The initial distress felt by lovers of homestyle cookies at the news that Archway & Mother's Cookies Co. filed for Chapter 11 bankruptcy this week is yielding to calls for an investigation into -- and former employees signing on to lawsuits against -- the management of the business by Cattertan Partners, headed by COO George Knobloch.
Several former employees claim that accounting irregularities led to the loss of operating funds. According to a corporate employee at the Battle Creek office, both Ernst & Young and Price Waterhouse accounting firms had been at the company offices earlier this year, and their main bank, Wachovia, also put in a surprise visit to ask for verification of data. This same corporate employee also states:
approximately $11 million dollars worth of fake sales had been put into the system at COO George Knobloch's direction. These were all backed out and Financial Statements since January had to be restated, as well as bank reporting information. Soon after, representatives from the Dispute Analysis & Forensics area of Alvarez and Marsal confiscated an employee computer in the Accounting dept. It was clear to all that worked there that we were going under and it was definitely not quote, unforeseeable, unquote.
Several former Independent Distributors say that cases of cookies were added to their orders, but never delivered, in order to inflate the value of the business and gain higher loan amounts. The motive for this manipulation of the Independent Distributor accounts was to force them out for falsifying orders and non-delivery of goods, supposedly so that the company could be sold to another entity. Ridding the company of these contractors means that they can drop distributors at any time without the expense of buying out the contracts. Archway has been working to force as many IDs, as they are called, to quit, and has done business directly with the chain wholesalers.
In its bankruptcy filing earlier this month, Archway & Mother's Cookie Co. listed assets in excess of $50 million and liabilities of more than $500 million.
An announcement early in the week said that Knobloch stepped down as chief executive, but later reports are that he was asked to stay on for another two weeks. He plans to move next to a chief executive position with Broyhill, the manufacturer of recliners.
Former workers may contact the office of the mayor of Battle Creek for information on how to contact the legal firm in Lansing which is handling a lawsuit on their behalf. Over seventy Independent Distributors in the northeast have signed on to a breach of contract lawsuit with McCarter & English law firm; their contact is James DeDonato at email@example.com. Interested parties may also search the website for the firm Kurtzman Carson Consultants for several legal papers on file. Also, reporter Ryan Holland of the Battle Creek Enquirer can be reached at 966-0690 or firstname.lastname@example.org.
According to the Ashland Times-Gazette of Oct. 6: Mother's Cake & Cookie Co. and Archway Cookies LLC intend to seek Court approval to retain Focus Management Group, a corporate advisory and restructuring firm, to assist in the wind-down of the U.S. operations. Upon Court approval, Jeff Granger of Focus Management Group will be appointed as Chief Restructuring Officer (CRO) of the Company. (per Topix, Focus Management has a toll-free number at 888.733.1544.)
Speculation abounds that Keebler will buy Mother's and/or Archway as it emerges from bankruptcy, with CBC buying the Salerno, Mrs. Alison and possibly the Archway brands, along with the Kitchener bakery plant. Archway had previously been owned by Deerfield-based Specialty Foods Corp. According to a company profile, variations of Archway's famous oatmeal cookie had accounted for 40 percent of overall sales. The Salerno butter cookies and coconut bars are sold in Illinois, Wisconsin and Indiana. Salerno started in 1936 and was a big company until Archway purchased them in 2001.
The company sent notices to the cities of Battle Creek and Ashland, Ohio, stating that the two locations would close, putting approximately 160 people out of work, 59 of those in Battle Creek. Archway distributors across the country have lost their jobs as well. Employees were notified either by letter or by a group announcement at the factory that the plants would be closing.
Employees were treated with very short shrift. They were told that their insurance was terminating, and that COBRA would not be offered. According to one California family, they would not even be paid for the last week of work. Mary Norwood wrote on Topix: Employees will not receive a pay-check for work that was done week of 9/29/08.)
Suspicions are that operations will be shifted to the Canadian plant in Kitchener. Factory equipment was sighted being removed from the Ohio plant and loaded onto Canadian moving trucks, as reported by a commenter on the Topix site. To quote: Our local paper reports that a truck left the plant in Ashland loaded with equipment. Funny thing is that the trucking company is from around a place in Canada that has a plant.
Reportedly Davis Cookie in Pennsylvania still produces Archway and distributes to all of Pennsylvania.
[Compiled from stories in the Battle Creek Enquirer by Ryan Holland, in The SouthStar News by Mike Nolan, the Ashland Times-Gazette, and the WOOD-TV of Grand Rapids and Michigan forum called Topix.]