Troubled Car Dealer Group Seeks to Make a Comeback
A group of financially troubled San Gabriel Valley car sales and finance companies, including one of the nation’s largest Chevrolet dealerships, is seeking state permission to reopen quickly under new management.
The two auto dealerships in the group, Grand Motors and Grand Chevrolet, had their sales licenses suspended by the Department of Motor Vehicles last week and have filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. Together with a finance affiliate known as Grand Wilshire Finance, they are trying to make a comeback, said Edward Wolkowitz of the Los Angeles law firm of Robinson, Diamant, Brill & Klausner.
Attorneys for the Grand companies want to name Thomas Scully, a specialist in reviving bankrupt firms, as chief executive of all three firms and their affiliates, Wolkowitz said. Lenders to the group support the choice of Scully, he said.
Representatives of the Grand companies will meet today with Department of Motor Vehicles officials as part of negotiations begun Monday to lift the 30-day suspension of the dealership licenses. DMV spokesman William N. Gengler said the state could issue its decision as soon as today.
Anxiously awaiting the results of those negotiations are officials of Glendora and El Monte, which face the loss of a large amount of their annual sales tax revenue if Grand Motors and Grand Chevrolet shut down permanently.
Also eager for results are the Southern California creditors owed nearly $200 million by the group and its customers. In addition, there are many Southern California investors who entrusted their savings with Eminiano (Jun) Reodica, president and controlling stockholder of the bankrupt companies. The group’s creditors and attorneys say they do not know Reodica’s whereabouts, and he is believed to have left the United States.
Reodica, a naturalized American who immigrated from the Philippines in 1971, stressed his ties to the Filipino community in Southern California. The bulk of his investors and customers were fellow immigrants from East Asia, particularly the Philippines.
Meanwhile, DMV officials have disclosed that they fined the Grand companies more than $100,000 last December, one of the largest penalties ever levied by the department.
The fines imposed last year stemmed from an investigation into the companies’ sales practices since early 1986. DMV investigators found roughly 1,500 violations of the state vehicle code, Gengler said. Those offenses included selling used cars as new and not submitting required vehicle registration fees and information to the state, Gengler said.
The charges leading to the DMV’s decision last week to suspend the sales licenses of Grand Motors and Grand Chevrolet, both based in Glendora, were of conducting improper business practices and failing to meet financial obligations.
The DMV alleged that the companies had committed “fraud or deceit” in arranging loans for employees, who bought cars and then resold them to customers. Grand Motors and Grand Chevrolet were also ordering cars from other dealers and paying for them with worthless checks, Gengler said.
Loss of Municipal Revenue
Officials in Glendora and El Monte view the companies’ financial problems with alarm. Grand Chevrolet, which reported sales of $146 million in 1987, provides about one-third of Glendora’s $3.3 million in annual sales tax revenue, by far the largest single source of city funds.
“There’s no question that this is going to be a significant loss,” said Councilman Bob Kuhn. “Obviously, it’s going to be a major problem for us.”
Council members said they envisioned at least a hiring freeze and delays in work on such projects as street repairs if the businesses close.
In El Monte, where Grand Motors maintains a five-acre dealership, city officials said the closing would create a budget shortfall of $250,000 to $400,000 a year.
Employees at the dealerships were mostly idle Monday. They had been ordered not to do any business, but were not told whether the dealerships would remain open and were waiting to hear from company lawyers. Sales and service departments were shut down Monday.
“We just don’t know what’s going on,” salesman Asir Musavvir said while standing in the spacious but unusually silent Grand Motors showroom.
One mechanic at Grand Chevrolet said the company had stopped issuing checks early this month, keeping most employees from receiving their last paycheck.
“I’ve got a family to take care of, and this isn’t doing it,” he said. “I’m already looking around for another place to work.”
About 400 anxious investors and employees received an update from the company’s bankruptcy attorneys Monday at the main Grand Motors showroom in Glendora. Officials offered few answers to a battery of questions, but promised to have more at a Wednesday meeting.
Tries to Be Reassuring
Lawrence A. Diamant , an attorney from Robinson Diamant, told the employees that last week’s payroll will be met to the extent possible under bankruptcy law. He explained that under bankruptcy law, the maximum paycheck a worker could receive is $2,000.
Diamant tried to reassure investors that the Chapter 11 bankruptcy filings were the best move for the businesses. Under Chapter 11, a company is shielded from the demands of creditors to give it time to reorganize its operations.
“Today we’re at the point where we’ve got the patient on the surgery table with brain cancer, and we’ve got to operate to save the patient,” he said.
Richard J. Annen, senior vice president and assistant general counsel for Imperial Corp. of America, the parent company for Imperial Savings & Loan in San Diego, said that another Southland financial institution may lose millions.
Annen charged that Grand Wilshire Finance Corp., which is also affiliated with Grand Motors, fraudulently sold both Imperial and First Los Angeles bank the same $7.5 million in auto loans.
“Either First Los Angeles has been defrauded out of $7.5 million, or Imperial has,” he said. First Los Angeles Bank officials could not be reached for comment.
An Imperial official said last week that the savings and loan bought $172 million worth of car loans made by Grand Chevrolet customers and that $20 million of those loans may be uncollectible.
Times Staff Writers Jeff Miller and Craig Quintana contributed to this story.
