A Texas court has granted a request to convert the Newark basket-maker's bankruptcy case from Chapter 11, which allows restructuring of debts, to Chapter 7, which forces a sale of assets.
The move means long-suffering Longaberger Co. sales consultants will likely never get paid, nor will the daughters of company founder Dave Longaberger.
Standing to benefit are two major creditors, JGB Collateral, and Richmont Capital Partners.
JGB Collateral, which says it is owed $5.3 million, requested the move to Chapter 7, which was granted by U.S. Bankruptcy Court for the Northern District of Texas. Under Chapter 7, administrative and legal expenses are paid first, then money raised from the sale of assets is used to pay off debts, with secured creditors first in line.
The move is the latest in the years-long death of a company that once employed nearly 8,000 workers and had sales of $1 billion. In June, the troubles culminated with Longaberger's parent company, JRJR Networks, filing Chapter 11.
In seeking Chapter 7, JGB Collateral argued that reorganization was never realistic. This was "not a case of reorganization but rather of liquidation," the company wrote in its request.
"There are no operations, no employees, questionable insurance, no payments to landlords, no cash collateral, no cash in any bank account, no plan of liquidation, and no operating reports filed," the company wrote, noting "the lack of any action during this Chapter 11."
In addition to JGB Collateral, the other secured creditor is Richmont, an investment firm whose top executives are John Rochon Sr. and John Rochon Jr., who are also chief executives of JRJR Networks.
In the June Chapter 11 filing, JRJR Networks indicated that it had assets totaling $13.9 million, the same amount owed to JGB Collateral, and Richmont Capital Partners.
The amount of assets is in doubt, however.
"Neither Longaberger nor JRJR disclosed any bank accounts with any funds in any accounts," JGB Collateral said in its court filing. "There have been no post-petition operations. Longaberger's schedules disclose three leased locations. Upon information and belief, the landlords have not been paid."
Whatever assets remain, the Chapter 7 bankruptcy would seem to put a final, sad end to the years-long Longaberger saga.
A one-time sensation for the hand-made baskets it sold across the country, Longaberger employed almost 8,000 workers at its factories and Longaberger Patio Shops tourism village in Dresden. But the death of founder Dave Longaberger nearly 20 years ago started a decline that was never reversed.
In 2013, JRJR Networks, then known as CVSL, bought a 51.7 percent stake in the Longaberger Co., making it the first acquisition by JRJR, which founder Rochon Sr. had promoted as a holding company of direct-sales businesses. Financial troubles persisted for both the Longaberger Co. and JRJR Networks, and Rochon in June 2014 asked Tami Longaberger, then CEO of the company, for a $1 million loan.
By April 2015, a frustrated Tami Longaberger sent Rochon a resignation letter. But Rochon asked Longaberger to withdraw her resignation so that JRJR, which was publicly traded, would not have to report it to the U.S. Securities and Exchange Commission, according to court filings.
A month later, instead of repaying Longaberger as she left the company, Rochon fired her for what he called "good cause."
Tami Longaberger sued and, in February of this year, was awarded $2.1 million.
In her pursuit of repayment, she joined a chorus of company sales consultants who said they had not been paid in months and had not received merchandise they ordered earlier in the year. Other sales consultants raised questions about whether they would ever be reimbursed for money they paid to register for the Bee, the company's annual sales conference and pep rally.
Meanwhile, the company's former headquarters in Newark — the Big Basket — fell into foreclosure. In late 2017, the iconic building was sold to Canton-based developer Steve Coon and partner Bobby George of Cleveland after standing empty for more than a year.
In filing for bankruptcy, JRJR Networks concludes a series of similar failures for the company.
Other companies under the JRJR Networks umbrella that have failed include: Your Inspiration at Home, a maker of spices and other gourmet food items that is in bankruptcy in New Zealand and Australia; My Secret Kitchen, a United Kingdom-based maker of gourmet foods that is in liquidation; and Kleeneze and Betterware, both of which are in the United Kingdom and collapsed and plunged into administration, the British term for bankruptcy.
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