The Phoenix Partners

"What Tenneson is doing to your previous employer is only the most recent of his ventures," she said.

The clippings in Sofie's folder told the story of a commercial baker in Illinois. Acquired by Tenneson Equity Partners six years ago for $50 Million, it had enjoyed unprecedented growth for three years that had Tenneson and his partners on the covers of Forbes and Money being hailed as "regrowth geniuses," but then had suddenly gone into a massive decline along with the rest of the US economy. It would soon default on its debts and its assets would be sold for whatever its creditors could recover. More than three hundred workers would be rendered jobless just in time for Thanksgiving.

"There are two other companies in conditions somewhere between this company's and your Maitland Mills," Sofie added, "Enough to suggest a pattern, do you not think?"

I could see what they were suggesting. Acquire a small company, grow it fast, drain it dry and then walk away, leaving its workers adrift and, well, fucked.

"Anything illegal happening here?" I asked.

"We suspect that the company's early growth was falsified to overvalue assets that could be used to secure loans," Arnau replied, "Tenneson purged the company's Finance group shortly after acquiring it and installed his own. But that is conjecture on our part. When the company went under, Tenneson's people wiped all the company's financial data as they left. So there is no proof."

"This has already been made public," I observed. The news clippings made that obvious. "So you couldn't be thinking that you'd be embarrassing Tenneson by revealing it. Your idea is...?"

"To rescue the companies and their employees," Sofie said.

"More precisely," Arnau corrected, "For you to rescue the companies and their employees."

Aranu's idea was for someone to step forward, save the company Tenneson had destroyed, and with words and actions that were diametrically opposed to everything Troy Tenneson said and did, go head to head against him and spectacularly prove that all his pronouncements about what made a business successful in today's economy were dead wrong by outperforming every venture he was involved in. Arnau and Sofie couldn't do it publicly, either as individuals or through their business or foundation; it would just look like super-rich people playing games with companies. But having it be someone who had already taken Tenneson on and won, for example in a divorce/child custody case that had pitted a small-town David against a half dozen of Tenneson's legal Goliaths in five thousand dollar suits, would get peoples' attention.

"You're assuming that we can actually succeed at this."

"You and your associates are already assuming that a new business producing quality products with integrity can succeed in the shadow of one that no longer does," Arnau pointed out, "Otherwise you would not be attempting to start one. What we are proposing is to provide you the necessary resources to do this using the assets and the workers of a previously existing one."

"And if we're wrong and the company loses money again it will have the opposite effect to what you want," I observed.

"The company will not lose money," Arnau replied, "We will ensure that it does not."

"Isn't that what Tenneson did?" I asked pointedly, "Faking the profits?"

"No," Sofie said, "We will not be 'faking profits.' The money will really be there."

"For how long?"

"As long as it takes to destroy Tenneson's credibility," Arnau promised, "And for you and your associates to have every opportunity to prove your business principles."

"And this is acceptable to you?" I asked Sofie, remembering the moral restrictions she had put on Arnau.

"We would do nothing illegal, and no innocent people will suffer because of what we do," Arnau pointed out, "Investors underwriting business ventures that may not succeed is a common practice, though admittedly we will be taking it to absurd lengths. Even if you eventually fail, hundreds of workers will have their lost jobs back for several years, and we will fund a generous 'soft landing' for them. So yes, it is within the limits Sofie has set."

"I'll have to lay this out fully for my associates," I finally declared, "There can't be anything held back from them."

There were four of us in "The Phoenix Group." Marty Ball, my former manager in Maitland Operations, Lucy Armstrong, who used to be Kathy's manager in Finance, Dennis McCoy, formerly the Maitland Technology Manager, and me (we hadn't determined yet what my role in the company might be, other than the person writing the business and marketing plans). We had also asked Paul and Alex to sit in, since it was expected that if we ever did become a real business they would be handling our legal affairs.

We were sitting at the big round table at the back of the restaurant, reviewing copies of the proposal I had brought back with me from Timberline and trying not to get them stained with soy sauce and chili oil from the working dinner we were sharing.

"Wow," Marty said, "Just...wow."

"Second that," Lucy said. Dennis nodded; he had just taken a bite of one of Zhen's new deep fried creations that I had yet to sample or figure out a cute menu name for.

"Is this legal?" Lucy asked.

"Not in a publicly traded company," Alex mused, "But when you're privately owned the rules are different. As long as you're not making false claims, especially to lenders or investors, Soulis is right, it's legal."

"It does seem to answer the question of what your role in Phoenix would be, Geoff," Marty observed.

"Yeah," I agreed, "Figurehead, Front Man..."

"Clay pigeon and sitting duck," Paul grumbled, "If Soulis is right about what happened to his son."

"There is that," Marty conceded, "But I was thinking that Geoff is doing our business and marketing plans and we still don't have anyone heading up either Business Development or Sales and Marketing."

"I figured Geoff would run both of those," Dennis said with a shrug, "At least until we got big enough to need two people for them. I mean, he's the one with the MBA."

"But that was for a startup cooperative," Lucy asked, "Would it scale up for something like this?"

"This company was like Maitland before they were acquired," I pointed out, "They already had people in these roles. Suppose some new owner called us and said, 'Come home and help us put Maitland back the way it was?' Wouldn't we all go back?"

"Saving companies like Maitland and the jobs of a lot of people sounds great," Paul argued, "But let's not forget Soulis' real goal here. He wants to ruin Tenneson's credibility in the business world. You've all experienced what Tenneson's capable of when people he sees as his peasants do anything more than disagree with him at the office. What's he going to do if this scheme works and he starts seeing the four of you as a threat?

"Especially you, Geoff. You're the one Soulis wants standing in the spotlight while he keeps himself and his family safe in the shadows."

A pall settled over the table. Paul had left it unsaid, but it was no secret to anyone there that he suspected that what had happened to Callie and Rose hadn't been entirely "accidental," even before hearing about Arnau's son and the president of San Lorenze. I guessed that Paul was seeing Soulis as just another filthy rich bastard looking for people he could use for his own ends.

Of course we said yes. Otherwise, I wouldn't be telling you this story. We did address the concerns that had been raised during that first dinner in a counter proposal, and the four of us, plus Paul and Alex, made the trek to Mount Hood again to meet with Arnau and Sofie Soulis to hammer out the details.

Phoenix Partners was formed as a New Mexico anonymous LLC. Why New Mexico? Because it's the one state where a truly anonymous LLC can be formed, with the identities of the owners not revealed even to the state government. Paul and Alex would continue to represent Dan, Lucy, Dennis and me as our personal attorneys, while the New Mexico attorney, an old friend of Alex's who had no other ties to any of us, would serve as corporate counsel. The four of us held 50% of the LLC while Arnau and Sofie held the other 50%, ensuring that neither we nor they held a controlling majority, and the four of us signed a mutual agreement that we would not vote on anything unless we could do it as a unified bloc.

To anyone outside the "inner circle" of the LLC, Dan, Lucy, Dennis and I would be presented as employees of Phoenix Partners. Dan would be Director of Operations, Lucy Director of Finance, Dennis Director of Technology, and my title would be "Managing Director." The discussion of whether I would be just the official talking figurehead or actually directing Business Development and Marketing was shelved until we determined what resources we might find available in the companies we were going to try to rebuild.

We would each draw the same salary of $250,000 per year, generous compensation but not entirely out of the range of credibility for a high-risk startup, with a conventional set of executive benefits for ourselves and our families. What was unconventional was what was added to address Paul's concerns about safety. We and our families would have a 24/7 hotline to an executive security firm who could provide armed security anytime it was needed. Lucy and Dennis would keep out of the public view as much as they could because they had spouses and children. And if things did go "worst-case," we would each have $10 million life insurance policies.

A week after we signed the agreements, Arnau informed us that our salaries and benefits were active, and that Phoenix Partners now had a working capital of $100 million with an additional capital reserve of another $100 million. Lucy nearly hyperventilated when a courier delivered the verified financial statement; it was probably only a small portion of Arnau's wealth, but it was more money than any of us had imagined we'd ever have access to.

Three weeks later the Illinois baking company shut its doors, throwing 316 workers onto the unemployment rolls. The bankruptcy trustee would begin entertaining offers for the company's assets within the next 30 days.

Phoenix Partners, LLC Announces Successful Bid to Purchase Assets of Pathway Bakeries, Inc.

Albuquerque, New Mexico, Dec 03, 2011 /APNewswire-FirstCall via COMEX News Net

Phoenix Partners, LLC today announced that the U.S. Bankruptcy Court for the District of Delaware has approved Phoenix's bid to purchase substantially all of the assets of Pathway Bakeries, Inc. of Kelton, Illinois. Under the terms of the Asset Purchase Agreement, Phoenix will acquire substantially all of the assets of Pathway for approximately $28 million. The transaction is expected to close no later than December 15, 2011. Phoenix will use private capital investments to fund the acquisition.

"We're excited about this acquisition," commented Geoffrey Jian Lee, Managing Director of Phoenix LLC. "We are looking forward to reopening the Kelton, Illinois production facility, where we intend to produce Pathway products.

"In our opinion, the old Pathway's last owners cultivated a toxic business culture that placed profits above people and quality and eventually led to the company's demise," Lee said, then added, "It is our intention to forge cooperative and mutually respectful relationships between management, employees, suppliers and customers and build a new Pathway that we can all be proud of."

SOURCE Phoenix Partners, LLC

Take that, Troy Tennneson. First shot fired.

Buying the assets of a bankrupted business is an incredibly complicated process. You don't just breeze into a trustee's office, lay down a pile of money and walk away with the ownership papers. If you're not an expert at steering your way through an endless maze of red tape and legal landmines, don't even try doing it yourself. Find someone with the necessary expertise to do it for you, which is what we had our New Mexico counsel do.

Kelton Record/Chicago Tribune, Monday, December 6, 2011:

Tiny Kelton, population 1,605, has been struggling. Illinois has lost over 130,000 manufacturing jobs since the recession began in 2007.

The outlook in Kelton became especially bleak in early October when the Pathway Bakeries plant was closed by its out of state owner, Tenneson Equity Partners. Workers at the bakery said they felt betrayed when Tenneson at first said there would be more work in a day or two, but then changed the locks.

Reena and Andy Dean were both thrown out of jobs.

"They just kept taking and taking until there was nothing left to take," Reena said, "and they didn't care that they were putting 300 people out of work."

"How can they do that?" Andy added, "This was a good company, a good place to work. They come in from nowhere and destroy it. How can you destroy peoples' lives just to make a profit?"

And with Christmas now only three weeks away, some 300+ Kelton families are looking at bleak holidays after nearly two months of unemployment.

This week, displaced Pathway workers learned that the shuttered plant that used to be their place of work had been acquired by another private equity firm, Phoenix Partners, LLC of Albuquerque, NM. Phoenix has said it intends to reopen the plant, and will hold a public meeting in the Kelton High School auditorium at 7:00 PM on Friday, December 10th to present their plans to the community.

"Showtime," Dan said as he handed me a bottle of water. "You ready?"

"Prepared," I said nervously as I looked out through the curtain, "Don't know about ready."

The Kelton High School Auditorium had 600 seats. Every seat was filled, the sides and back were packed and it looked as if there were people overflowing into the halls outside. The seats had been reserved for former Pathway employees, and each had been handed an envelope with his or her name on it and asked not to open it until told to. We had brought 316 envelopes, one for every person on the list of employees who had lost their jobs the previous month, and every single one had been claimed.

"Looks like some of them brought their families with them," I observed.

"Most of them, I think," Dan agreed. "And invited their relatives from the Chicago Tribune and CNN, too."

I groaned. Well, we wanted to make a splash, didn't we?

"What do you think?" I asked, "Go out through the curtain or walk on from the side of the stage? Curtain feels like I'm a big star trying to make an entrance. Seems like something Tenneson would do."

"Side," Dan agreed, "Definitely side."

"There's a podium out there," I noticed, "I'm not going to stand behind that and lecture them."

I took a last swig from the water bottle and we headed out onto the stage. The podium had a microphone on it, thankfully a wireless one, so I pulled it off its socket and walked up to the front of the stage.

"Hello everyone," I said, "And thank you all for coming tonight. I'm Geoff Lee, Managing Director of Phoenix, and this is Marty Ball, our Director of Operations.

"Those of you who previously worked for Pathway Inc were given envelopes when you arrived. Would you please open yours now?" We waited while envelopes were torn open all around the auditorium and the enclosed letters with their attached bits of plastic were withdrawn and examined. Then there was the sound of gasps, and even a few shrieks as people read the title on the letters and realized what they were holding: hiring letters.

"We wish we could call you all in to work in time for Christmas," I explained, "But the reality is that between the way previous management neglected equipment and facilities and the fact that the plant has now been closed for almost two months, there's a lot of work that needs to be done to bring Pathway back online." Another dig at Tenneson there.

"We've staged the report-to-work schedule in two-week intervals over the next two months. If your letter says you're in the first hiring round, the main gate and Building One will be open Monday morning at 8:00." There was a round of applause and cheers from the audience.

"Health insurance benefits for everyone went back online at noon today. If you haven't sent your COBRA papers in yet, there's no need to." Another cheer.

"Direct deposit of pay will resume right after the new year. All salaries and seniorities will be preserved.

"Attached to your rehire letters are Visa debit cards. Each of these cards has been preloaded with $1,500. They're activated by going to the web site or calling the toll free number on the letter and entering your Social Security numbers. We hope this will help make the holiday and the rest of the year a little brighter for everyone." There were gasps and scattered "Oh my Gods," and the audience sat stunned for a few moments, then burst into a huge round of cheers and applause. Some actually cried.

"There's a buffet in the gym," I said to complete my remarks, "Please join us and enjoy. Thank you again for coming, and welcome to what we hope will be a much better Pathway than the one you knew at the beginning of this year!"

Yeah, I couldn't resist taking one more little poke there.

The official meeting was followed by interviews with various reporters. Mostly, I just expressed the same views we had previously based our nascent grain cooperative proposals on as I talked about how the "new Pathway" would succeed on high quality, integrity and just "doing the right thing." And took advantage of every opportunity to point out how Pathway's previous owners had not.

We spent the remainder of the evening meeting and shaking hands with our soon-to-be new employees and their families. I looked into the eyes of people who just a few weeks ago had been looking at a hopeless future and saw hope. I hadn't seen much of that lately. I wanted to see more.

"You think any of this is getting back to Tenneson?" Marty asked as we headed for our hotel.

"Not a clue," I admitted. "But it feels pretty damned good."

"Yeah," Marty agreed. "There is that."

Rising from the ashes: Phoenix gives displaced Pathway workers $1,500 gifts.

December 12, 2011

Kelton Record/Chicago Tribune

A company reopening the former Pathway bakery in Kelton, Illinois, stunned displaced employees by presenting them with $1,500 Visa gift cards.

Albuquerque, NM based Phoenix Partners will begin operations next week at the former Pathway plant with a staff of 70. More than 300 employees lost their jobs when Pathway filed for bankruptcy in October. Phoenix says it hopes to have all employees back on the job by the end of February.

Mary Gladden, a worker at the bakery, had been preparing her children for a very modest holiday.

"They said they understood," Gladden recalls. "You always want to give them more, but ... I didn't think I would be able to."

Now she can.

"I was crying," Gladden says of the gift. "Who are these people? They don't know me. They don't know any of the Pathway people. And they come and do this."

Each former Pathway employee received a gift card at a meeting Friday at the Kelton High School.

"We are a new company," Phoenix Managing Director Geoff Lee told the Kelton Record, "We don't have a history people just can look up. These are the folks we're depending on for our future success. They suffered a lot under the old Pathway's owners, and we want them to know that we are not the same as the people who did that to them."