Forensic accountant helps save iconic steakhouse brand | Business Observer
It took him nearly 50 years, but Southwest Florida forensic accountant and bankruptcy trustee Jerry McHale says he has finally worked on the most exciting case of his life. This from a crusher of the legal side of the financial industry with a stubborn, down-to-earth style that belies his brilliant and polished resume. McHale has done everything from selling an Alaskan airline to finding a buyer for a repossessed yacht, to recovering millions of funds stolen from the Ponzi scheme.
The stimulating case? Oversee the forced sale of intellectual property and other assets owned by the parent company that ran the famous Palm restaurant chain for generations. With 21 locations from Boston to LA and Miami to Mexico City, the company dates back to 1926, when Pio Bozzi and John Ganzi opened the first Palm, in New York City. The Bozzi and Ganzi families were in their third generation of owners when, in 2013, things started to deteriorate. It all started with an inter-family lawsuit that ultimately led the parent company, Just One More Restaurant Group, to file for Chapter 11 bankruptcy in March 2019.
This is how McHale, owner and president of Fort Myers-based McHale PA, got involved in the case. The judge, of the US Bankruptcy Court for the Middle District of Florida in Tampa, appointed McHale director of restructuring of Just One More Restaurant and related entities.
Federal bankruptcy trustee for decades, McHale knew the details of the system intimately. But the complexity of the Palm affair – and the sprint-like nature of his sales readiness, leading to the brink of life before the pandemic, was something he sees as a defining moment for his career. “I like to get into problematic situations and try to resolve them,” says McHale. “It was definitely one of the most interesting cases of my career.”
It’s quite interesting that industry trade publication M&A Advisor picked the Palm Sale, and McHale’s work, as its struggling 2021 M&A deal in the $ 50-100 million category.
People who worked with the folkloric, snakeskin-clad McHale, 76, say such national recognition is long overdue. McHale has served as a court-appointed trustee, liquidator, restructuring agent, accountant, examiner and expert witness in dozens of high-profile cases. The list includes the Brasota Mortgage Co. in Sarasota and Bradenton, which collapsed in a Ponzi scheme in the early and mid-2000s; PenAir Airways, based in Anchorage, Alaska; and the maker of Twinkies Hostess Brands.
“The judges love him because he’s frank and honest, and if he says he’s going to do something, he does it,” says New York attorney Michael Devorkin, who has worked on cases with McHale over a decade ago. “Lawyers like to pontificate and go on and on. Jerry is a guy with no BS who can work with lawyers, cut the noise, and come up with practical solutions. “
Michael Markham, a Johnson Pope attorney in Tampa who has worked with McHale on cases for twenty years, sees the same. He also notes that when McHale is called into a case, it’s usually because there is a lot of wrongdoing, a lot of money lost, and a lot of people getting frustrated, angry and upset. “It can be like a funeral director,” says Markham, who met McHale when they both spoke at a restructuring law panel in the late 1990s. “But Jerry has a way to stop driving them crazy. He has a calm way of dealing with people and a unique style of problem-solving.
For McHale, the Palm case wasn’t just convincing work. It was the affirmation of a lifetime of business lessons learned during his career. A lesson ? The value of having super organized paperwork. Another? The nuanced importance of negotiating to win – not just to see the other party lose.
McHale seized the case after the bankruptcy of Just One More Restaurant on March 7, 2019, in which the judge called the case a “classic example of fiduciary misconduct.” The list of creditors numbered 50 parties, with liabilities of up to $ 50 million, according to bankruptcy records.
The genesis of the bankruptcy was that the founders’ grandsons Walter Ganzi Jr. and Bruce Bozzi Sr. faced a $ 120 million judgment in a civil case brought by some of their cousins. The allegations: The pair conspired to defraud the cousins of millions of dollars in royalties over 40 years. Bankruptcy, according to McHale, was the best option out of the quagmire. Still, that didn’t make things any less complicated. “It was a family feud that just kept on going,” McHale says, “and to make matters worse they had a major cash flow problem.”
“Any fool could cut costs, but the trick is to maintain the revenue and increase it. »Jerry McHale, McHale PA
A big problem was in the bookkeeping for the bookkeeping issues at the Palm, McHale says. With locations in multiple states, there was a big pile of tax and other documents, which he said were in disarray. “It took Yeoman’s work to put them in readable packaging,” he says.
A close examination of the books also led to the discovery of another problem: what McHale called some $ 3 million in “deadwood on the payroll.” This led McHale to make quick decisions, in an effort to make the bankrupt business attractive to buyers. At the same time, in another long-standing lesson, he’s been able to protect the company’s chic culture and polished customer service, with celebrity caricatures on the walls and rocked, not stirred martinis. “Any fool could cut costs,” says McHale, “but the trick is to keep the revenue going and increasing it. “
McHale’s next decision was to hire Raymond James & Associates to facilitate the bankruptcy sale. The St. Petersburg banking giant, says McHale, has done a tremendous job of lining up a pool of possible buyers, with around fifty in general and five or six serious entities. And he did it in three months. As for the last possible buyer, McHale recalls making several phone calls with a dozen lawyers and others until 3 a.m., all negotiating the details of the deal. “Everyone knew they had to get the best deal for their customers,” he says. “There really was no gnashing of teeth. “
The buyer was Landry’s hotel conglomerate, led by Texas entrepreneur Tilman Fertitta. Landry’s brands include the Golden Nugget Hotel and Casino, Joe’s Crab Shack, Morton’s The Steakhouse, and the Rainforest Café. Fertitta also owns the Houston Rockets in the NBA.
But there was another problem: On March 7, 2020, Landry officials called McHale. They sought to reduce the agreed selling price by $ 5 million – from $ 50 million to $ 45 million, plus assuming about $ 25 million in debt. McHale, not wanting to lose the buyer but also knowing he was facing a tough payday given Palm’s cash crunch, offered Landry a deal: yes to $ 45 million if Landry’s moved the date forward. closing – at a blazing fast two days later. Getting the money on hand, McHale explained, would be worth the $ 5 million. Landry’s executives accepted. On March 9, the Chief Bankruptcy Judge of the United States, Caryl Delano, approved the sale of the bankruptcy. Landry’s paid $ 45 million in cash and assumed $ 23 million in debt.
That date of March 9, 2020, of course, was crucial because four days later the world began to shut down after what is now a 19-month pandemic. “We were very lucky the sale took place at that point,” said McHale. “If it wasn’t, there probably wouldn’t be a Palm restaurant anymore.”
Markham and Devorkin, lawyers who worked with McHale, say one of his strengths is preparing a complicated entity like Just One More Restaurant for sale. “He’s really good at valuing a business and (measuring) what it’s worth,” says Devorkin. “And he’s also very good at getting the best dollar he can on the business, which is difficult because everyone knows you’re desperate.”
McHale started his own business in 1974 in Fort Myers. His story of how he arrived in Florida is typical: Originally from Rochester, New York, and then recently graduated from Wilkes College in Wilkes-Barre, Pa., McHale saw an advertisement seeking help in a newspaper of a Fort Myers real estate developer. The developer was looking for a CFO. “I didn’t even know where Fort Myers was,” says McHale, the first in his family to go to college, “but I thought I was going to give it a go. “
This developer ran into financial trouble and in less than a year McHale was on his own. He decided to focus on forensic accounting and slowly built his business. McHale PA now has 10 employees and generates around $ 2 million in revenue per year, explains McHale, with a don’t take “every case that presents itself.” The company has had customers in it. New York, Virginia, Texas and California, and the staff includes her business partner, Veronica Larriva.
“I kind of fell into that line of work,” says McHale. “But I really like the challenge. I think it’s a very involved chess game.