Wheeler Spa Bankruptcy Petition Stops Auction
Minutes before the debt-plagued Wheeler Hot Springs resort went on the auction block Tuesday, the retreat’s owners filed for bankruptcy protection in Santa Barbara, canceling the IRS sale and angering creditors.
The Chapter 11 filing in U.S. Bankruptcy Court buys more time for executives at Wheeler Springs Resorts Inc. to come up with a plan to reorganize the company’s debt and keep the business afloat.
“We’ve got our hands off until the bankruptcy court makes a judgment about how it will be reorganized,” Internal Revenue Service spokesman Chips Maurer said.
The bankruptcy petition came as IRS officials planned to open the bidding for the historic resort at $40,000. But any new owner would have to assume more than $3 million in debt, including about $300,000 in unpaid payroll taxes due the federal government, IRS officials said.
“If they reorganize, we’ll see what happens,” Maurer said.
Company President Thomas Marshall, who bought the resort in 1993, said he wants to pay off his creditors and hold on to the spa and restaurant. The facilities are now open despite the financial problems.
The bankruptcy filing also came after Ventura County prosecutors charged Marshall with writing bad checks to company employees.
Deputy Dist. Atty. Steven Phillips said Tuesday that Marshall will face five misdemeanor counts when he is arraigned in Municipal Court on Oct. 25.
“Paying employees ought to be a very high priority,” Phillips said.
Marshall said employees’ salaries “will be made current very quickly,” but declined to discuss the criminal charges.
Located deep inside Los Padres National Forest about six miles north of Ojai, the resort has at least six liens placed against it for nonpayment of bills, property records show.
Most recently, Wheeler Springs Resorts defaulted on a $500,000 loan this summer, records show.
A handful of creditors and interested bidders gathered Tuesday morning outside the local IRS office in Oxnard. Several said they were disappointed to hear that the sale was off because of the bankruptcy filing.
“He had to do that,” said Evelyn Landucci, a former owner of the resort and one of Wheeler Springs Resorts’ largest creditors.
Landucci declined to comment further, saying that it would be premature. “Sometimes you have to assimilate things before you can make a statement,” she said.
But employees of the 85-acre resort, which has survived a storied history of flood and fire for more than a century, were not so diplomatic. Some spa workers said they have not been paid for weeks.
“The paychecks were due last Wednesday, but there were no checks,” said one massage therapist, who asked not to be identified. “I called up to ask about getting paid, but nobody knows.”
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Workers outside the IRS office Tuesday said that Marshall has taken valuables from the Wheeler Hot Springs restaurant over the past few days.
“He was up there taking artwork out of the restaurant and money out of the cash register,” said one employee, who also did not want his name published.
They also claimed that suppliers have refused to make deliveries to the resort, making it difficult for the employees to do business.
Marshall admitted taking artwork from the restaurant in recent days. But he said the paintings never belonged to the company.
“There has never been artwork at Wheeler Hot Springs that belonged to Wheeler Hot Springs,” he said. “It was there for a matter of six weeks.”
A Century City attorney who filed the bankruptcy petition said the company simply needs time to plot a new strategy.
“It’s not unusual in a Chapter 11 to see some employees that are owed pre-petition wages,” attorney Michael Wiener said. The company’s “intention is to reorganize the business and pay its creditors what they’re owed.”
Federal trustees will meet with a group of creditors next month and propose potential resolutions to the debt, Wiener said. The bankruptcy court judge will have to approve any reorganization plans, he said.
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Located directly across from the Wheel country bar on California 33, Wheeler Hot Springs has long been a favorite resort of Southern California vacationers.
Early in the century, stage coaches traveled up what was then known as the Maricopa Road, depositing clients in search of rest, relaxation and the famous sulfur baths at the resort.
But the facility has fallen on hard times throughout the 1990s, including fires, floods and other calamities of a less natural origin.
The grounds survived the Wheeler Gorge fire in late 1993, a sprawling blaze that burned much of the nearby forest. In 1994, health inspectors closed the hot tubs for several weeks due to a bacterial contamination.
As recently as last month, Ventura County health inspectors ordered the Wheeler Hot Springs restaurant closed because of poor water quality. The dining room was reopened days later after county health inspectors conducted consecutive water samples that turned up clean, officials said.
