Sheldon Good details improper withdrawal by ex-chairman
(Crain's) — Sheldon Good & Co. has identified a $10,235 life insurance premium payment as the first example of improper withdrawals by Steven Good, which the company says created a cash crunch that forced it into Chapter 11 bankruptcy protection.
Meanwhile, the company also disclosed that rival DJM Realty LLC has a 20% stake in Good & Co., whose total commissions dwindled to less than $500,000 during the first five months of the year.
DJM, the commercial real estate brokerage arm of Boston-based store liquidator Gordon Brothers Group LLC, is a likely bidder for Good & Co., which is expected to be sold at a bankruptcy auction sometime next month.
No matter who steps up to buy Good & Co., it's tricky to determine what the struggling firm is worth, says Garry Benson, president and CEO of Garrison Partners Inc., a Chicago-based residential marketing firm that recently partnered with a Boston-based firm to focus on condo auctions.
"You're buying the name, which is almost like buying goodwill," says Mr. Benson, who does not plan to bid on the firm.
The revelations, contained in a court filing late last month, are the latest twists in the unusual case, which began when the Chicago-based firm sought protection from its creditors April 24, nearly four months after Mr. Good, who was chairman, committed suicide.
When the bankruptcy petition was filed, Good & Co. said Mr. Good's improper withdrawals left the firm without adequate cash reserves. One of the company's lawyers, Heidi Sorvino, head of the bankruptcy practice at New York law firm Smith Gambrell & Russell L.P., said at the time that the losses were believed to total millions of dollars.
But the Jan. 24, 2008, premium payment is Good & Co.'s only loss listed during the 12 months before the Chapter 11 filing, according to the company's statement of financial affairs filed May 20 with the U.S. Bankruptcy Court in New York.
The $10,235 premium payment was made without the board's permission and the company was not the beneficiary of the $8-million policy, according to a brief description by Good & Co.
A message left for Ms. Sorvino was not returned. Chicago attorney Joel S. Rothman, who is handling Steven Good's estate, declined to comment, as did a Good & Co. spokesman.
Meanwhile, Good & Co.'s commissions from the "sale of real estate and other miscellaneous income" plunged to a paltry $489,748 between Jan. 1 and May 20, the financial affairs statement says. In 2008, commissions fell 31%, to $6.8 million, compared to $9.8 million in 2007.
The statement of financial affairs also disclosed for the first time that DJM, which specializes in the sale of troubled real estate assets, is the second-largest owner of the company, with a 20.1% stake.
Mr. Good's estate is the largest owner, with a nearly 32.5% stake. Good & Co.'s current management, including President Alan Kravets, owns the rest of the company.
Melville, N.Y.-based DJM's director of marketing had no comment.
Good & Co. is likely to be auctioned off next month.
If DJM decides to bid, it would likely go up against John Cuticelli Jr., CEO of New York-based Racebrook Capital Advisors LLC, which buys distressed real estate and nonperforming commercial loans. Mr. Cuticelli is a former Sheldon Good & Co. executive who agreed to provide the firm up to $2 million in debtor-in-possession, or DIP, financing, according to a court filing.
A Racebrook affiliate called Racebrook Marketing Concepts also performs real estate auctions.
