What a sad, strange tale it is
You should grab a cup of coffee before you start this; get comfortable, for what a long, sad strange tale this is.
Last week, the Times reported that Seaway Valley Capital Corp., the Tom Scozzafava-led holding company that started WiseBuys, turned that chain into Hacketts, bought North Country Hospitality with its restaurants and bakery and then watched as the whole empire crumbled, has found its redemption a half a world away, in the form of Asian investors.
And not just any Asian investors. These are the Asian investors willing to pay a half a million dollars U.S. just to get a visa to come here. Mr. Scozzafava was effusive in describing the virtually limitless possibilities, looking at $30 million in new, undemanding capital if only 60 Chinese nationals buy into his scheme – er, investment opportunity.
That $30 million, he says, could be split with $10 million going to the bankrupt Hacketts stores and $20 million to Harbor Brewing Co.'s brewing and baking operations and new restaurants. And since Hacketts is only somewhere between $5 million and $7 million in debt, according to a statement Mr. Scozzafava made to the Times last May, it could use $7 million to resurrect the defunct WiseBuys stores to offer merchandise on consignment, creating a bold new opportunity for consumers. It would allow them, Seaway Valley officials said, to buy "discounted or obsolete" merchandise.
The visual immediately pops up: former Ames stores stocked with row on row of such desirable obsolete items as rotary phones, typewriters, analog TVs, wind-up clocks and on and on and on.
All it will take is for Seaway Valley Capital to register as a regional center under the EB-5 Immigrant Investor Pilot Program. ACG Consulting, a subsidiary of a California company, will help Seaway do this for the very reasonable cost of 51 percent of the regional center. With Seaway Valley's 6 billion shares outstanding, this will take total investment in the company up to around 467 percent.
The only words missing from Seaway Valley's release announcing this plan are "Nigerian Prince."
A review of the EB-5 requirements indicate that Seaway Valley is either missing or soft-pedaling some key elements of the program. Most telling is the requirement that investors must be engaged in the management of the enterprise, either on a day-to-day basis or through participation in policy making decisions. While Seaway Valley has not been shy about the number of managers it has had running through its various enterprises, it's a bit hard to see how it's going to absorb 60 Asian nationals running Hacketts stores, Sackets Harbor Brew Pub or Good Fellos. Although they could be put to work selling obsolete merchandise…
The EB-5 fund-raising plan is nothing new to Seaway Valley, which has been walking the financial tightrope since shortly after its WiseBuys chain opened in the fall of 2003. The decision to merge Patrick Hackett's Hardware stores with WiseBuys in 2007 accelerated the accumulation of debt, including a $5 million Wells Fargo line of credit that was called in 2009 and triggered a near-catastrophe for the companies under the Seaway Valley umbrella.
And the decision in 2008 to acquire North Country Hospitality and its bakery, restaurants and Jreck franchises, led to even more financial distress and introduced Christopher Swartz to the operation. Within a year, Mr. Scozzafava would be blaming Mr. Swartz for causing many of the company's financial woes by failing to disclose outstanding obligations – including tax liens, loans from private investors and court judgments – against North Country Hospitality.
So now, Seaway Valley staggers along, grasping at straws. Hacketts survives in four locations, although it is in Chapter 11 bankruptcy and has yet to provide a plan to come out of that protection. The restaurants in Sackets Harbor – Sackets Harbor Brew Pub and Good Fellos – are being sought by investors in the Swartz operation, some of whom already have judgments against North Country Hospitality. The suit by three New Jersey residents and a Florida investment company, if successful, would require Seaway Valley to come up with about $1 million to retain ownership of the restaurants and Alteri's Bakery. Otherwise, the assets could be sold to satisfy the judgment.
It is no wonder that Mr. Scozzafava is scouring the countryside – and the Internet, and Madame Grezchenko's crystal ball – for money. Seaway Valley has become one of the north country's heaviest bleeders.
Some might like to compare the saga to the tale of Icarus, who flew too close to the sun. Sadly, it is more analogous to the tiny boat fleeing a Caribbean island on the high tide, riding high at first but sinking ever lower into the water as it picks up stragglers floundering in the sea. You certainly can root for this motley crew to make safe harbor, but with the seas rising, it's hard to believe that will ever happen.
