built it with his own two hands from scratch. This is a private equity group trying to unjustifiably take advantage of a craft distiller and take his ownership of Balcones.”

Clouston did not return phone calls to his office Tuesday.

Balcones was founded in 2008 and upgraded its South 17th Street facility to triple its production capacity after its brand quickly earned a reputation in the spirits world.

Or, as Tate puts it in his response to the suit: “Literally, Chip and Balcones could not keep their whiskey ‘on the shelf’ and could not produce their award-winning whiskey fast enough to satisfy demand — an enviable position to be in for a startup company.”

The company announced last year that it was undertaking a major expansion and planned to convert the historic Waco Fireproof Storage building at 225 S. 11th St. into its new headquarters, featuring a gift shop.

Balcones’ products have garnered more than 140 awards, Tate’s response says, including the 2012 World Whisky Distillery of the Year and U.S. Craft Distillery of the Year at the inaugural Wizards of Whisky competition and the 2014 Single Malt of the World Whisky of the Year by London’s Wizards of Whisky.

But board members allege in their petition that Tate’s “unconscionable and reprehensible” behavior is jeopardizing the timing of the $15 million expansion and its funding.

Accusations denied

Tate denies the accusations and charges that he is a member of the board of managers and any action taken by the board without his presence is improper. He says he was not suspended, but terminated and escorted out of the offices by two sheriff’s deputies Aug. 5.

“Rather than be allowed to reap the rewards of success and reach even higher by expanding production facilities and continuing to develop award-winning products, Chip has been forced to engage in a life-or-death struggle not only over the future of Balcones and his ownership interest in the company, but over his professional and personal reputation and the very ‘soul’ of Texas Whisky,” Tate’s answer says.

Tate alleges the “true villain” in this dispute is PE Investors, an Oklahoma limited liability company with 29 members that were not disclosed to Tate or Balcones until after the “fraudulently induced June 2013 transaction admitting it as a member to Balcones.”

“The facts will show that not only were the allegations false, but they were made knowing they were false,” Tate says in his answer. “Is it greed, is it the jealousy or the personality of one of more of PE’s members, or is it ‘aggressive’ ignorance?

“Maybe it’s all of the above. Regardless of the reasons, it is not the one-sided, simple employment dispute that PE, acting in the guise of the hijacked Balcones, wants this court and the public to believe,” the response says.

In a statement issued Tuesday, Balcones Distilling board member Michael Rockafellow said Balcones closed this week on a $15 million deal to fund the construction and provide operating funds for the expanded distillery. He said the company is operating at “full capacity and our team is more energized than ever about the growth plans.”

“The craft distilling process at Balcones has always required a deep, cohesive and talented team,” Rockafellow said. “The recent investment to build a new facility validates our commitment to the quality and pioneering spirit of the Balcones organization.”

Filings by the distillery allege Tate owes the company $14,947 for personal charges he put on a company credit card and refuses to repay. Tate disputes that.

In issuing the temporary restraining order against Tate on Aug. 22, 74th State District Judge Gary Coley Jr. ordered Tate to refrain from entering any of the Balcones facilities without making prior arrangements; refrain from contacting Balcones’ employees or suppliers; refrain from communicating with any person in the spirits industry or in the media about Balcones or about his current assignment at Balcones; and refrain from using company debit or credit cards or other company resources.

Also, Tate is ordered to return to Balcones company computers, phones, traveling cases and all files in his possession, and to provide immediate access to and provide passwords for any of Balcones’ social media accounts and to not post anything on those accounts.

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