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May 29, 2008

 

 

Bellach’s Leather for Living, Inc., filed for bankruptcy Chapter 11 Reorganization on March 3, 2008. Because of the housing crisis and the general poor economy, we made the difficult decision to file. Bellach’s has been in business for 40 years and has developed family-style relationships with our suppliers and customers. Our customers have returned and referred friends and family over and over again. We have happily served our community. Bellach’s is the oldest leather specialist in the United States and has enjoyed a wonderful reputation throughout the Bay Area. We are well-respected for innovative design and considered a Bay Area institution.

 

Bellach’s filed for bankruptcy Chapter 11 Reorganization with the understanding this meant that we would be allowed time to bring in additional income to pay our creditors, satisfy our customers and emerge as a healthy business.  Evidently, that is not the spirit of how the Santa Rosa Bankruptcy Court looks at it.  It seems they are intent on destroying a company, not paying creditors, not satisfying customers and deceiving the consumer. From attorneys to trustees…the motivation is GREED…they are all concerned about their fees and how much they will be paid by Bellach‘s.  This is a pattern all involved attorneys and the appointed trustee have repeated over and over again.  As we have learned, this pattern is prevalent in that judicial district.  Attorneys do not want to do any more than absolutely necessary to earn fees.  Attorneys and judges are members of “the good ol’ boys club”…no one seems to work at arm’s length.

 

The following are just a few examples of how they are collectively working against  Bellach‘s (attorneys, the judge and Office of the United States Trustee):

 

We filed to immediately raise capital and hire a professional promotional group to run the sale.  This process should only have taken one week. The court delayed making a finding so we could not start the sale for approximately two months.  We continually asked our attorney to push for an answer and he refused to do so citing the temperament of the judge.  He stated the judge would simply place our motion at the bottom of his pile and get to it “whenever“.  Therefore, the Bellach‘s went deeper into debt…bills continued to be delivered but there was almost no income because virtually no orders were being written.  We were unable to pay rents causing landlords to begin proceedings against us for eviction and lawsuits for rent owed.  To make things worse, the judge ordered “the word ’bankruptcy’ shall NOT be used in any advertising, banners, signs or other promotional materials.”  The judge would not explain in any way why we would be prohibited from using the word ’bankruptcy’, even though we were holding a bankruptcy sale.

 

I asked Bellach‘s attorney, if he thought the court’s ruling to omit the word “bankruptcy” was legal and right.  He responded “my gut says yes.”  I asked him to research any case law pertaining to the order and he said he had no time.

 

When a judge of the bankruptcy court tells a retailer to omit the truth when  advertising, the judge goes beyond the scope of bankruptcy court and is in violation of the First Amendment.  Truth in advertising is controlled by other governmental agencies.  I have been told this judge has never ordered another retailer to be hamstrung in this manner.  During the Bellach‘s 40 years in business, we have never been cited for misleading advertising or any other type of misconduct.

 

During this period of time the Office of the United States Trustee was represented at all court hearings by an attorney who continually alleged improprieties against Bellach‘s of various sorts including fraud, gross mismanagement and the principals stealing from the business. Asked by the court to provide proof, he was unable to do so… but accusations were put over to other hearings at least seven times in order for him to come up with the proof. Never did Bellach‘s attorney force the issue, nor did the judge order him to stop making false accusations. The judge ruled there would be an evidentiary hearing in June for him to present evidence. However, the US Trustee Attorney moved to assign a trustee prior to the evidentiary hearing, therefore avoiding the presentation of any proof.

 

We immediately supplied the trustee’s office’s accountant, through our attorney, all information requested proving that these were false accusations.  We also supplied proof no salaries or rents had been paid to the principals for several months prior to filing.  The judge ordered the continuance of non-payment of salaries and rents to the principals thereby forcing us to work, not even at minimum wage, for nothing since filing (3 months ago).  He also ordered Bellach‘s to use the principal’s buildings without paying rent so mortgage payments could not be met.

 

The Office of the United States Trustee wanted to appoint a trustee to run Bellach‘s office, warehouse and all showrooms from the date of filing, March 3.  Our belief upon filing for Chapter 11 Reorganization was the trustee’s office would work to benefit the business, our customers and our creditors.  Although their attorney knew we filed Chapter 11 Reorganization, he continued to refer to Bellach‘s as going out of business.   By doing so, he deliberately confused the judge, and attorneys for the creditors. 

 

The sale was finally held.  It was promoted never using the word ’bankruptcy’ as ordered by the judge.  However, I used Chapter 11 Reorganization to keep the public informed about the type of sale being held.  When the judge found out, I was told I would be found in contempt of court and could be thrown in jail and/or fined. Standing before the judge I was threatened with contempt if Bellach‘s did not remove all signage, banners and stop all advertising immediately.  This process caused another week’s lack of business and loss of income.  I was advised by Bellach‘s attorney to retain counsel because he claimed he would not represent me due to “a conflict of interest”. I was forced to hire another attorney from another firm, at personal expense, to draft a petition to the court citing reasons why Bellach‘s should not be found in contempt of the “SPIRIT” of the court’s ruling. 

 

Concurrently, the attorney for the Creditors’ Committee gave the creditors false information.  The committee was told I had thrown in the towel and had walked away from the business.  NOTHING CAN BE FURTHER FROM THE TRUTH.  She also claimed I had not made all court appearances (false) and was devoting all my time to another business venture that DOES NOT EXIST!!!  She also told the committee it was in their best interest to agree to appoint a trustee.  She’s continually referred to Bellach‘s as going out of business…even when informed, during direct conversation with us, we had filed Chapter 11 Reorganization.

 

On May 16, 2008 Bellach‘s attorney got up before the judge and protested my desire to speak to him.  However, the judge acquiesced because of my insistence to do so and submission of the brief written by my personal counsel. After the presentation, the judge looked at Bellach‘s attorney and said, “I assume you are in favor of us appointing a trustee because you did not file an objection at the appropriate time.”   Bellach‘s attorney stated he did not have time but he was NOW objecting.  He said in the best interest of the business, customers and creditors I should be allowed to continue running the company.  The judge responded by saying we could not be trusted because we violated the “SPIRIT” of his ruling not to use the word “BANKRUPTCY” in any form of advertising. (This is not a legal ruling per Bankruptcy Code 1104 stating cause for appointing trustee includes fraud, dishonesty, incompetence and mismanagement.)  When I asked Bellach‘s attorney why the judge would appoint a trustee, he said, ”THE JUDGE DOES NOT WANT TO ROCK THE BOAT OF THE OFFICE OF THE UNITED STATES TRUSTEE!” In other words, the judge does not want to affect future working relationships with the trustee and would rather just pass the case on to them.

 

Within 3 days of this ruling, the Office of the United States Trustee appointed a trustee.  The trustee called and set up meetings in her attorney’s office first with the promotional company Bellach‘s had hired and later in the day with us.  Bellach‘s attorney appeared by telephone.  During the meeting, we asked her many times if she had already made up her mind about flipping the Bellach‘s into Chapter 7.  She responded “No“.  I told her I had plans about how to increase revenue to pay off creditors.  She said we’d talk about it later.   During this meeting, the Trustee stated all she was interested in was making enough money to cover her fees.  She was very explicit about NOT CARING TO PAY CREDITORS OR CUSTOMERS. Since the basis of filing Chapter 11 Reorganization is to pay back creditors and customers, we found this statement to be self-serving and reprehensible; completely against the very spirit of Chapter 11.

 

After we left the office (we had turned off our cell phones) we had received several calls from Bellach‘s corporate office and showrooms telling us the trustee had ordered the promotional staff to begin selling assets below cost and not to pay attention to anything we have to say.

 

We later checked into the background of this particular Trustee and found not only is she listed as a Chapter 7 Trustee, according to our research, she has had no experience working to assist retailers in emerging from Chapter 11 Reorganization. We found all her experience was related to flipping Chapter 11 Reorganization filings to Chapter 7 (meaning, the business is forced to be closed rather than emerging as a viable business).

 

Bellach‘s asked its attorney to file a motion to ask the judge to reconsider the appointment of the trustee.  The attorney responded he thought it would be a waste of time but would do it if we insisted.  After filing, we noted he wanted the hearing scheduled 28 days later.  We objected because before then, the trustee would file to flip Bellach‘s into Chapter 7.  And indeed, we learned she had already filed to do so.  Bellach‘s attorney acquiesced and agreed to file the motion to be heard within five days from filing.

 

IN THE MEANTIME, the trustee had all locks changed in all showrooms and the distribution center to lock us out.  She then fired all of Bellach‘s employees with no notice including the Customer Service Representative.  The Rep asked how all customers requiring service were going to be helped.  The trustee responded she doesn’t care.  She then ordered the promotional group, we hired, to remove merchandise from all showrooms and the warehouse with no controls or supervision whatsoever.  THIS IS A CLEAR CASE OF MISMANAGEMENT BY THE TRUSTEE AS POINTED OUT AS A REASON TO ASSIGN A TRUSTEE TO SUPERVISE BELLACH‘S…By firing everyone she has caused at least 2 long-time employees to lose their homes.  This saddens us greatly because all of our employees are also our friends. This is all happening before the court approved the Trustee’s motion to move the business into Chapter 7.

 

Again…it appears the court is run by GREED and the good ol’ boys club. The judge should be brought up before his peers and made accountable for his actions.  The trustee appointed should be severely chastised and/or fired for bigger errors than have been relayed in this article.  Customers and Creditors should file a class action suit against the Bankruptcy Court and the trustee.

 

Upon filing Chapter 11 Reorganization, Bellach‘s was assured this would protect our customers, our creditors and the corporation.  It has always been Bellach‘s intention to repay all creditors dollar-for-dollar.  We have always enjoyed a wonderful relationship with them.  And, as it stands, most customers have responded very positively to Bellach‘s situation and are willing to wait for their merchandise!  The judge put up major roadblocks so Bellach‘s has been unable to accomplish what has been promised.   The judge and attorney for the Trustees’ Office have allowed severe delays in Bellach‘s business to the detriment of all.  They have made untrue declarations and placed restrictions to the detriment of all.  It has forced a Trustee upon Bellach‘s much to the delight of the Trustees’ Office attorney.  (In fact, during Bellach‘s last appearance before the court on May 16, 2008, he was overheard, by an independent party, talking on his cell phone to his superiors telling them “we finally got them [Bellach‘s] where we want them!”) 

 

This statement summarizes the entire process thus far. The goal of the court, trustee, and attorneys HAS NOT had the true interest of the public (creditors/customers) in mind. Rather, they have been self-serving and taken the easy way out to the extreme detriment of Bellach‘s and all related parties.