Corona Councilman’s Bankruptcy Adds Fuel to Political Fire
Corona Councilman Jeffrey Bennett and his family live the good life: They have a $2.5-million home in the city, occasionally jet to Hawaii for deep-sea fishing and own a stable of automobiles that includes a Bentley and Ferrari.
Bennett also is digging out of bankruptcy.
The councilman, who made his fortune in the gourmet dog kibble business, blames attorneys, creditors he calls inflexible and a luxury auto broker for his financial troubles.
His enemies on the City Council, however, lay the blame squarely on him -- and his personal debts have become a juicy political target in his November reelection bid.
Two council foes have accused Bennett of hyping conflict-of-interest allegations against them to deflect attention from his own problems.
“It’s obvious that Mr. Bennett’s personal life has become overly complicated and mildly depressing, and therefore he has chosen to spin these negative energies outward to diffuse people’s interest in him and have them look at us,” said Councilman Darrell Talbert. “It’s good, old-fashioned dirty politics.”
Bennett and his wife, Nan, who were worth $35 million in 2000, were worth negative $14 million two years later, with their debts taken into account, according to court records. To clear his debts, Bennett has sold millions of dollars’ worth of property -- including vacation homes in Lake Arrowhead and Breckenridge, Colo., as well as commercial property in Corona.
“Everyone, at the end of the day, is going to be made whole,” Bennett said. “There’s plenty of assets and equity to pay off everybody.”
Bennett said he planned to hold on to the Bentley and Ferrari for now, but even those may eventually have to be sold.
Bennett is a brash New York native who co-founded Nature’s Recipe pet food company in 1981, coming up with the concept after cooking daily vegetarian meals for his ailing dog, who had food allergies. The company’s products included dog kibble made from New Zealand lamb and rice. In 1996, H.J. Heinz Co. bought Nature’s Recipe for a reported $90 million to $100 million.
Bennett spent some of his fortune on philanthropy, producing a documentary about dogs that served in the Vietnam War, and donating $100,000 to a memorial for Medal of Honor recipients at Riverside National Cemetery.
Bennett, 51, also donated generously to Republican candidates and jumped into politics himself in 1992, when he was first elected to the Corona City Council.
In recent months, that council has become a tense, divided panel, where former allies are now enemies.
Talbert and Mayor Jeff Miller have come under scrutiny for having started an energy consulting firm while the city was trying to take over some Edison power lines, substations and other facilities.
Bennett, who helped Miller get his political start by appointing him to a city parks and recreation board, became the pair’s loudest critic, hurling damning allegations against them in court papers and the press.
Talbert and Miller were cleared of criminal wrongdoing and accused Bennett of lying to inflate the controversy surrounding them and deflect attention from his financial woes.
The matter came to a head in a Riverside courtroom this month when Bennett tried to make amends with Talbert and Miller. He extended his hand, but Miller loudly refused to shake it.
Bennett’s financial problems stem from a series of deals, investments and transactions, which were put under a microscope when he filed for federal bankruptcy protection in November.
City National Bank lent Bennett $9 million for a variety of business ventures and sued the councilman in 2002, saying he failed to keep the bank apprised of his finances, as required.
Specifically, bank officials were alarmed after being told Bennett had transferred his family trust to an account based in the Cook Islands, a well-known haven for keeping assets low-profile.
According to the bank’s court filings, Bennett told the bankers he was trying to make himself “judgment-proof” because of an airplane purchase deal that fell apart.
Bennett and a partner had bought a passenger jet for about $18 million, which was supposed to be leased monthly, then eventually bought, by Kentucky Fried Chicken. But KFC never bought the plane.
According to the bank, that left Bennett and his partner holding a bill for $5 million and threatened with a lawsuit by GE Capital Corp., the financing agent for the airplane purchase, according to the bank’s court filings. Bennett vehemently denies the bank’s allegations regarding his family trust, saying he never tried to make himself judgment-proof. He says he received bad legal advice about the trust.
Jeff Broker, Bennett’s attorney, acknowledged that the trust was briefly moved to the Cook Islands but that it was moved back to California in early 2003, as required in the settlement agreement between the Bennetts and City National Bank a year after the lawsuit was filed.
“It happened, but it has basically been unwound,” he said. “All of the Bennetts’ assets and properties are subject to the jurisdiction of the Bankruptcy Court.”
Bennett’s problems were compounded when a company that owed him millions allegedly failed to pay up.
In 2001, Bennett and his wife had invested $7 million in Executive Wholesale in Riverside, a company that bought repossessed high-end cars such as Ferraris and Bentleys and sold them for profit. In March 2003, he received proceeds from his investment: two checks totaling roughly $3 million. Both checks allegedly bounced.
Bennett sued and received a judgment in his favor for more than $8 million. The company reportedly never paid, and is being investigated by Corona police. Officials with the company, now known as Inland Empire Auto Brokers, did not return phone messages seeking comment.
Bennett said he had been counting on that money to repay City National Bank. When it didn’t come through, he and his wife filed for bankruptcy Nov. 14.
According to their attorney, the Bennetts now owe about $3 million to City National Bank and $1.4 million in other undisputed claims. They are still fighting roughly $12 million in claims, mainly involving a separate and defunct air-charter business.
Bennett notes that he and his wife filed for a Chapter 11 bankruptcy, which is typically used by businesses for financial reorganization.
“Chapter 11 is a reorganization,” he said. “United Airlines is in Chapter 11. My case was I had a bunch of money that was [improperly withheld] that caused me not to meet an obligation.... I’m honoring the debts I owe.”
They have already sold millions of dollars in property to repay the bank. In June, they sold a commercial parcel in Corona for $2.35 million. Last month, their Lake Arrowhead home sold for $755,000. A vacation condo in Breckenridge, Colo., has just been sold for $675,000. A home and animal reserve in St. Augustine, Fla., which features two Siberian tigers, is close to entering escrow for roughly $210,000. Residential properties in Los Angeles and Agua Dulce have also been sold.
Assets that may be used to repay creditors include any money obtained from the $8-million judgment against Executive Wholesale; a vacant lot in Corona worth some $600,000; a federal tax refund of more than $1 million expected this year; and a $500,000 interest in the Colonies Partners, a developer building a master-planned community in Upland.
If creditors still aren’t fully paid, the Bennetts will turn to selling additional assets: the $120,000 fleet of vehicles, including the 1999 Bentley and 1970 and 1977 Ferraris; insurance policies; interest in three local companies; and art, furs, jewelry, firearms, sports equipment and other personal property.
If City National Bank is not fully repaid by Jan. 2, 2006, it will have the right to auction off the Bennetts’ $2.5-million home in Corona, which Bennett says will not be necessary.
“It won’t be a problem. Hopefully, it would be done at the end of this year,” he said. “I’m not going broke.... I won’t be in the same situation I was in, but I’ll be back on my feet. I’ll be able to do things and get back on track.”