Chapter 11 Protection Sought by Phoenix Group : Bankruptcy: The Irvine high-tech holding company’s deal to ship millions of computers to the Soviet Union has apparently collapsed.
With its ambitious plan to sell millions of computers to the Soviet Union apparently up in smoke, Phoenix Group International has filed for Chapter 11 bankruptcy protection.
Phoenix, an Irvine holding company that controls several high-tech operations, listed liabilities of $939,469 and unspecified assets, according to a bankruptcy petition filed Tuesday in federal court in Santa Ana.
Two weeks ago, Phoenix’s Netcom Research subsidiary also filed for bankruptcy protection, listing debts of $1.65 million.
The deal--a joint venture between Phoenix and Soviet concerns--was announced with great fanfare at a New York press conference attended by top Soviet trade officials in September, 1989. Phoenix Chairman Charles Missler later described the computer sale as the “deal of the century” and said it could generate billions of dollars of revenue for his tiny technology company.
Missler boasted that the company had beaten out 16 competitors, including “every major computer company in the world,” to win the contract to supply up to 6 million PCs to schools and businesses in the Soviet Union.
Missler did not return calls seeking comment Wednesday.
The Soviet deal was greeted with a lot of skepticism from trade experts who noted that Phoenix had agreed to be paid through a complicated barter arrangement instead of cash. Computer industry observers wondered how Phoenix and its subsidiaries, with virtually no experience in building computers, could carry out the deal.
“I feel bad for the shareholders who invested their money,” said Warren Halperin, a trade consultant who did jobs for Phoenix until February. “It’s a sad situation, but I’m not surprised.”
Phoenix’s largest unsecured creditors include the Missler Group, a company controlled by Charles Missler, owed $234,071; Chuck Smith, a Santa Ana church pastor, owed $150,000; Woodman Office Building in Colorado Springs, owed $61,568; Stradling Yocca Carlson & Rauth, a Newport Beach law firm, owed $57,794; and Alexander Metherell of Laguna Beach, owed $51,230.
Smith, pastor at Calvary Chapel in Santa Ana and a personal friend of Missler, said he loaned $150,000 to Phoenix last summer to help the company increase production of its diskless personal computers. The loan was to be repaid in November, Smith said.
Missler teaches a popular Monday night Bible study class at Calvary Chapel. Shortly after the deal was announced, Missler, a biblical scholar, told the class that he had recently received a divine inspiration in which it was prophesied that God “was going to send us the deal of the century.”
Smith said Wednesday that he was unaware of the status of the Phoenix computer deal.
“I know Chuck Missler is a man of integrity,” Smith said, “and I’m not the least bit concerned about getting my money back.”
Signs that the deal was in trouble began to surface in December, 1989, when two key executives left the company. And in court documents filed in Orange County Superior Court in Santa Ana late in 1989, the president of a Phoenix subsidiary said the company did not have a formal contract to sell PCs in the Soviet Union.
But Phoenix announced in January that it had received its first confirmed order from the Soviet Union to ship 770 computers. It couldn’t be determined if the computers were ever shipped.
During the summer, Phoenix’s stock was dropped from trading on the American Stock Exchange, and the company moved from its spacious offices at the Park Place tower in Irvine.