Ocean Pacific Creditor Seeks Repayment in Suit : Courts: It demands that the beleaguered Tustin firm’s major owners pay the $4.7 million owed.
The largest secured creditor of Ocean Pacific Sunwear Ltd. has filed a lawsuit against each of OP’s major owners demanding payment of the $4.7 million owed on a credit line that once ran as high as $20 million.
Republic Factors Corp. in Los Angeles, a company that buys invoices from apparel makers and others, filed the lawsuit last week in Los Angeles Superior Court. It demands repayment of the total amount owed by each of three major owners: Elaine Ornitz, Robert Driver and OP Chairman Jim Jenks. It seeks partial repayment from two owners with smaller stakes in the company: Thomas Hilb and surfboard pioneer Hobie Alter.
“This move by Republic is no surprise,” said Mike Balmages, OP’s senior executive vice president and the company lawyer. “They are just covering their bases.”
The lawsuit came in response to OP’s filing last month for protection from creditors under Chapter 11 of the U.S. bankruptcy code. Wells Fargo Bank, which is owed $2.1 million on an original loan of more than $6 million, took similar action against Tustin-based OP earlier this month.
The Wells Fargo suit took on a new twist last week when Ornitz, who holds the largest single stake in OP, alleged a “conspiracy” involving Jenks and the bank.
Ornitz, who owns 30% of OP, said in the filing that Jenks and the company’s six other owners gave their own personal backing to the Wells Fargo loan but that she was never told about it.
The bank had a conflict of interest, according to the filing, because of more than $3 million in personal loans it had made to Jenks. Because of that conflict, Ornitz said in the filing, the bank and Jenks sabotaged seven buyout offers for OP because the prices offered would not have yielded enough profit to guarantee repayment of what the company owed as well as Jenks’ personal loan.
“By virtue of the bank’s willful misconduct, fraud and conspiracy with Jim Jenks, Elaine Ornitz, a 53-year-old widow, is now facing the prospect of having her life’s savings and those of her family wiped out in a financial disaster that Wells Fargo helped perpetrate,” the filing stated.
Jenks flatly denied Ornitz’s allegations. There was no conspiracy, he said, and “what I owe the bank is my business.” The loan, he said, was actually a credit line that he used for various purposes, from building a house to improving his Oceanside-based boat-building business. He questioned why Ornitz would make such allegations.
“I don’t know why she is hellbent on destroying this company,” Jenks said in an interview.
Balmages said that Ornitz’s contention is ridiculous. Jenks is one of eight partners, Balmages noted, adding that Jenks’ ownership stake is only about 25%. And the fact that OP accepted two of the seven buyout offers disproves Ornitz’s contention that Jenks tried to block all offers for the company. The deals fell apart for lack of financing, Balmages said.
“It’s another conspiratorial theory by Mrs. Ornitz and her attorneys,” he said.
Robert Morrison, a lawyer representing Wells Fargo, said Monday he had no comment on the case.
Earnings Eroded ... OP has lost money in three of the last four years. In millions of dollars Sales: ‘91: $11.3 Profit: ‘91: -$1.1 ... and Buyout Offers Slipped Away OP executives have had seven offers to buy them out: * December, 1989. Argyropolous-Apollo Group Offer: $15 million cash, $3.5 million subordinated promissory note, $6.5 million preferred stock, assumption of $30 million in liabilities. * December, 1989. Lehart Corp. Offer: $10 million for 54% of OP equity. * December, 1989. Generation One-Dean Witter Capital Offer: $10 million cash, 5% ongoing royalty interest, assumption of $30 million in liabilities. * June, 1990. Guaranty Acceptance Credit Corp. Offer: $22 million cash, $8 million in equity securities and a $5-million note. * July, 1990. Argyropolous-Apollo Group Second offer: $31 million cash (subject to reduction if OP partners took portion of cash in stock). * October, 1991. Sequoia Associates Offer: $20 million cash, $4-million note. * February, 1992. Sequoia Associates Second offer: $3 million to $5 million cash, $15 million in notes, assumption of liabilities. * Offer was accepted, but deal fell through because of lack of financing. Source: Court filings Researched by CHRIS WOODYARD / Los Angeles Times
