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therepublicblogs · 11 months

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Troubled Nursing Home Chain Owner Shlomo Rechnitz Gets New Licenses Just Before State Reforms Take Effect

The state is moving forward with licensing two dozen nursing homes whose primary owner’s companies have a lengthy track record of problems – as uncovered by a CalMatters investigation – despite a new law designed to provide better oversight of the facilities.

The nursing homes in question are owned by Los Angeles businessman Shlomo Rechnitz, who owns dozens of California facilities through a web of companies, including Humboldt County's four primary skilled nursing facilities.

One of his main companies, Brius Healthcare, has been scrutinized for poor quality care and inadequate staffing, according to federal and state inspection reports, plaintiffs’ attorneys and press accounts. By 2015, government regulators decertified or threatened to decertify three of Rechnitz’s companies’ California nursing homes, a rare penalty that strips facilities of crucial Medicare and Medi-Cal funding.

One of those facilities, Wish-I-Ah Healthcare & Wellness Centre near Fresno, was closed following the death of a 75-year-old resident from a blood infection after staff left behind in her body a foam sponge used in dressing her mastectomy wound. Investigators also found toilets brimming with fecal matter and other serious problems, according to the state’s accusation.

The State Auditor’s office in a May 2018 report spotlighted Brius for its higher rate of federal deficiencies and state citations, compared to the rest of the industry in the state.

It was via bankruptcy court that Rechnitz scooped up 18 Country Villa-branded nursing homes in 2014. Per state law, he then filed change-of-ownership applications seeking licenses to run those homes. The state didn’t approve or deny them, instead leaving them pending. In the meantime, Rechnitz continued to run the nursing homes for years without a formal license in his name – which isn’t technically illegal.

A new law was supposed to close that loophole. But that law, co-authored by Democratic Assemblymembers Al Muratsuchi of Los Angeles and Jim Wood of Santa Rosa, doesn’t go into effect until July 1 — and it focuses on new license applications, rather than those that have been operating in the legal gray area for years.

The California Department of Public Health, which oversees the state’s nursing homes, defended the new licensing settlement with Rechnitz, which includes tools for the state to monitor the nursing homes’ performance. The department noted the settlement allows the nursing homes to continue operating, instead of closing and forcing hundreds of residents from their homes.

“This settlement resolves longstanding issues we have had with this provider and provides our department stronger enforcement tools to ensure the provider is delivering reasonable and appropriate care to its residents,” Dr. Tomás Aragón, director of the Department of Public Health, said in an emailed statement. “With this settlement, we will continue to monitor the facilities involved with a focus on maintaining that level of care.”

Under the settlement announced this week, the state health department agreed to approve license applications for 24 skilled nursing facilities owned by Rechnitz – once the department receives all necessary documents to complete the process.

The settlement includes some oversight provisions, including a two-year monitoring period. The health department is to meet with each facility every six months to review the quality of care residents are receiving, and each facility is to provide a slew of documents before the meetings. Deficiencies in care are to result in heightened oversight, including daily phone calls. Failing to comply with those parameters is to result in a fine of $10,000 per failure.

An attorney representing Rechnitz’s company Brius did not respond to a phone call or an emailed request for comment.

“We think this is a message to residents of nursing homes in California that their welfare just isn’t all that concerning to the state.” Tony Chicotel, California Advocates for Nursing Home Reform

Tony Chicotel, a staff attorney for California Advocates for Nursing Home Reform, called the state’s move to license Rechnitz’s nursing homes “sad.”

“There’s been longstanding, systematic problems in nursing homes run by this chain,” he said. “We think this is a message to residents of nursing homes in California that their welfare just isn’t all that concerning to the state.”

Not all of Rechnitz’s applications had been left pending – some were denied outright. In denying his licensing application for Windsor Healthcare Center of Oakland in 2016, the Department of Public Health said staff at the facility neglected to treat the skin ulcers and pain of six different residents — including a paralyzed resident who was left covered in feces and then hospitalized for sepsis.

That facility is now one of the 24 the state is moving toward licensing under the new settlement. The two-dozen facilities also include 13 of the 18 Country Villa properties Rechnitz purchased in 2014.

Another one of Rechnitz’s nursing homes was in hot water recently. Alta Vista Healthcare & Wellness Centre in Riverside, owned by Rechnitz, and its management company, Rockport Healthcare Services, agreed to pay the state and federal government some $3.8 million over allegations they provided kickbacks to doctors. According to the U.S. Justice Department, Alta Vista gave doctors extravagant gifts – including expensive dinners, limousine rides and massages – in exchange for referring patients to their nursing home between 2009 and 2019.

That facility is not included in the new licensing agreement.

Chicotel said he’s “disappointed but not surprised” the state is moving to license Rechnitz’s facilities. It was clear that the law taking effect July 1, which he opposed because he said it lacked teeth, would not take existing facilities away from bad operators, he said.

Assemblymember Wood’s spokesperson, Cathy Mudge, said he was not aware of the settlement and would not be able to comment on it yet. “This is an important issue to him and he will be asking CDPH for more information,” she said in an email.

Assemblymember Muratsuchi’s office did not respond to an email seeking an interview.

The new law still has value going forward because it will apply to new cases, said Dr. Michael Wasserman, a geriatrician and chair of public policy for the California Association of Long Term Care Medicine.

“I think (it) was meant to keep the type of licensing issues that have occurred in the past from ever happening again,” he said.

Author: Celia Hansen

#Shlomo Rechnitz #nursing homes #news #top news #news on top #trending

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therepublicblogs · 9 years

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You may not know Amit Raіzada’s name, but some of KC’s wealthy won’t soon forget it

On December 26, 2012, Amit Raizada drove his wife, Amanda Raizada, to the office of his estate-planning attorneys. Amanda was presented with several large binders filled with documents and instructed to sign where indicated.

“Amit told me that I needed to sign the documents and to trust him because everything he did was for the good of the family,” Amanda later stated in a sworn affidavit.

Amit Raizada was, and still is, CEO of Spectrum Business Ventures, a private investment firm that was headquartered then on Kansas City’s Country Club Plaza. Personal financial statements at the time valued the couple’s estate at $90 million.

Seven days earlier, Amanda Raizada had signed an amended postnuptial agreement. Amit Raizada and his attorney Pete Smith, of McDowell Rice Smith & Buchanan, have since argued in court that Amanda voluntarily signed the postnuptial agreement; Smith has supplied evidence of a monthlong correspondence between him and Sheldon Bernstein, who served as Amanda Raizada’s legal counsel for the postnup, prior to her signing the agreement.

But Amanda Raizada alleges — and e-mails introduced into the couple’s divorce proceedings confirm — that Smith chose Bernstein to serve as Amanda’s counsel. Smith wrote to Amit on November 5, 2012: “Attached is Sheldon Bernstein’s business card. Amanda needs to contact him. He has the agreement and all the documents. I met with him to provide the background.” Four minutes later, Amit forwarded Smith’s e-mail to Amanda and wrote, “Please call the guy and set up the next available appointment.”

Could Bernstein serve as an independent and disinterested legal counsel for Amanda Raizada, given that opposing counsel Smith handpicked him and met with him prior to Amanda’s even knowing his name? That question is at issue in the couple’s ongoing divorce proceedings, due to what Amanda discovered a year later, after she and Amit separated. (Bernstein declined to comment for this story.)

By signing the postnup, Amanda had cleared the way for a reshuffling of the Raizadas’ estate plans — plans that, upon execution, resulted in the transfer of 70 percent of the assets on her side of the couple’s financial statement into irrevocable trusts for their children and Amit Raizada–owned entities.

“Ms. Raizada’s 22% ownership interest in the Raizada Group, LP, rather than providing $16 million in assets, resulted in a projected $237,000 tax liability for her in 2013,” say her attorneys, Bradley Manson and Katie McClaflin, of Manson Karbank Burke. “Mr. Raizada … not only directly undermined the value of the parties’ assets, but actually divested Ms. Raizada of the vast majority of her wealth, leaving her with hundreds of thousands of dollars in potential tax liabilities every year for the rest of her life.”

“Amit exercised complete control and made all decisions regarding estate planning during our marriage,” Amanda stated in an affidavit. “My husband did not ask me what I wanted to do with my assets, or explain to me what he was planning with his attorneys.”

Amit Raizada did, however, discuss some details of the arrangement with Michael Gortenburg, who was a principal at the time at Spectrum Business Ventures. According to Gortenburg, Amit Raizada walked into his office one day in a cheery mood and informed him that Amanda had recently signed the postnup. Gortenburg asked if Amanda had a lawyer. Raizada responded that she did but that he had told her that he himself had “read the agreement, it was fine, and the lawyer’s objections were just an attempt to run up big fees.”

According to Gortenburg, Amit Raizada said he had convinced Amanda to sign the postnup by telling her that Gortenburg and Scott Asner (another of Raizada’s business partners at Spectrum Business Ventures) would not do business with him unless she signed it. Gortenburg responded that he had never said such a thing nor had he heard Asner say such a thing.

Raizada shrugged his shoulders and said, “I can’t believe she signed it,” according to Gortenburg.

By just about every account, Amit Raizada is a savvy businessman with a talent for structuring deals. Amanda Raizada is a stay-at-home mother of three with almost no business background. And she trusted her husband.

She’s not alone. In alleging that she is the victim of financial trickery orchestrated by Amit Raizada, Amanda Raizada joins a growing chorus of individuals, locally and across the country, who say Amit duped them. Unlike Amanda, though, many in this group had extensive experience in the business world.

None of that experience seemed to prepare them for making deals with Amit Raizada.

Amit Raizada moved to Miami last year, following a decade spent building his fortune in the Kansas City area. He did not respond to requests for comment for this article.

Born in India in 1976, Raizada was brought to the United States when he was about 18 months old. He attended high school in Farmington Hills, Michigan, and college at Michigan State University and Cornell University, according to a 2004 deposition. After college, Raizada moved to Florida and met Amanda; the two took up residence in Michigan, where she finished her degree at Michigan State, and he opened three Nextel wireless retail locations in Grand Rapids. In 2000, Raizada sold the Nextel stores, and the couple resettled in Olathe. Amanda is from the area and graduated from Olathe North High School.

Raizada’s first Kansas City–area business venture was Cellular 4 Less, a chain of authorized Cingular Wireless retail outlets with locations in St. Joseph, Lawrence, Mission, Shawnee, Lenexa and Bonner Springs. Cellular 4 Less also operated kiosks inside local Wal-Marts.

On July 8, 2002, Raizada stopped in at a US Bank in Olathe to make a deposit for Cellular 4 Less. While waiting for one teller to process his deposits, he handed another teller roughly $2,000 in cash and asked her to change it into higher bills. The teller asked for Raizada’s ID and Social Security number. At that point, a dispute broke out. Several bank employees swore under oath that Raizada called the tellers “fucking whores” and “fucking bitches.” He also allegedly spit on the bank supervisor and punched her in the chest. Raizada stated in a subsequent deposition that he felt he was being discriminated against by the US Bank employees because of his race. He later sued US Bank and settled out of court.

Raizada was arrested and charged with two counts of battery and one count of disorderly conduct. He later agreed to a 12-month diversion program and undertook an anger-management class. Raizada also paid a settlement to one of the tellers after she filed a civil suit against him.

Representing Raizada in these legal actions was Phillip “Chuck” Rouse, of the law firm Douthit Frets Rouse Gentile & Rhodes. During this period, Raizada moved his office into the same building as Rouse’s firm: 903 East 104th Street, near Holmes Road and Interstate 435. According to Kansas business filings, Rouse and the other partners in the firm still retain ownership interests in some of Raizada’s businesses. The firm, which now has its office in Leawood’s Park Place district, declined to comment for this story.

After the US Bank episode, Raizada was involved in rolling out T-Mobile stores in California, and with rehabbing and reselling local real-estate properties through a company called Kansas City Real Estate Investors Inc. In 2005, he changed the name of the latter company to Spectrum Business Ventures. Joining Raizada at Spectrum were Asner and Gortenburg, two local real-estate investors specializing in multifamily housing. The company evolved into an investment firm and capital venture that aimed, marketing materials read, “to bring exclusive opportunities to create and preserve wealth — while trying to minimize risk — to family offices, high-net-worth individuals and institutional investors.” Raizada moved to Mission Hills in 2006.

Raizada, Asner and Gortenburg had done well on their own prior to Spectrum Business Ventures, but what took their joint operation into the financial stratosphere was a series of investments tied to online payday lending.

As The Pitch has been reporting for more than a year, many wealthy Kansas Citians doubled and tripled their net worth over the past decade by investing in online payday-lending operations, which are notorious for charging borrowers interest rates of several hundred percent and hidden fees.

As a software provider, eData Solutions offered the technology to filter loan applicants, process transactions, and purchase defaulted loans from customers for third-party resale to debt-collection agencies. The company grossed $30 million in 2007, $37 million in 2008, $38 million in 2009 and $54 million in 2010, according to documents obtained by The Pitch.

To expand eData, its founder, Joel Tucker, sought increased financing in 2008. Spectrum Business Ventures was ready to help him.

In 2011, Spectrum Business Ventures owned 17 percent of eData and, according to several sources, owned significantly more in 2012, when the company was sold to the Wyandotte Nation, an American Indian tribe, for $277 million. (Forging alliances with Indian tribes is a common strategy in the payday-loan industry. Because tribes enjoy sovereign immunity, businesses that claim to be based on tribal land are more difficult to regulate and prosecute.)

At the height of the online-lending boom in Kansas City’s business community — 2007–13 — investors such as Spectrum Business Ventures were enjoying annualized rates of return as high as 40 percent. If you knew the right people, you could turn $500,000 into $700,000 in a year. Raizada was one such person. And while the low-income borrowers of these payday loans watched helplessly as online-lending operations drained their bank accounts via hidden fees and exorbitant interest rates, people such as Raizada were living large — very large.

Receipts obtained by The Pitch, as well as court depositions, document nights of stunning excess. In August 2012, Raizada racked up a $94,000 tab in a single evening at a Las Vegas club called XS Nightclub. The following day, he spent $40,000 at Encore Beach Club. On a trip to Chicago in November 2012, he spent $20,000 at a nightclub called Board Room, and another $41,000 at a venue called Paris Club. In his divorce case, Raizada testified under oath that “spending $100,000 or $200,000 in an evening at a club entertaining was normal and ordinary business.” (Some of these expenses are being contested in court by former business partners.)

The payday party ground to a sudden halt in 2013, when the federal government implemented what has become known as Operation Choke Point. The Department of Justice began sending subpoenas to banks and payment-processing firms that facilitated online payday loans, and the Federal Deposit Insurance Corp. began auditing banks suspected of processing Automated Clearing House (ACH) payments involving lenders under suspicion. Those banks and processors, fearing financial and regulatory penalties, treated their former clients like hot potatoes: Virtually overnight, online payday-lending operations found themselves without the ability to drop money into — and, more essentially, out of — borrowers’ accounts.

As Amit Raizada’s divorce filing puts it: “The incoming stream of his [Raizada’s] personal cash flow has been severely curtailed given that the Raizada Group had significant investments in payday lending industry entities which involves an industry that is in a state of flux resulting in a significant reduction in the amount of cash flow that flowed through Spectrum Business Ventures and then to him [Raizada].”

It’s easy not to ask too many questions when big checks are rolling in. It’s only when the cash machine stops spitting out bills that people have a tendency to become a little more detail-oriented. When the golden payday yacht sank, Raizada’s business partners began wondering about their money. Many are still waiting for answers.

In the past year, five lawsuits have been filed by former business associates of Raizada’s, alleging that he defrauded them of large sums of money. Multiple sources confirm that still more have either settled with Raizada out of court or are in the process of doing so.

For the most part, these individuals are not complaining because Raizada or Spectrum Business Ventures irresponsibly sank their money into payday funds that tanked when the government went after that industry. Much of the fraud that he is accused of is instead similar to what Amanda Raizada claims in her divorce pleadings: sneaky, complex financial manipulation and self-dealing relating to back-office shuffling of corporations and limited liability companies.

Asner and Gortenburg know what she means.

By 2013, Spectrum Business Ventures had moved its operations from its 104th Street office to a tonier space on the second floor of 420 Nichols Road, on the Country Club Plaza. In the middle of that year, Asner and Gortenburg, then principals at the firm and partners with Raizada and Rouse in dozens of operating companies and real-estate projects, were tipped to suspicions of foul play in Raizada’s business dealings. They soon found evidence that, through an entity called Spectrum Management LLC, Raizada had been improperly invoicing a variety of personal expenses to various other entities in which Spectrum Business Ventures had invested. Asner and Gortenburg also say they discovered that Raizada was misrepresenting financial information related to entities in which they were investors, and misrepresenting the price he paid to acquire certain entities.

Not exactly the stuff movies are made of. Still, Raizada’s transgressions were serious enough that Asner and Gortenburg moved out of the Plaza office. In resolving the dispute, Raizada relinquished control of 12 companies in which he, Asner and Gortenburg shared an interest, and paid Asner and Gortenburg a $4 million settlement in November 2013.

In 2008, Raizada and a business associate he had met in Mexico, Richard Houghton, began pitching Mexican land deals to local investors. Houghton already had a record of unscrupulous behavior. He and three other self-proclaimed movie producers agreed in 2002 to pay $18.5 million in penalties and restitution for selling bogus securities via a boiler-room-like operation in California. The premise was that the investments would finance two upcoming Hollywood films: a drama starring Ben Kingsley, called American Peacekeepers, and a children’s movie called Treasure Hunt. Investment returns of 400 percent were promised. In reality, neither film existed, and more than 200 investors lost all their money.

It is believed that Raizada met Houghton on a business trip to Mexico; Houghton had taken up residence on a yacht in Tulum following the California lawsuit. Documents and correspondence obtained by The Pitch strongly suggest that Raizada and Houghton then conspired to defraud investors by inventing a story that would attract capital investments. For example, Raizada sent the following e-mail to Houghton on January 10, 2009, in advance of David Vittor’s visit to consider investing with Raizada. (Vittor is the former president of Major Brands, the largest alcohol distributor in Missouri.)

“Story of Rich [Houghton],” Raizada wrote to Houghton. “Sold Venture Capital Company for several hundred million out of La Jolla, CA. Moved to Mexico west coast. Saw that all opportunity was on East coast (Tulum). Have made LOT of money in Tulum by buying land, zoning it, dividing it up into sections and selling it.”

Raizada went on: “Ask him [Vittor] behind my back what I’m getting besides my lots for upside. Tell him he is surprised that I’m not making the lots up or asking for some of his upside. Tell him he must have a good relationship with Amit, because if I were Amit I would never show anyone the goldmine we hit.”

Vittor — as well as Steve Sobek, a local real-estate broker; Ed Schifman, former CEO of Interconnect Devices Inc.; Steve Grewal, a local homebuilder; Asner; and Gortenburg — invested several million dollars in the Mexican land deals, according to documents obtained by The Pitch. In 2011, Raizada reported to investors that Houghton had embezzled the Mexican real estate. Their money was gone.

Vittor, Sobek, Schifman and Grewal either declined to comment or did not respond to requests for comment about whether they had reached an out-of-court settlement with Raizada over the Mexican deals. But Asner and Gortenburg are pursuing financial restitution over Mexico, alleging that Raizada diverted their investment money into his personal accounts.

“There is no clear or logical story that has emerged regarding the Mexico land deal,” Dan Blegen, who represents Asner and Gortenburg in the Mexico suit, tells The Pitch. “Amit has told different stories to different people at different times. His explanation of the timing of the deals makes no sense, and his pleadings make no sense and are internally inconsistent. We have no idea if anyone’s investment in Mexico was actually legitimate. At this point, it does not appear that Amit ever had the land investment in Mexico that he sold to people. It was just a way for him to take money from people. He essentially sold people nothing.”

An investment involving the sale of wireless stores in St. Louis provides perhaps the most easily grasped representation of how Raizada’s opponents say he did business. Two separate lawsuits, both filed in 2014 in Jackson County, charge that Raizada approached a group of investors in 2009 about purchasing four distressed Verizon Wireless stores in St. Louis for $1.4 million. What actually happened, these investors allege, is that Raizada bought the stores for $400,000, through an entity he created called Cellular Management LLC. He then waited two weeks and sold the stores to the investors for $1.4 million — essentially creating $1 million out of thin air.

“He lied to everybody,” says Blegen, who is also the attorney for spurned investor Efraim Gershom. “And even after the purchase, we believe there was additional malfeasance and self-dealing in his management of the stores.” (Gershom’s lawsuit also alleges that Raizada misrepresented the value of some Arkansas subdivision lots that Raizada sold to Gershom.)

The other group of investors that has brought suit against Raizada over the St. Louis Verizon stores includes Terry Van Der Tuuk, who founded and took public Graphic Technology Inc.; Jon Staenberg, a techie venture capitalist from Seattle; and Dan Becker, a senior vice president at Waddell & Reed, the prestigious Overland Park asset-management firm.

Becker was also an investor, through Raizada, in eData Solutions. Documents obtained by The Pitch indicate that Becker had a percentage interest in eData in 2010, via his investment vehicle Badger Capital LLC. Was Becker investing Waddell & Reed clients’ money in eData or other online payday-lending entities? “No comment,” Becker tells The Pitch.

(Becker and Sobek, who was also an eData Solutions investor, share financial-victim status in a separate alleged scheme. Both invested with Brenda Wood, the Leavenworth businesswoman accused of running a check-kiting scheme on a downtown Kansas City real-estate deal. Becker has sued Wood for $6.1 million.)

A revocable trust in Vittor’s name was one of the plaintiffs in a lawsuit filed in early 2014 in Miami against Raizada. The lawsuit centers on Adore, an opulent Miami club opened by nightlife mogul Cy Waits (best known as Paris Hilton’s ex-boyfriend) and bankrolled in part by Spectrum Business Ventures. The plaintiffs claimed that Raizada interfered with the development of the club, diverted its funds to Raizada-affiliated entities, and charged inappropriate expenditures to Adore’s books.

The parties have since resolved their differences. “The air has been cleared,” Raizada said in a press release last August. “After bringing in independent forensic accountants and completing a thorough review of project documents, we have shown there were no improprieties of any sort by my firm, our staff, or myself.” Adore permanently closed the same month, after only four months in business.

Resolution on the other lawsuits brought against Raizada remains elusive. Of those, Raizada’s attorney Pete Smith says: “Out of over 100 transactions, people were upset that five transactions lost money. Overall, the track record was great, but there seems to be a lack of realization that high-return investments carry commensurate risk, and when risky transactions go awry, the loss does not result from fraud.”

Spectrum Business Ventures today lists a post-office box in Lee’s Summit as its headquarters. Asner and Gortenburg took over the former SBV headquarters, at 420 Nichols Road, as part of the process of severing their professional ties with Raizada. They now operate a real-estate investment firm there called Eighteen Capital.

In the southwest corner of the space — where windows overlook Sperry, Cole Haan and other high-dollar retailers — is Raizada’s former office. It contains a large desk, mahogany molding, a large TV mounted on the wall — and little else. Nearly a year and a half after Raizada’s acrimonious departure, his office remains unoccupied, an odd vacancy in an otherwise vibrant business environment. The mention of Raizada’s name to former SBV employees in the office induces not just frowns but also traces of trauma.

“Amit is a really bright guy,” one former SBV employee said in December. “He could have done really great things here.” The employee shook his head and got back to work.

#News

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therepublicblogs · 15 years

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Owners of Columbus Components have closed at least 10 plants in 10 years

By Kirk Johannesen and Boris Ladwig, The Republic

[email protected]; [email protected]

THE owners of Columbus Components Group have closed at least 10 manufacturing plants in North America in the last decade and eliminated at least 1,500 jobs.

A former CCG executive said many of the companies did not generate a profit - but produced enough revenues to pay the owners a management fee.

Cleveland, Ohio-area businessmen Patrick K. James, Jay L. Schabel and Michael D. Klinginsmith bought the former Arvin-Meritor Inc. plant on 17th Street in 2004.

In the last decade, James, now CCG's sole owner, has owned at least 16 automotive-related companies in five states and two countries. At least 10 of those have closed.

One of the companies, Cleveland-based Dickey-Grabler, had operated for 125 years when James bought it in March 2007. Ten months later, it folded.

An 11th company, Pennsylvania-based Hood & Co., was closed and the employees let go before assets were sold to another company, which reopened the facility and rehired the employees.

Four companies are still operating: Cleveland area-based Hawthorn Manufacturing LLC, Detroit-based International Specialty Tube LLC, Columbus Components Group LLC and Madison-based Century Tube LLC, which James bought in February.

Columbus Components Group sent a Worker Adjustment and Retraining Notification notice to Indiana Department of Workforce Development on March 23, stating that the withdrawal of sales orders by clients would result in layoffs and possible closure.

James, who often purchases other companies through his principal companies, Hawthorn and Viking, could not be reached despite repeated attempts.

James, Schabel and Klinginsmith formed Hawthorn Manufacturing Corp. in 2006 and Hawthorn Manufacturing LLC in 2007.

Schabel, who lives in Chagrin Falls, Ohio, said he left Hawthorn about 1½ years ago.

He now runs a farm with his wife and is chief operating officer of Polyflow Corp., an Akron, Ohio-based Clean Technology startup.

Klinginsmith also has left the company, according to Rick Bohn, Hawthorn's former chief operating officer. Klinginsmith also could not be reached.

Local CCG officials repeatedly have declined to be interviewed.

Employment decline

Employment at CCG has fallen from 520 in 2004, when Schabel, Klinginsmith and James bought it, to about 140. On April 9, the company laid off 123.

Bohn said that James, Schabel and Klinginsmith, bought the former Arvin-Meritor plant because it fit a profile of companies they desired.

"Their strategy was to ... try to purchase businesses that were stressed," Bohn said.

That allowed the purchasers to obtain the companies with relatively low startup costs, Bohn said.

Some of the companies that Viking/Hawthorn bought had just gone through bankruptcy or changed ownership or were struggling like many other companies in the automotive business, Bohn said.

"Every one was a challenge," he said.

Bohn, who lives in Ohio and said that he left the company under good terms, said that the Viking/Hawthorn principals tried to acquire related businesses to give them more of a strategic foothold. For example, if they acquired an exhaust system supplier, they would try to acquire other similar suppliers.

Bohn said James' strength in marketing and business development allowed the company to establish a sizable network through which it would find out about possible acquisitions.

Sometimes the customers of a business that was being sold or about to close asked the Viking/Hawthorne principals to take over, because the customers did not want to lose their suppliers, Bohn said.

"I don't think there was any other strategy than that," he said.

While Bohn was with the company, it owned auto suppliers in locations including New York, Pennsylvania, Ohio and Ontario, Canada.

"During my (tenure) ... something happened to every one of them," Bohn said.

All of the companies had struggled previously, though, he said, and capital was limited.

"The shining star actually was CCG," he said.

The former ArvinMeritor plant had good equipment and was relatively healthy and therefore did not require a substantial capital infusion, Bohn said.

ArvinMeritor sold the plant, which stamped exhaust systems components, as part of a larger strategy to shed operations that it did not consider its main focus.

Breaking even

Bohn also said that the companies bought by Hawthorn and Viking often generated no profit.

At fiscal year's end, sometime the income was zero or negative, he said.

However, the businesses generated enough revenues to make bank loan payments and pay utility bills, suppliers and employees.

And, Bohn said, "There (was) enough revenue to draw some kind of management fee or salary (for the principals)."

Typically the new owners would try to secure commitments from existing customers and then find new customers to keep the business going, Bohn said.

"Unfortunately, in almost every case it required things that weren't necessarily controllable," he said.

Schabel said Hawthorn was a private, entrepreneurial company that was fairly diversified and that its business strategy evolved over the years. Schabel said he worked for the company four years.

He said he could not discuss details about the business because he signed a non-disclosure agreement when he left.

He said he has not had contact with James for about 10 months.

James was born in 1965, according to a Data Universal Numbering System report, which provides background information on companies. The DUNS report stated that James has been employed in the automotive industry since 1986.

#CCG #therepublic #News #Columbus Components

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