If you share ownership of your restaurant with outside investors, you may have wondered about what might happen if your relationship with those investors were to turn sour. Scenarios typically range from fisticuffs (rare) to verbal threats (frequent) to lawsuits (also frequent), with the end result often being that no one walks away happy.
But it could be worse, as we're about to learn from the foodservice operations that have become caught up in what's looking to be the biggest investment swindle in history. Federal prosecutors have moved to seize any and all assets owned by Bernard Madoff, the presumption being he purchased them with the ill-gotten gains of his $65 billion Ponzi scheme.
The government's plan is to take control of these assets, sell them and split the proceeds among the thousands of investors who lost all or part of their life savings to Madoff's long-running scheme.
So what exactly are the feds going after here? In addition to Madoff's real estate, jewelry and sizable loans to his sons ($22 million for Mark Madoff, $9.5 million for Andrew Madoff), they're also exploring the tangled web of his many personal “venture” investments. Included on the list of targets detailed in U.S. v. Madoff, Notice of Intent to Seek Forfeiture are a trio of foodservice-related holdings.
The court document specifies Madoff's investment in 125-year-old full-service restaurant PJ Clarke's on the Hudson in lower Manhattan (but not the other PJ Clarke's in New York City); his interest in San Francisco wine-centric fine-dining spot Bacar; and Madoff's partial ownership of Delivery Concepts LLC, which operates its Manhattan-based online food ordering business from the www.delivery.com website.
It's not clear how much Madoff invested in PJ Clarke's. So far, the Clarke's people aren't talking. Neither are the owners of Delivery Concepts LLC. But the general partner of Bacar LLC has been quick to let the world know that Madoff was no longer associated with Bacar and that the feds were looking at out-of-date records when they concluded he was.
In fact, Madoff's wife, Ruth, had been an investor in Bacar for a number of years. The details: In 1999, Ruth Madoff purchased a 2.5 percent interest for $50,000. In 2007, Bacar Investors LLC, which maintains a controlling interest in the restaurant, bought her out for $35,000, says the group's Jon Jackson.
We'll find out later how these three operations fare post-Madoff. In the meantime, the majority owners of PJ Clarke's on the Hudson's and Delivery Concepts will wind up with new partners they may or may not want. And because their ownership situations are so muddled, it would be tricky to get money out of these businesses now, should the owners desire.
But at least there would be money to get out. If Madoff invested in you, you get to keep your end of the business. But if you invested in Madoff, you lost it all. Among his victims is Los Angeles chef (Campanile) and entrepreneur (La Brea Bakery) Nancy Silverton. She gave her take from the sale of La Brea Bakery — $5 million — to Beverly Hills money manager Stanley Chais, who in turn invested it with Madoff. What did it cost her? “My entire retirement, my kids' college funds, trust funds, were all invested in this,” she tells the New York Times. “All I have is my restaurant now. We just can't believe it.”
Actually the 54-year-old Silverton has two L.A. restaurants, Pizzeria Mozza and Osteria Mozza, that will help her rebuild her finances. Both wildly popular, they are joint ventures with Mario Batali and Joe Bastianich. She's also working on her eighth cookbook. Silverton's no longer in the financial position she expected to be in at this stage of her life, but many of her fellow once-wealthy-now-broke Madoff investors would swap places with her in an instant.