Skagit Gardens Files For Bankruptcy After Owners Charged With Fraud

Mount Vernon, Washington- Skagit Gardens in Mount Vernon,  Filed for Chapter 11 Bankruptcy protection on May 27th 2016. This is  nearly three months after the owners were charged on March 10th, 2016 by the U.S. Securities and Exchange Commission (SEC)  in what is described as a $350 million dollar Ponzi-scheme.

The bankruptcy has been administratively consolidated to include all four of the businesses that Skagit Gardens is operating under, including the operating company “Skagit Gardens Inc“, case number 16-12879, one holding company, “Skagit Real Estate Holdings, LLC” case number 16-12881 and two special purpose entities, “Skagit TPPSPE, LLC” case number 16-12887 and “Skagit RESPE, LLC” case number 16-12885.

According to a press release from the SEC, they  charged the  Oregon-based investment group and three top executives with hiding the rapidly deteriorating financial condition of its enterprise while raising more than $350 million from investors.  Aequitas Management LLC and four affiliates allegedly defrauded more than 1,500 investors nationwide into believing they were making health care, education, and transportation-related investments when their money was really being used in a last-ditch effort to save the firm.  Some money from new investors was allegedly used to pay earlier investors.

According to electronic court documents obtained  by SkagitBreaking.com, an Aequitas Management affiliate bought Skagit Gardens in 2008. Skagit Gardens President, Mark Buchholz, wrote in  U.S. Bankruptcy court documents that Skagit Garden operations have been “uneven” since the purchase.

Skagit Gardens,  was founded in 1966 by Jim and Ruth Youngsman. In 1967 they built their first 20′ x 150′ greenhouse. Today Skagit Gardens has two locations totaling over 50 acres.  21.59 acres located at 3100 Old Highway 99 is leased from Skagit Garden  affiliate Skagit RESPE, LLC, which is included in the bankruptcy filings.

Skagit Gardens has two divisions—one is finished Sales for retail-ready plants that are selected for GARDEN CENTERS & LANDSCAPERS, and the other is Skagit SuperStarts!™ for liners of seedlings and cuttings. These are sold to GROWERS & HORTICULTURAL BROKERS for independent garden centers, retailers, and landscapers across the country.

Court Documents show the company has an annual revenue of between $20 million and $25 Million dollars and documents have been filed requesting emergency motions for authority to pay pre-petition payroll and commissions, employee benefits and related expenses  as well as utilities to keep the business in operation.

Court Documents show Skagit Gardens currently has 262 employees and during the May growing season the number may grow to 275 employees.

Skagit Gardens lawyers told U.S. Bankruptcy Judge Christopher Alston that they plan to sell the company quickly so that the buyer can take profit from the current growing season, which lasts until August.

Court Document 51, filed on June 1st, 2016 with the Bankruptcy court, state the company has a tentative offer from an Ohio based company, Early Morning LLC, for $6,227,500.00 plus $450,000 in employment liabilities and includes a deposit of $311,375.00.  This purchase agreement would include but is not limited to, all of Skagit Gardens tangible and intangible assets, including inventory, accounts receivable and real estate property. It would not include cash or bank accounts that were identified in the court documents.

Court documents show that in addition to  negotiations with Early Morning LLC,  which have been ongoing for some time, Skagit Gardens and its professionals actively reached out to a number of other potential buyers.

Court documents show that in total, they contacted fifteen (15)  parties to gauge interest, twelve (12)  of which signed Non-Disclosure Agreements and received due diligence information. Of those, Skagit Gardens management and professionals had meetings and conversations with at least nine, and seven have expressed serious interest in purchasing Skagit Gardens. Skagit Garden representatives communicated to each of the interested parties that the sale process would be completed through a Chapter 11, with an initial bid from Early Morning LLC,  against which competitive overbids could be submitted with an auction to determine the highest and best offer.

You can read the over 1900 pages of Skagit Garden Bankruptcy court documents by visiting http://www.wawb.uscourts.gov/   *note there is a charge for this service*