On Sunday, Glenside Local reported on the bankruptcy filings for Advanced Sports Enterprises and four affiliated businesses. Led by Mr. Patrick Cunnane, husband of Congresswoman-Elect Madeleine Dean, Advanced Sports Enterprises is a major force within the bicycle industry.
The news story was news beyond the bicycle industry because the United States Congress requires Congressional candidates and members of Congress to file specific disclosure statements. These financial disclosure statements include information about not only the Congressional candidates or the members of Congress, but also information about certain family members – including spouses – of the Congressional candidates or the members of Congress.
During the election, Ms. Dean spoke little about her husband’s business. When The Philadelphia Inquirer, though, noted that the disclosure statements required of Congressional candidates did not include key information about her family’s wealth, her campaign indicated that it would update her disclosure statements.
The campaign did so.
You can view the initial financial disclosure statement, filed on April 20, 2018, by clicking here.
You can view the amended financial disclosure statement, filed on September 27, 2018, by clicking here.
Mr. Koh Chiba, Campaign Manager for Madeleine Dean, explained that “During the campaign, we focused on the candidate, not on the candidate’s husband. We focused on the policies, priorities, and plans that Madeleine has for the 4th Congressional District.”
“Madeleine and her family are extremely proud of PJ [Mr. Patrick Cunnane], his business, and his business ethics,” Mr. Chiba continued. “And have been throughout his entire career.”
“Madeleine’s job is to represent the people and that’s what she is doing,” Mr. Chiba concluded.
According to the sworn statements signed by Mr. Cunnane, the businesses have had severe debt problems for about two years. Efforts have been underway for sometime to try to resolve some of the financial difficulties. One option that has been considered is the sale of part or all of the businesses included in the recent bankruptcy filings.
“In May of 2018 [around the time of the Primary Elections], the Debtors retained an investment banker, D. A. Davidson & Co. (‘D. A. Davidson’) to assist them in negotiating with interested parties, preparing for and initiating marketing efforts and facilitating due diligence by various parties.”
Later in the statements: “D. A. Davidson, in conjunction with assistance from the Debtors, identified 84 potential investors and/or acquirers to date. These 84 potential investors and acquirers include 60 financial parties in form of private equity funds and family offices, 17 strategic parties and seven liquidators.”
The statements indicate that on October 31, 2018, the Debtors entered into an agreement with Gordon Brothers Retail Partners, LLC “to conduct Store Closing Sales”.
The Mid-Term General Elections were held on November 6th.
The businesses filed for Chapter 11 Bankruptcy on November 16th.
Whether voters should have had information on a spouse’s business operations prior to voting is a moot point.
Going forward, while some may indicate that the business plans of direct family members of a candidate or elected official are something that should be disclosed, such disclosures do not appear to be required of candidates or elected officials.
Broad categories of assets, liabilities, sources of income, and related items are required for disclosure.
Business dealings, strategies, plans of action, and related concepts do not appear to be required in Congressional financial disclosure statements.
The results of those business dealings, strategies, plans of action, and related concepts – the assets, liabilities, sources of income, and related items – are the items that are disclosed.
Consider a simple example that does not involve a large bicycle company:
A husband and wife own their home. One is running for elected office. During the campaign, which is going well, the husband and wife decide that their current housing situation won’t fit their needs if the one spouse wins the election. The sale of the current house may provide sufficient funds to allow the family to pay for the down payment on a smaller house within the district as well as providing sufficient funds for a second home that may need to be purchased closer to the where the one spouse will be working, if that spouse wins the election.
That would be prudent planning to many people.
Yet, none of that is anyone’s business until and unless the husband and wife decide to put the house on the market publicly (when the news media will notice) or until the house is sold and assets and liabilities as well as sources of income may change (when disclosure statements will need to be updated).
While the bicycle firm may have had debt problems for the past two years, while the bicycle firm may have been seeking buyers since May, and while the bicycle firm may have considered bankruptcy and, likely, other options in recent months, none of those items appear to be required disclosures by the candidate seeking election.
That said, the plans outlined in the bankruptcy filings are detailed and do have impact in communities across the nation.
A few items of note:
As noted in the press release from Advanced Sports Enterprises, “Employee layoffs and store closings are inevitable.”
There are substantial loans with a large bank, Wells Fargo, and several other entities.
The overall business includes operations in the form of retail stores in a number of communities throughout the United States as well as ownership in production operations in other countries. Some of its own ownership is in the hands of several foreign entities.
“The Debtors intend to exit the leases of at least 40 underperforming retail stores during these Chapter 11 Cases, thereby right-sizing their retail space in a way that simply would not be feasible outside of bankruptcy,” according to a statement in the bankruptcy filings.
Later, in the statement, it is detailed that “The Debtors have designed procedures to enable them to efficiently reject the leases of at least 40 but up to 104 Stores.” The retail operations include 104 stores.
In the bankruptcy filings, the Debtors ask for permission to reject certain agreements with one of the foreign entities. If permitted, this would mean that the foreign entity “would not be permitted to engage in the manufacture and/or sale of bicycles and related parts and accessories that are branded with the Debtors’ trademarks.”
You can view part of the bankruptcy filings by clicking here.