At The Grassmueck Group, we believe that success in such a volatile environment requires more than technical knowledge and skill. A receiver, a trustee, an administrator must also know how to be tenacious, flexible, and creative. The resourcefulness to be effective in the face of situations never before encountered comes only with experience.
CHAPTER 11 TRUSTEESHIP
ADVANCED RODS, INC. (DBA ROGUE RODS)
The company manufactured high-grade, medium cost fishing rods. It had enjoyed sudden and rapid success, but was undercapitalized and lacked knowledgeable management. As a result, the company was unable to deliver the products ordered and consequently lost the confidence of the market. As Chapter 11 Trustee, we continued operations to meet strategic needs while positioning Advanced Rods for sale to maximize returns.
RESULT: The company was sold and its employees' jobs were retained. Creditors received more than two times the amount anticipated from the sale of assets. Litigation with principal doubled final payment to creditors.
CHAPTER 11 AND CHAPTER 7 TRUSTEESHIPS
Agripac, an agricultural co-op, had grown to become the largest food processor in Oregon's Willamette Valley when the decline of agricultural activity in the area forced it to file for bankruptcy. Our review of documents and subsequent investigations as Chapter 11 Trustee led to numerous preference cases against co-op members, board of directors, attorneys, and accountants. Selection of a mediator acceptable to both sides was the key to timely resolution of these delicate proceedings. We recruited the services of a well-known federal judge with a background in farming in the Willamette Valley. His name and stature were enough to bring all parties to the table and effectuate settlements.
RESULT: The settlements helped increase assets from $600,000 to more than $16 million for distribution to creditors in subsequent Chapter 7 proceedings.
ASSIGNMENT FOR THE BENEFIT OF CREDITORS
CENTER FOR NEUROLOGICAL EDUCATIONAL TRAINING
The board of directors of this nonprofit institution had allegedly misallocated funds granted from the State of Oregon. The state claimed the board had potential criminal and personal liability. To satisfy the legal obligations, the state and board reached an agreement that all corporation assets would be surrendered to the state.
The Oregon Department of Justice requested our assistance in recruiting a liquidator. Our analysis of the case revealed that the proposed action exposed the state to liability on issues relating to other creditors' rights. Under our recommendation, the Oregon Department of Justice and board appointed our company assignee for the benefit of creditors. We were able to facilitate the recovery of assets while shielding the state from liability, and simultaneously relieve the legal burden faced by the board. Agreements were made to preserve personnel records and confidential patient files.
RESULT: The school's personal property and real property, living facilities and vehicles were successfully liquidated, the State of Oregon made significant recovery on its debt, trade creditors were paid, and the board of directors avoided personal liability.
FTC RECEIVERSHIP ACTION
The Fortuna Alliance was an international case that operated an Internet Ponzi scheme based in Bellingham, Washington. Appointed Receiver by the Federal Trade Commission, our company took immediate possession and control of locations there and in Carson City, Nevada, where we intercepted domestic and foreign cashier's checks worth millions of dollars. We uncovered and drilled multiple safe deposit boxes, from which we seized hundreds of thousands more in international money orders. Other actions included assisting the FTC and U.S. Attorney in seizing funds in Antigua and uncovering the purchase of an island offshore of Belize, part of the perpetrator's scheme to establish its own bank.
RESULT: More than $2.5 million in assets were seized. Funds were turned over to disbursing agent upon successful resolution of the case between the Federal Trade Commission and principals of Fortuna Alliance.
HEALTH MAINTENANCE CENTERS / ZNETIX
Over a period of nearly seven years, executives of HMC/Znetix and its affiliates defrauded more than 7,000 investors of an estimated $91 million in what has been called the largest stock fraud in Washington State history. Investors were enticed in part by promises of spectacular stock returns, when the company had no plans to go public and was not registered to solicit investments in Washington State or elsewhere. The investment income was instead used to fund a lavish lifestyle that included million-dollar homes, boats, luxury cars, and expensive jewelry.
Appointed Receiver by the Securities and Exchange Commission, we mounted an exhaustive asset-recovery strategy. Our close review of entangled individual and company records uncovered significant hidden assets, and forensic accounting turned up questionable transactions that led to recoveries. Public auctions returned $1.6 million; real estate sales grossed another $5.6 million. Civil suits filed against the company's directors and officers and against its law firm resulted in multimillion dollar settlements. As the case proceeded, we processed approximately 5,000 claims from investors in 49 states.
RESULT: From assets of $47,000 at appointment as Receiver, more than $30 million has now been recovered and is in process of disbursement. The scheme's ringleader is currently serving a 20-year prison sentence, one of the longest in a white-collar fraud prosecution in U.S. history. Eleven other company insiders have either been sentenced or are awaiting sentencing.
CHAPTER 11 TRUSTEESHIP
HOYT AND SONS RANCH PROPERTIES, INC.
Hoyt and Sons Ranch Properties was landlord to other related entities who operated a complex “phantom cow” scheme out of Eastern Oregon. The subject properties included nine ranches covering thousands of acres and numerous leases for additional grazing land. No rent was being paid on the properties, putting them under imminent threat of loan default and subsequent foreclosure.
As court-appointed Trustee in the Chapter 11 bankruptcy of Hoyt and Sons, we established the existence of a landlord's lien against the lessees' cattle herds in favor of the bankruptcy estate. The terms of a landlord's lien require possession; in this case, the property subject to the lien was living cattle grazing on land spread throughout four states. Our solution was to mobilize a group of retirees in motor homes to physically stay with the cattle at locations in Oregon, Idaho, Nevada, and California. In other actions, we systematically listed ranch properties for sale, corrected U.S. Forest Service and Bureau of Land Management lease issues to preserve lease rights for each ranch, and negotiated a $1,000,000 settlement from the lessees for back rents owed. That settlement failed to be completed, and the estate eventually received $2,000,000 total through subsequent renegotiated settlements.
RESULT: More than $5 million was collected. In a 1999 indictment for mail fraud, bankruptcy fraud, and money laundering, the perpetrators were charged with selling thousands of adult female breeding cows that “they never had and which did not exist.” Our efforts as Trustee helped ensure that the principal architect of the scheme was sentenced to a lengthy term in federal prison.
CHAPTER 11 TRUSTEESHIP
Pearl Foods operated a poorly performing Arby's franchise in Honolulu, Hawaii, out of leased space with leased assets. At the time of its Chapter 11 filing, the company was unable to purchase food from Arby's corporation due to poor credit and imminent threat of closure by the Internal Revenue Service.
Our assessment indicated that strategic internal reorganization could turn the company into a viable entity. As Chapter 11 Trustee, we negotiated for a purchase of all leased equipment, shed leases that had no value to the estate, restored employee confidence, and remodeled the interior to increase sales value. With these changes, gross sales and net profits increased each month, and the restaurant rapidly grew into one of the top ten worldwide in the Arby's chain.
RESULT: After approximately three years of improving operation, the restaurant emerged from Chapter 11 and was sold as an ongoing business for $825,000.
STATE COURT RECEIVERSHIP
Professionals 100 was one of the larger real estate brokerages in the greater Portland metropolitan area until the State of Oregon uncovered illegal banking activities relating to a company investment fund. Further investigation also showed that the chief financial officer had embezzled several million dollars. Checks to all agents had bounced within days prior to Christmas.
Appointed by the state court as Receiver, we mobilized a diverse team willing to work through Christmas Eve and on Christmas Day to assess the feasibility of continuing operations and outline a plan of action. Potential purchasers had expressed skepticism that the business retained value since all sales and listings would evaporate, and sales agents would simply move their licenses to other brokerages. Resolution of the case centered on our decision to close the business. That action prompted potential purchasers to reevaluate their previous unfavorable view of the company's value. In less than 48 hours, through a competitive bid process, we negotiated a sale of all 13 locations and its book of business to the John L. Scott Company of Washington.
result: Within days of the sale, the creditors filed three involuntary bankruptcies. Funds recovered from the receivership action were paid to trustees for the creditors' benefit. Jobs that might have been lost were preserved, and John L. Scott was able to enter the Oregon market.
STATE COURT RECEIVERSHIP,
The State of Oregon had made low-interest loans and grants to rehabilitate the aging Wynema Hotel in Klamath Falls, Oregon, to enable a developer to convert it into low-income housing. Problems with the developer over building management and the proper care and housing of the hotel's elderly tenants led to severe loan payment defaults.
Appointed Receiver by the state court, we analyzed the building's condition; corrected signification health, safety, and environmental violations to ensure a sound environment for elderly tenants; and collected funds pending foreclosure.
Operating under a management contract, we functioned as agent for the state, shielding the state from liability relating to the building's condition and issues with elderly tenants. Our responsibilities as agent included all phases of building management and preparing the building for sale. Sales preparation included contracting for and supervising installation of a new roof.
RESULT: The building was brought up to safety and environmental code. Through the use of a receiver and agent, the state made recovery on its loans to the original developer and was effectively shielded from liability in its relationship with tenants.