Judge hears opposition to Garces' bankruptcy filing, partners could lose millions

Steve Tawa
May 21, 2018 - 7:27 pm
Chef Jose Garces in his Olon restaurant.

Hadas Kuznits | KYW Newsradio

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PHILADELPHIA (KYW Newsradio) -- A federal judge is hearing a celebrity chef’s plan to declare bankruptcy, and get himself out of the financial soup. But his business partners oppose the move, and are stirring the pot. 

Jose Garces, who began with Amada in Old City in 2005, grew his restaurant empire to nearly 30-nationwide. Now, he's down to a baker's dozen.

The subset of this hearing is whether the chef can include some of his successful charges, Amada, Tinto, Village Whiskey, Buena Onda and Old Bar, in the Chapter 11-Bankruptcy filing.

Garces has arranged to have restaurant chain operator Ballard Group, which has 150-restaurants and coffee houses, buy the assets of the Garces group for more than $5 million.

His early investors, Spinner Family Holdings and food purveyor Jim Sorkin claim Garces "fraudulently, unethically" divided his corporate structure to out vote their opposition to bankruptcy.

If Garces is allowed to go through bankruptcy to relieve his massive debts, they stand to lose millions of dollars.

An investment banker, Jeffrey Manning testified Garces offered his partners a path around bankruptcy in January, by having Ballard Brands pay more than $14 million, with the Spinners and Sorkin receiving nearly $5 million, but they rejected that offer.

Sorkin, for example, claims Garces "exploited" Sorkin's assets, in "an attempt to save Garces' other failing restaurants."

Now, while Ballard is the so-called "stalking-horse" leading bidder - the entity with the initial bid on the assets of Garces' bankrupt company - the investment banker believes at least five others could place bids when it goes to auction in late June.

It's a complex web - while Garces sat behind counsel tables - there are a dozen lawyers representing various concerns in the courtroom, with more by phone.

The case continues on Wednesday, leading up to a potential auction June 26.