Company offers $5.2M for murder victim Cannon's stake

Buyout deal proposed as widow Kelley Cannon, charged with the killing, asks court to bar opposing lawyer and give back her lap-dog

Email | Print By E. Thomas Wood

Kelley Cannon

Medical Reimbursements of America, the Franklin-based healthcare collections firm led by the late Jim Cannon, has reached an agreement with his estate's administrator to purchase the murdered Nashville entrepreneur's equity in the company for $5.2 million.

The company and representatives of Cannon's estate and heirs are slated to appear before Davidson County Probate Judge Randy Kennedy tomorrow for approval of the deal. Not all parties to the probate case could be reached this week, and it is not clear whether all will support the transaction, as proposed in this court filing.

Cannon was found strangled to death in his Bowling Avenue home on June 23. Police later charged his estranged wife, Kelley Cannon, with first-degree murder.

He co-founded Medical Reimbursements of America in 1999 and obtained venture capital backing from Clayton Associates, also based in Franklin. The limited liability company's operating agreement includes terms under which it can purchase the shares of a deceased member.

MRA invoked those terms in a letter sent by Stuart McWhorter of Clayton Associates to court-appointed estate administrator Mike Castellarin on July 31. It calculated Cannon's 25 percent equity interest in the firm to be worth $4.8 million.

Castellarin, relying on a provision in the operating agreement for an outside appraisal that would set the value of the ownership units, then retained two local accountants to provide separate estimates of what the shares were worth.

Tom Price of Price CPAs projected the company's future earnings based on growth over the past five years, estimated the company's value as a multiple of earnings, and came up with a figure of $5.6 million for the Cannon shares. CPA William Varley applied four different valuation methods, as detailed at this link, to arrive at a price range of $5.1 million to $5.4 million.

MRA and Castellarin settled on $5.2 million. The deal calls for an initial payment of $1 million, with the remainder to be paid out over the next four years.

McWhorter's July letter disclosed that MRA had revenues of almost $1.7 million in May 2008 and projected annual revenues of $20.1 million. The company focuses on medical claims arising from accidents, workers' compensation cases and large-balance accounts that become delinquent.

The Cannon estate case involves numerous interests and has been contentious at times. A court has appointed Jim Cannon's sister, Anna Kate Stallings, as custodian of the Cannons' three young children. Attorney Jennifer Evans of Springfield is the court-appointed guardian of the children, while Jeanan Stewart, public guardian for Davidson County, has been named to serve as guardian of their property interests.

In addition to the value of Jim Cannon's business ownership, an estate inventory shows other assets totaling almost $1.9 million. If Kelley Cannon is convicted of her husband's murder, state law would prevent her from inheriting any of his property.

Kelley Cannon, represented by attorney Andrew M. Cate of Nashville, has petitioned the Probate Court over numerous matters in recent months, including access to the family home on Bowling and possession of personal property and financial assets. The court in October imposed a freeze on estate assets held by Smith Barney/SWS Group, ruling that no disbursements should happen without court approval.

The widow has also asked the court to disqualify Nashville attorney Claiborne McLemore from representing Stallings, on the grounds that his prior representation of Jim Cannon makes him ineligible to act as counsel to Stallings. The court has so far taken no action on that request.

Most recently, on Monday, Kelley Cannon asked the court to make Jim Cannon's aunt, Cynthia Sewell, a party to the probate case. The grounds: "Sewell has knowingly and fraudulently taken possession of the widow's dog, a Bichon Frisé named 'Sugar.'"