Owners of failed business say they tried to make it work
It may not be on the scale of an Enron or a Worldcom, but when one of L.A.’s largest color printers went under, a small Santa Monica businessman got caught in the middle.
Brian Goldberg, owner of Beyond Imagination Graphics on 17th Street, said L.A.-based GP Colors purposely placed an expensive order with his company knowing they were about to go under.
Goldberg took both former and current owners of GP Colors to Santa Monica Small Claims Court last week, but he only recouped some of his money.
Judge Pro Tem Jane DuBovy ruled the company owed Goldberg $2,200 of the $4,800 order for paper and ink the company had placed with him. Judge DuBovy awarded about half of the claim because only half of the shipment arrived before the company went bankrupt.
“I find it interesting that while they knew they were going downhill, they still made a very large order,” said DuBovy, who is a practicing bankruptcy attorney.
“I find it interesting that while they knew they were going downhill, they still made a very large order.” — — JANE DuBOVY Judge pro tem
The ruling could cost GP Colors much more if other creditors of the company, such as Xerox and Kodak, decide to go after the new owners as well.
GP Colors officials argued they didn’t owe Goldberg anything because when their business failed, they liquidated the company’s assets and sold the company to new owners. Typically that means all past debts are forgiven.
“We paid for what we owed (Goldberg),” said Tom Wilhelm, the new president of GP Colors. “The rest of the costs are from the previous company which no longer exists.”
Goldberg — who used to work for GP Colors before opening his own shop 10 years ago — went to great pains to make sure the old and new owners of the company were present in the courtroom. He believes the former owners, John Petaro and his mother Jannette Petaro, made an arrangement with the new owner, Bill Gordon, who is the former president, to avoid paying creditors.
“The old GP Colors players are the same as the players in the new GP Colors,” Goldberg said. “There is no new company.”
Gordon admitted to owning the majority of the company but said the Petaro Family Trust owns 20 percent. John Petaro — whose father, Salvatore, began the business decades ago — said he still works for the company. But he said he only receives straight commission and dividends he gets through his family’s trust.
By setting up the business venture in such a way, the previous owners and the new owners can avert paying back old debts — like Goldberg’s company — and avoid being held liable in court, according to DuBovy. She said it’s a common practice for companies that try to unload their debt to attract new investors.
But John Petaro said he wasn’t trying to out-scheme anyone.
“We were trying everything to save the business,” he said. “We were constantly looking for new capital and investors.”
But Goldberg successfully argued that the shop got his shipment days before the company filed its foreclosure papers, making him able to recoup some of the bill. His claim was backed up by a former GP Colors purchasing agent who’d placed the order and checked it in.
“Assuming everyone has been honest with me under oath and not lied about any collusion, you still owe (Goldberg) some money,” DuBovy said. “I have before me evidence and all I can rule on is the evidence.”
Originally published in the Santa Monica Daily Press print edition on August 6, 2002. Read the original PDF.