Sucker Punched: Unite Bankruptcy Low Blow to Local Businesses
The news came surprisingly to staffers on the morning of November 16, 2009.
As they showed up for work, a note was pinned on the doors in different cities, reading simply that “It is with GREAT regret that we must inform you that the operations of Window and Unite Media, effective immediately, have closed down.”
As we all now know, the collapse of Window and Unite Media last November led to the sudden demise of the South Florida Blade and 411 Magazine. While it may have seemed surprising and shocking to the average person reading the paper, it was no surprise to insiders. The events were a year in unfolding.
Unfortunately, the cessation of their business left in its wake scores of local businessmen holding the bag. PCA Printers, which published 411 weekly, was left with a debt close to $100,000. But Buddy Tuchman, the owner, is philosophical: “Over the years, the gay community has been very good to me. And while the magazine was on a COD basis with me for close to a year, I was hoping they could pull it out. I did not want to be the one to pull the plug.”
Still, local freelancers were really stung bad by the sudden closures. The lists of people owed money include the popular and omnipresent photographer, Pompano Bill who was stuck for $1,062. All these are monies these persons and businesses will never collect.
Anyone who dealt with Unite Media is stuck like Chuck. Especially Chuck. The people who traded with 411 and The Blade were blue collar businessmen like Charley Braun, who delivered and distributed the papers every week.
Braun is owed almost $6,500 for ten back weeks of distribution. “In this economy, it hurts,” he said. “I still have to pay my drivers. Basically, I worked for their company for free for over two and a half months.”
Who Got Stung?
Sadly, the wounds they cut carved a scythe across the local gay business community. When the doors were padlocked, Wilton Executive Suites were owed back rents of over $9,000, and since the doors were closed by the court due to the bankruptcy, the owners could not lease the place for at least another two months.
Columnists as well felt the pinch of the sucker punch. Take J.W. Arnold, now an entertainment editor at SFGN: “They owed me more than $1,200, and at one point more than that. I know I will never see it. When I finally got some money, their check bounced. I ended up being charged more than $200 in overdraft fees by my bank because I didn’t realize the check was returned. I knew then that the company was in serious trouble if they couldn’t pass a $400 check. Meanwhile, they were disingenuously advertising for new writers while not paying their old ones.”
Arnold is not alone. The unsecured creditors holding non priority claims, which is another way of saying they will never see a buck, include columnists Wayne Besen for $300, Pop Life web designer Eric Herb for $300, and photog JR Davis for $150.
Even local activist and CLAD Tile owner Earl Rynerson was hit for fifty bucks, for a column which he authored and was never paid. Freelancer Nigel Revenge, who wrote the dining column, Knife and Fork, is owed $1750.
Another local businesses feeling the hit was the printer of The Blade. Southeast Offset is owed $18,000 and a tech company, Accelerated Solutions, which leased Unite Media their copy machines, has outstanding lease payments due of $1,800 for a $30,000 machine they now have to repossess.
Pitney Bowes had leased stamp machines which were owed close to $4,700. Greg Walker’s Fort Lauderdale Company, Dynamix, which supplies telephones, had outstanding invoices of close to $1,000. ADT Security lists a $500 debt.
Even before the bankruptcy filing, the company showed signs of its inability to maintain operations. When its records were filed with the US District Court in December, the listings revealed that payroll, printing and distribution checks were routinely being returned by banks as far back as the early summer. As late as September 4, a dozen payroll checks were returned to staffers including Anthony Verrico, Sherri Elfman, Lee Janko, and Dennis Dean.
“It was ongoing,” admitted one former employee, now working with Mark’s List, “maybe it is all for the best.”
In August of 2008, the Small Business Administration had sued the publishers of the South Florida Blade and 411, Unite Media, because they had defaulted on the terms of a business loan with the government.
Under the terms of the loan agreement with the SBA, Window and Unite Media promised the government a certain level of liquidity in order to stay current. But lavish spending and a diminishing economy, with reduced credit availability, combined with the downturn of newspapers, and the media entities just could not cut it any longer.
Rather than contest the suit, the owners admitted their liability, acknowledged their failings, and stipulated to an agreement placing the newspapers under the supervision of a federal trustee and receivership, essentially relinquishing their governing powers.
The duty of that trustee was to generate as much return as possible on the government’s defaulted loan, an amount we would learn was in excess of $45 million.
Because the owners of Window/Unite were in default on this subsidized business loan, they were not long for this world anyway. Under instructions from the government, which they agreed to, they were ordered to sell off all their properties to satisfy as much of the debt as they could, from The Washington Blade to 411. The papers were essentially up for auction to the highest bidder.
Knowing that the government had taken over a collapsed operation over a year before, the handwriting was on the wall for the principals of Window Media. Fully aware that the company was being liquidated, conscious that they were going to be replaced, they left the company in the first few months of 2009.
Exit William Kapfer. Exit David Ungar. Exit Kevin Hopper, who would return only last week to assume the helm of the new publications, Agenda and Mark’s List Magazine.
Meanwhile, the government still had a paper to sell. During the summer of 2009, the SBA used representatives from Washington, D.C., to solicit the highest price for the failing properties. The Small Business Administration went back and forth with bidders, setting deadlines in July, August, and September, attempting to squeeze the market for every penny possible. While negotiators were delaying, the papers were failing, their revenues were plummeting and the community’s economic conditions deteriorating.
Already in receivership, supervision and spending were in turmoil, management was abandoning the venues, and revenues were falling precipitously. The company began routinely bouncing checks to their employees, stiffing their vendors, and failing to compensate the freelance writers and photographers.
It was just a matter of time to see whether the firemen could save the house before it fell down. It was not to be. The government dawdled while Rome burned.
Mike Kitchens would remain at the helm for the sinking ships, and the duty fell upon him to eventually co-sign the bankruptcy papers for Unite Media in US District Court as the Publisher and CEO of the South Florida Blade and 411. It could not have been easy. The parent company was even bouncing its payroll checks to him.
Why it Happened?
Paul Schindler, editor-in-chief of the Gay City News in New York blamed it on “the bad business decisions of the company, that leverage-to-the-hilt mentality…taking high performing properties and imperiling them with unthinking financing schemes.”
In late October, nearly two months after the date they said they were going to decide who could buy what, the SBA privately announced the successful bidders for the various gay media in different cities, from The Washington Blade, to the South Florida Blade, to other newspapers and magazines in Atlanta and Fort Lauderdale.
Amongst the bidders in South Florida was Multi Media Platforms, a small business group organized by Bobby Blair, who had previously published a now defunct bar guide by the name of The Buzz. His bid was the highest, and the SBA inked him in as the winner and future operator of the South Florida Blade and 411.
By all rhyme and reason, he should have paid the government its money and moved into the paper’s offices. It could have happened as early as Labor Day. The winning bid, said Brian Stern, a Washington, D.C. based negotiator for the government, was $175,000.
Under the terms of the purchase, Multi Media Platforms tendered a trust account check to local attorney Dean Trantalis. The transaction was to close in mid December, and upon the deal’s completion, the team led by Blair and his investors would have begun publishing 411 and The Blade before Christmas.
How It Happened
Unbeknownst to the government however was that attorneys for Window Media and Unite Media were preparing bankruptcy papers for their papers. Unable to pay staff, meet obligations or even print any more issues, they in effect could not wait for the sale to take place. They were flat ass broke and had to shut down at once.
Numerous employees were also owed back due checks. They had suffered all summer by depositing ones which were being returned by the bank. The handwriting was on the wall. Fortunately, the prospective buyers of The Blade offered many of those staffers new work at a start up magazine, which would be called Mark’s List, and a new newspaper, named The Agenda.
On November 16, while the monies to buy them were sitting in an attorney’s escrow account, the papers closed their doors, ceased operations, and went into bankruptcy court. This event preempted even the foreclosure action which had put Unite and Window Media into receivership and up for sale. Everything came to a dead halt, and the offices of all the Window and Unite properties were boarded up by court order. They remain so today.
The same Unite Media which paid close to one million dollars for The Express in December, 2003, shut its doors down just before December of 2009 owing debts totalling nearly 8 million dollars to 126 creditors. Separately, Window listed claims of nearly $7.85 million to 277 secured and unsecured creditors.
Combined, the companies owe $1.04 million in payroll and other taxes to federal, state and local agencies; $418,189 to printers in several states; $168,109 in rent in Atlanta, Fort Lauderdale and Washington, D.C.; $71,798 to distributors of the former publications; and $4,500 to two companies providing health insurance.
Under the rules of a bankruptcy, you as a debtor have to list your creditors to the court, so those debts may be excused. But you also must list your potential assets, such as debts people owe you. The bankruptcy judge appoints a trustee to marshal and gather your assets, which he then disburses to creditors in terms of priority interest.
In this case, the IRS and other creditors are owed almost $5 million, and there is virtually nothing left to pay anyone back. ‘The average Joe’ on the street who is owed money is out of luck.
What About Who Owes Them?
A number of businesses who had outstanding debts to 411 and The Blade may have thought they were home free after the bankruptcy. They are finding out this week they are not. Since the requirements of a bankruptcy demanded that the collapsed enterprise list not only its creditors but its debtors, the government has a list of everyone who owed the paper money, including any delinquent advertisers.
As the trustee has a duty to collect those debts for the government to mitigate its losses, court officials have now started the collections process.
The bankruptcy says Unite Media owes the government $5 million, but the trustee, doing his duty, has written a letter to a number of bars and nightclubs demanding sums as little as $200 for outstanding ads run in 411 last October. That is because the trustee has to fulfill his judicial obligation and collect monies anywhere he can.
One nightclub owner, asking not to be singled out, scoffed: “This is amazing. They owe the government 5 million dollars and they want a $150 from me for a quarter page ad?”
A second method to collect funds to pay back the taxpayers who essentially are the losers when a government loan fails is to sell off any assets the bankrupt company may have remaining.
What About the Assets?
In this case, the domain names of Expressgaynews.com, SouthFloridaBlade.com and Genre have some value. Not much, but some.
Within weeks after the November, 2009 bankruptcy, the Atlanta based trustee, Stuart Clayton, put those assets up for sale.
News and distribution racks, and the old monitors are examples of assets others might seek to acquire. The South Florida Gay News.com and Hot Spots Magazine discussed purchasing them, along with the websites and URL’s.
On January 29, 2010, the Bankruptcy Trustee, Jeffrey Kerr, approved the purchase of all the archives and websites, to Peter Clark, the Publisher of Hot Spots Magazine, for the sum of $3200.
Also included in the purchase, awaiting approval from the Bankruptcy Court judge, were the news racks, and miscellaneous properties.
Stated Clark, “We and SFGN want to reclaim the URL’s and donate them to the Stonewall Library so the gay and lesbian history of South Florida is preserved. Our mutual concern in acquiring these items was to secure the domain names of the old newspapers for posterity. ”
Ironically, Agenda Publisher Kevin Hopper wrote a letter to the SFGN this week expressing concern that this publication was improperly using the news racks of Multimedia Platforms to distribute the paper.
While claiming they were the former property of the Buzz, he could not produce receipts to establish ownership, and he was quite apparently unaware that the US Bankruptcy Trustee has awarded those distribution racks to Hot Spots, along with the domain names of 411 and The Blade.
Because Multi Media Platforms has no ties to the collapsed entities of Unite or Window, they do NOT have any right to use their newspaper racks, names, offices or any of the property of the bankrupt companies. Nor are they allowed to collect the debts of Unite Media. Anything owed to, or owned by, Unite Media is under the custody of its bankruptcy trustee.
Last Thursday, SFGN representatives watched and took photographs as distributors of the Agenda threw SFGN on the floor in numerous locations, while putting new labels for Mark’s List and the Agenda on news racks already bearing the Blade logo.
“It’s hilarious,” said John Fugate, who photographed the episodes for SFGN. “Hot Spots is buying these racks from a bankruptcy court, above board, and legitimately, and the Agenda is trying to call them their own.”
Not to worry. Beginning next week, SFGN will be circulated on red news racks with its own name and label, just ordered from a major news rack company.