Hyde Park in the Year 1 AC (After Co-Op)

posted by Richard Gill

Hyde Park Co-Op ca. 2007

It’s been a whole year since the Hyde Park Co-op finally did the neighborhood a good turn by going out of business. That finale occurred amidst Co-op adherents’ cries that its closure would destroy “the character” and the “uniqueness” of the neighborhood. You’d have thought the Co-op, moribund and dysfunctional as it was, constituted some sort of essence without which Hyde Park would wither and die. Well, the Co-op closed its doors January 20, 2008, making way for Treasure Island. And look—Hyde Park is alive and well in 2009.

The “character” of the neighborhood is none the worse without the Co-op. Unfortunately, the characters of the neighborhood are still working hard to prevent other changes that would break with their misty-eyed regard for the “good old days”, whatever that represented. Other characters merely want to retain specific privileges for themselves at the expense of everyone else.

The Good Old Days

The Co-op was simply doomed by money problems and a dose of hubris. The controversy that raged around the Co-op in its final days had little impact on the store’s actual closing. Nonetheless, that noisy and angry finale did serve as a rude awakening for what this blog has termed the Hyde Park Establishment. There is change afoot in Hyde Park. More and more people recognize the folly of a community mired in the past, and they’re not going to allow the Hyde Park Establishment—a dwindling lot—to control life in the neighborhood.

Hyde Park has seen a number of favorable additions and deletions in the past year. Co-op closure/Treasure Island opening. Zaleski and Horvath MarketCafe. The removal of Orisha Wall. Park 52. The Sit Down. Bike shop, Homemade Pizza and a new US Post Office making for a fully-occupied Hyde Park Shopping Center. Expanded Hyde Park Produce. Open Produce. U of C library expansion under construction. Istria Café more popular than ever. Chant. Parker’s Pets.

Admittedly, the Hyde Park Establishment did, for the moment at least, stop development of a much-needed hotel at Doctors Hospital. But look what they had to go through to win that self-serving, extremely narrow victory.

On the other hand, the Solstice development was approved and, the economy notwithstanding, it will be built. Density along 53^rd Street will increase, to everyone’s benefit, whether or not the Hyde Park Establishment wants it. The Point will be rebuilt largely along the guidelines of the Compromise Plan. The dark hulk of St. Stephen’s church will not remain, even if the neighbors like it because it gives them a semi-private block. 57^th Street will open to two-way traffic at Stony Island, even though some neighbors don’t want to lose their semi-private public street.

When these changes ultimately do occur, the Hyde Park Establishment and the NIMBYs among them probably won’t admit that the “character” of the neighborhood will not have been degraded. Whether they like it or not, that character—cultural, intellectual, social—is largely a function of the presence of The University of Chicago. The University is imperfect and has stumbled at times with regard to neighborhood relations and development. But the University, warts and all, is at the core of what is Hyde Park. And the University isn’t going away.

Here’s a closing note to the Hyde Park Establishment and its NIMBY subset: Nobody elected you the guardians of Hyde Park’s inner juices. What’s worthwhile saving will be saved, but the neighborhood will progress around you, for the better.

In the words of the Borg Collective: resistance is futile.

Report From the Final Co-Op Board Meeting

posted by Richard Gill

My wife and I attended the Dec, 17 Co-Op Board meeting. About 75 people attended, and I estimate at least 25 percent of those were employees.

By my watch, the meeting ran three (3) hours and 18 minutes, broken down as follows: 2 hours, 48 minutes of discussion from the audience; 25 minutes in executive session; 5 minutes of open session, during which the Board voted.

Media were there - Tribune, Channel 7, Herald, maybe others. They stayed for the whole meeting.

Based on audience misbehavior at the meeting, I want to commend: the entire Board for valor in the line of fire; James Withrow for unhesitating adherence to the election results and doing, with a heavy heart, what he thought was right; Jay Mulberry (not a Board member) for openly stating his favorable assessment of the vote-counting process, though the voting results clearly disappointed him; and Board president Jim Poueymirou for extreme courage under fire, patience and restraint in the face of insults and abuse, and clarity in his explanations. Similar praise for Alderman Preckwinkle, who was there and spoke about the realities and was peppered with audience abuse for her efforts.

The final Board vote was 7-to-1 in favor of Option 'A', with Director Mueller casting the lone dissenting vote. Director Stanek was absent.

I won't try to chronicle the whole meeting (you had to be there). Here are just some of the highlights.

Several shouted charges of collusion, corruption, being on-the-take, leveled at the University, the Board, Certified, Alderman Preckwinkle. Most - but not all - of this came from employees and a few "activists". This then was followed by cheering and feel-good yelling. Interruptions by employees got so bad that Bruce Brandfon, the store's general manager, had to try to get them to exercise some civility.

There was much audience speech-making among themselves, much rehashing of history and many words about matters beyond the Board's control.

There were audience attempts to belittle and discredit the election.

Sue Walker, of the Herald, announced that Bruce Sagan would pledge a half-million dollars - which the Board explained more than once was too little, too late.

After a number of audience charges that the Board had not involved enough people, James Withrow asked them where they had been all the years that nobody was volunteering for committee work.

Many in the audience demonstrated either a total misunderstanding of economics, bankruptcy and the law, or willful denial of all of the above. Many made wishful remarks about what if they had more time, what if they could ask for this or that; a lot of what-ifs, which more than one Board member explained, more than once, doesn't pay the bills.

Several in the audience made statements about how the Co-Op had been a community center, a democratic institution, etc. As has been previously observed, the sentimentality went far beyond anything that would be felt for a store. It was more like the Co-Op had been Hyde Park's Mother Ship, and it was now imploding.

There was also much negative talk about Treasure Island and Certified.

Jo Reizner and Susan Campbell, of the U of C, attended the meeting and stayed throughout. They were asked to speak. Ms. Campbell briefly and clearly (amid interruptions) stated the University's position.

Near the end of the audience session, someone suggested that the Board had to vote against Option A because of the general anti-Option A sentiment in the audience. Someone shouted something like, "How come nobody here is speaking for Option A; they didn't even come to the meeting." At that point, I felt I had to say something. I raised my hand and was called upon to speak. First, I stated my name, said I voted for Option A and hoped the Board would do the same. Next I said that people who charged bribe-taking and corruption should be ashamed of themselves for making such unsubstantiated accusations. An employee tried to interrupt me, but I yelled back and wasn't interrupted again. I then said that over 5000 votes had been validated. I said further that there were just a few dozen people in the room who could not claim to be representative of the Co-Op's membership.

When the Board came out of executive session, Mr. Poueymirou said that they had called the University and asked if a time extension might be possible. He said the answer had been 'no.' He said this meant the Board still had only Options A and B from which to choose. The Board then voted for Option A, and the meeting was adjourned.

Keystone Co-Op #8: The "New" Option B

posted by chicago pop with deep throat

Mastermind of Co-Op Plan for Commercial Loan

Say what you will about chain grocery stores, about "capital" and all the 1960s phobias that make Co-Op die-hards and Hyde Park isolationists shiver. What we're getting from the community of amateurs lately is no more reassuring.

It consists of a deep paranoia projected onto the University of Chicago when all the evidence makes clear that it is the Co-Op itself that is to blame for its current pickle; a laughable arrogance in the conviction that there are higher moral questions involved in this tale of banal mismanagement and play acting; and a revealing sense of entitlement to a continued existence at the expense of the University and other folks willing to keep the Co-Op on the dole.

The New Option B -- since the first one, the one members probably thought they were voting on, is moot, since that the National Cooperative Bank has rejected Chapter 11 financing -- is all about getting a regular commercial loan, with interest and terms, to help keep gas in the Co-Op's tank while the Co-Op gets its act together. This loan, which will only come on condition of an agreement with the University and Certified, has been seized upon by Co-Op savers as the "Third Way" out of the current crisis.

While we're not sure if there is such a thing as a third way out of a hole you've dug yourself into, we're quite sure that there are three questions that hover over the present strategy of Option B supporters now that a third attempt is being made to secure a commercial loan.

Can the Co-Op even secure a commercial loan? On what terms can it be secured? And can it be serviced in such a way as to do more than defer a resolution of the present crisis to a future point in time?

Rather than making an examination of any of these questions, the "Save the Co-Op" website highlights the very distant possibility of restoring some value to member shares, while glossing over the potential risks involved. The "lure" of Option A that is written off as part of a surreptitious, University-sponsored PR campaign is not that different from the "lure" of redeemed member shares here being proffered with next to no assessment of its real probability.

The risks not mentioned on the website include 1) the likelihood of meeting the conditions of a loan, meaning a payment plan agreed to with the University of Chicago on the Co-Op's back rent, and with Certified Grocers on its lease on 47th Street; and 2) the chances that the Co-Op will default on this loan, leading once again to supplier and liquidity troubles, and the threat of liquidation.

The Save the Co-Op website minimizes any downside to Option B because it counts on the University to provide a bailout in the event of the Co-Op's failure in servicing the new loan. In the bizarro-world of Co-Op Director Mueller, this expression of entitlement to financial rescue is "the more moral option."

Here's the key text outlining the preferred scenario from the Save the Co-Op website:

Option B passes but there is no way possible for the Co-Op to get a loan or go into reorganization. At this point the University will either go back to Option A or disgrace itself by allowing the Co-Op to go into liquidation. The idea that the University would allow the dismemberment of the store, the non-payment of merchants, the community with no place to shop, its mall without a keystone, residents heading north for all their shopping, etc. etc. is completely at variance with dozens of statements made by President Zimmer, Henry Webber and other University representatives for months and months. They would be doing what they claim the Co-Op has done -- but doing it with 100 times greater destructiveness.

Essentially, the Co-Op savers are playing a game of chicken with the University. The claim here is that the University is bluffing, that if the Co-Op membership and Board decided to go for Option B, now that debtor-in-possession financing is off the table, the University would in fact come to the Co-Op's rescue because they don't want a shuttered store in the neighborhood. This plan counts on the hegemonic University saving the Co-Op's insolvent but entitled arse.

Somehow or another, at the end of this queer passage, you get the sense that if the Co-Op goes down, it will somehow be the University's fault, rather than that series of friendly, neighborhood Co-Op Boards staffed by your friendly neighbors, the ones who ran this ship into the ground. In the absence of evidence to the contrary, this is what I see as the true fruit of the "democratic center of community involvement" advertised on the Save the Co-Op website.

Rather than stepping up and shutting down a failed business like responsible adults, the Co-Op Savers are acting like spoiled children -- eager to speed around in the family car knowing that if they crash it, Daddy will just buy them a new one.

It's one thing when amateurs botch up their own accounts. We don't have to live with that.

It's another thing entirely when amateurs botch up an enterprise that is supposed to serve the entire community, hold no accountability for the wildest schemes, and then make claims of moral superiority that would make Hugo Chavez cry.

Herald's Chicken: Are we all on the take?

posted by Peter Rossi

The news is grim. There is little hope for the Co-Op to go on turning over Hyde Park stomachs. To file for Chapter 11 Bankruptcy, debt consolidation financing is required. Even the starry-eyed James Withrow admits that there is no hope for chapter 11. The rapacious University of Chicago sits like a vulture waiting to feast on the remains.

Look! Up in the sky! It's a can of soup. It's a pigeon. No. It's the Hyde Park Herald (December 5th edition) to the rescue. The Herald pulled a fast one with an unverified (of course) lead story that there is the possibility of a 2.5 million commercial loan to "bailout" the Co-Op. Those news hounds at the Herald beat a confession out of the Co-Op Board President that there had always been a commercial loan on the table.

I am sorry to let reality intrude on this pipe dream, but there are at least three catches:

1. there are conditions on the loan. The U of C must forgive the 1.2 million in back rent and Certified must allow themselves to be bought out of their 47st street lease on the cheap (for only one year's rent)

2. 2.5 million only goes half way to erase the mountain of Co-Op debt (more than 5 million)

3. The Co-Op must be a going concern. The myth started by Sir James is that the 55th street store makes a profit of 1 million per year. Our own Deep Throat exposed that bit of fancy. Not paying your rent can make even the anemic Co-Op look rosy.

By now, even the Herald editors must realize that no one really believes anything that the paper tosses out to stir up the pot. So the story goes on to spin the favorite conspiracy web. Here the villain is that sinister organization, the University of Chicago. An "aggressive and well-coordinated effort to convince Hyde Parkers to shut the Co-Op down" is afoot.

How do we know that the University is behind these fliers circulating around the neighborhood? The source, Hyde Park Co-Op manager Bruce Brandfon, says it is "likely that the University bankrolled this effort." The Herald fails to cite any actual evidence that the University is behind any of the recent efforts to persuade Co-Op members to vote for option A. It's bad enough to splash rumors on the front page but when the source of the rumor has a direct interest keep the Co-Op around so he can get paid for a few more months, you do want to scream.

The first to start pointing fingers at our fair University was James Withrow (who is employed by the University). Mr. Withrow accused the University of stuffing the "fact sheet" that was sent with the ballots down the throats of the Co-Op board. Mr. Withrow has since apologized for his error in his own private blog. So like many NIMBY conspiracy theories it has acquired a life of its own divorced from reality. In a recent email, prominent NIMBY Jay Mulberry aped the University theory stating without a shred of proof, "Option A is represented by a PR machine, financed by the University and supported by workers from Alderman Preckwinkle's office."

But what of it? If it is true that the University is lobbying Hyde Parkers to shutter the Co-Op, why aren't we all shouting-- Go Maroons!

It is hard to understand why the University comes out such a villain on the Co-Op. They have been most patient (some say financially irresponsible) in allowing the Co-Op to have a free line of credit for 1.2 million. They have offered to pay more than 5 million to bring a real grocery store into our neighborhood. The university competes on an national level for students and faculty. On this issue, the neighborhood and University interests are perfectly aligned. If the University wants to pay a subsidy to obtain a better quality grocery store than we would get otherwise, let them spend their money.

Our friends in the Herald editorial suite are mystified by the University. In their editorial, they wonder out loud why the University is so determined to bring a quality store to our neighborhood. Are the Herald editors too tightly wrapped in the NIMBY flag to see the obvious or are they too beholden to the Co-Op ad revenue and worried that Dominicks will not advertise in a tiny paper with an aging and shrinking readership?

Herald's Chicken: Co-Op Pledge Drive "Almost There"

posted by Peter Rossi

There is a light at the end of the tunnel for the debt-saddled Hyde Park Co-Op. The Co-Op web site proudly proclaims a total of $26,245 (as of December 1st) has been pledged by members to defray the debt. "We have been surprised at the support the neigborhood has shown us," reported maverick board member Jim Too-Tall Tail. "The pledges we have received so far top our total store revenue for November."

When asked by this Herald reporter why neighbors should support the dying Establishment institution, Mr. Tail responded "People give back in proportion to the contributions that the Co-Op has made to our community."

"The Co-Op's contributions to our community are intangibles that can't be measured by action but must be considered an ethos," added Mr. Tail.

The prospects for the success of the pledge drive are bright, according to Mr. Tail. "At this rate, we may reach $50,000 by the bankruptcy deadline of December 14th. Only the failed 'Save the Point' campaign has raised more money in our community than our drive."

"We hope this signals a return to the hey-day of community activism. Members of our community are putting narrow concerns for their own welfare behind them and reaching out in the cooperative spirit to ensure that we are all worse off."

Tale of the Tape
Co-Op Debt
1.2 million back rent to U of C
2.3 million owed to suppliers
0.685 million 47th store debt
1.01 million owed to Certified
Total: 5.195 million
Pledged: .026 million

"We expect that the fund raising drive will finish successfully around the year 2100," Mr. Tail asserted. "We feel very strongly that there are many lenders who will jump at the opportunity to extend us credit on the strength of this pledge cashflow."

In the past, my Herald's Chicken posts have been commentaries on or parodies of Herald coverage. However, the penchant for NIMBY points of view by Herald reporters and editors allows me to predict future Herald coverage. It is particularly easy to presage Herald articles as most articles do not involve any news content.

Herald's Chicken: Add Co-Op to List of Abandoned Buildings

posted by Peter Rossi

Hyde Parkers moved closer to adding the Co-Op store on 55th to the long list of shuttered and abandoned buildings in Hyde Park. Ignoring recommendations that the Co-Op accept a generous bail-out proposal in exchange for a replacement with an actual grocery store, Co-Op members shouted "Save the Co-Op" at a meeting last Sunday.

Boldly defying market forces and dry balance sheet statistics, many attending held out the panacea of bankruptcy as a way to save one of the oldest neighborhood Establishment institutions. These members were exhorted by two maverick Board members who were seen to be holding well-thumbed copies of The Rochdale Principles.

"Bankruptcy is a way to turn the rules of the Capitalists against them," commented member Ned I.M. B. Young, 99. "If the Co-Op files for bankruptcy, they can simply walk away from the 47 Street store lease." A Herald reporter reminded Mr. Young that Certified Grocers is both the Co-Op's landlord on 47th street and supplier for 55th. "Details, details, the people have spoken -- these suppliers will just have to give us free groceries until we get back on our feet."

Others at the meeting excoriated the Co-Op's landlord, the University of Chicago. "As rich as these people are, they can certainly afford to extend us another few millions to let the Co-Op continue to provide us with poor service, high prices and low quality produce," said local writer Curtis B. Misguided. "You need to suffer in order to be truly creative. The long Chicago winters, coupled with the Co-Op, have helped many of us do our best work."

Still others emphasized the preservation motive in taking the bankruptcy route. Freeze! Illinois chair, Daniel Buttress, explained that "we want to preserve buildings in the amber of the Hyde Park backwater. We have been very encouraged that Alderman Hairston has turned down proposals to replace Doctor's Hospital with a hotel. We have St. Stephen's, Doctor's Hospital, and the crumbling Point revetment on our list of historically significant, abandoned structures. If the Co-Op takes the bankruptcy route, it will be shuttered within a few months and we can add it to our list."

When asked why the Co-Op structure deserves the attention of preservationists, Mr. Buttress replied, "well, it is true that Co-Op was very badly rehabbed in 1999. But if we don't abandon poor architecture today, we will have nothing to preserve tomorrow!"

Some at the meeting noted that the "Save the Co-Op" campaign could be a boon to local environmentalists and recyclers. "We can recycle the rhetoric of the unsuccessful 'Save the Point' campaign for use here," according to Save the Point task force spokesman, Don Sheepish. "Even the 'Save the Point' bumperstickers can be reused by covering 'Point' with 'Co-Op.'We are going to use minimum wage dishwashers from the Cosimo's to help out with this task."

Whatever the outcome, many in the community welcome a rebirth of the unrealistic expectations, empty rhetoric, and financial irresponsibility that our community was once famous for. A group of members is preparing to chain themselves to Co-Op shopping carts, if the Co-Op turns over operations to another retailer.

Happy Thanksgiving from HPP!!

Keystone Co-Op #7: Board Split on Bankruptcy or Buy-Out

posted by deep throat

Bankruptcy Option No Easy Fix for Co-Op

At Sunday's standing-room-only community meeting on the Co-Op's future, two different factions on the board laid out opposing options for the membership to vote on.

No matter which option is ultimately selected, the Co-Op and its democratic community principles will no longer exist, whether the 55th Street store stays in operation or not.

Further, any funds raised in a "capital drive" not only will probably never be refunded, but may very well end up helping to keep alive a store that winds up owned by someone other than the remaining cooperative members.

And, if the die-hard faction's proposal to go into bankruptcy and reject the University's bail-out is chosen, the high risk of eventual liquidation of the Co-Op's assets means that the chances are higher that the neighborhood will go longer without any grocery store at all. No one brought up this potential consequence of the bankruptcy route.

But first, let's review the afternoon's events.

It was cause for some concern that the audience was clearly composed mostly of die-hard Co-Op supporters who did not understand the magnitude of the institution's financial distress, the concrete implications of bankruptcy proceedings, or the complicity of the retail cooperative Certified in the Co-Op's troubles.

The first option presented, also known as "Sorry Charlie" in our earlier post, involves the generous debt workout plan that the University has proposed. This approach would allow the University to buy out the remainder of the 55th Street store lease (through 2013) and forgive the 14 months of back rent that the Co-Op still owes. The 55th Street store would close, and a new grocery store would open within 14 days of the Co-Op's exit. The Co-Op would take the proceeds from the buyout and pay off the 47th Street lease with Certified, and pay off its vendors.

While the University has purportedly had discussions with several grocers, it has clearly stated that whichever grocer ends up moving into 55th Street must make significant improvements to the store space. With this option, the Co-Op's last remaining store would likely be shut by the end of January, and a new grocer would open up in that freshened space within two weeks.

The second option, also known as "Rehab," means the Co-Op would file for Chapter 11 bankruptcy, keep the 55th Street store in operation, and attempt to clean its financial house. However, this option is fraught with 6 very big "ifs."

The 6 Very Big IFs:

Rehab will only work out 1) if the Co-Op is able to get an approximately $2 million loan; 2) if Certified will agree to a $1 million buyout of the 47th Street lease; 3) if the Co-Op can raise "substantial" pledges from the membership for the capital campaign; 4) if General Manager Brandfon stays on and continues to improve operations; 5) if shoppers start spending more food dollars at the store; and 6) if it can pay off all its creditors 100%.

Even if all of the above conditions are met, make no mistake about it: this alternative would only save the existing grocery store at 55th Street -- but not the current cooperative management or ownership structure -- and the store would wind up in the possession of whichever lender is foolhardy enough to loan the Co-Op more money. It does not allow the membership to retain control of the Co-Op during bankruptcy proceedings.

In this Chapter 11 debtor-in-possession arrangement, the new (post-bankruptcy petition) creditor will take precedence over pre-petition creditors and shareholders (the membership), and will be in the position to oversee operations of the 55th Street store.

As one Hyde Park resident, Mark Johnson, pointed out in the meeting, the creditors will have a lot of influence on the bankruptcy judge, not the Co-Op members. In this bankruptcy situation, the Co-Op will be answering to its newest creditor, not to its membership. So much for the democratic control that the Co-Op likes to stand for.

If the Co-Op pursues rehab and is not able to secure the considerable financing necessary, then the default would be bankruptcy and liquidation. In this case, the 55th Street store would be shut down, the court would appoint an independent party to liquidate all remaining assets and pay creditors in order of seniority.

This default situation would also likely make it very difficult for the 55th Street landlord, the University, to line up a new grocer on short notice, leaving the neighborhood potentially without any grocery store for longer than 14 days.

Note: the Co-Op has thus far not been able to secure financing for rehab. It must be in place by 12/17/2007, which is when the University is likely to file for foreclosure notice on the 55th Street store.

So, the clock is ticking. The National Cooperative Bank is willing to entertain the possibility of loaning the Co-Op $2 million, which would allow the Co-Op to enter Chapter 11, and will be voting on it Monday 11/19. But before anyone gets too excited, the NCB's loan is itself contingent upon Certified Grocers agreeing to a $1 million buyout of the 47th Street lease. As President Poueymirou pointed out, Certified has not in the past and is not currently willing to negotiate on this point.

In the earlier Keystone Co-Op posts, we had originally thought the board would endorse the rehab option. After the University entered the scene with its extremely generous debt workout offer, we then believed the board was likely to move in that direction. As it turns out, the board is split on these two approaches.

With the University's debt workout plan, the biggest uncertainty is which grocer would move into the 55th Street store space. However, I'm fairly confident that any new grocer would be an improvement on how the 55th Street store has been run over the last five years.

With the rehab option, on the other hand, there is more uncertainty and risk concerning the ultimate outcome. Going down that path could result in 1) a quick liquidation, 2) a long, slow death if the capital campaign fails or if GM Brandfon leaves, or 3) ownership by creditors even after emerging from bankruptcy if the Co-Op fails to pay off its creditors 100%. In this last scenario, the members would be left out in the cold, and their shares would still be worthless.

Interestingly enough, many members who commented in the meeting seemed willing to view the University as the great villain in this drama, but no one was nearly as critical about Certified, which in my view has been the biggest obstacle keeping the Co-Op from regaining any financial footing.

The University has cut the Co-Op plenty of slack, to the tune of 14 months of missing rent payments, while Certified has been quick to cut off food shipments as soon as the 47th Street rent payment is late. As President Poueymirou related, the Co-Op tried to stop its rent payment to Certified only last month, but Certified immediately cut off a food shipment.

As a result, the only reason the Co-Op has been able to continue to stock its shelves and stay in business is because it's stiffing the University on rent in order to keep up with its lease with Certified. In this case, the membership should be thanking the University.

Big kudos go to President Poueymirou, Treasurer Lowenthal, and Alderman Toni Preckwinkle for championing the debt workout plan -- the most realistic option that will bring a new grocer to the neighborhood in an orderly and efficient manner. While they are in a difficult position of having to advocate for the end of a Hyde Park institution, this is the most financially responsible choice for members.

On the other hand, Secretary Withrow and Director Stanek fueled hope and promoted the rehab option, without explicitly outlining the risks associated with that approach. In the vast majority of bankruptcy cases, the pre-petition shareholders -- such as shareholders -- are left with a big fat zero by the end of the reorg. Chances are very slim that members will get any value for their stock, or enjoy the right to participate in the management of the business.

That's because control over the Co-Op during the reorg will reside with the creditors, not the members. For all practical purposes, it will cease to be a cooperative. Rehab promoters ask members to invest more money in the capital campaign, while chances of ever realizing a return are extremely low. If you are inclined to make a pledge, I'd suggest you think of it as a donation.

Needless to say, this vote is very important and all Co-Op members should make sure their voice is heard on the options. Ballots will be mailed starting Wednesday 11/21. Having said that, the membership vote will only be taken into advisory by the board. In the end, the board is authorized to make the decision, and it may have to do so very quickly in those few days before 12/17.

Keystone Co-Op #6: The Co-Operative Spirit in Action

posted by chicago pop

Rogue Faction Disrupts Co-Op Community Meeting

This Sunday's community meeting of the Co-Op membership to decide the fate of the institution promises to be great spectator sport, and we hope they'll be selling popcorn. We're expecting a model display of cooperative sentiment, as die-hards and dead-enders make their last stand against a Board and a frustrated majority of the membership dedicated to guiding the Co-Op gently to the junkyard.

If we're lucky, we may even see some blood on the floor as a few lone Board members attempt to seize control of the insolvent colossus and are beaten down by enraged grocery shoppers who are tired of the ceaseless propagandizing.

We'll begin this installment of Keystone Co-Op by giving credit where credit is due, and quoting directly from the recent to-the-point Maroon editorial collectively authored by that paper's editorial board (the only one in Chicago, we'll point out, that we usually agree with):

It has become increasingly clear that the Co-Op has no sustainable operating plan, and this time it has dug itself a hole too deep to climb out of. The University and the community must learn from the Co-Op debacle and invite outside competition into Hyde Park. Be it Trader Joe’s, Dominick’s, or some other chain store, this neighborhood deserves an affordable, financially stable supermarket. (November 13, 2007)

It should also be noted that today's sepia-tinted story on the front page of the Tribune's "Metro" section captured two of its most supportive quotes from individuals over 90 years old. If there ever was a neighborhood minority, this age cohort is one of them.

"I love this store, it's a neighborhood institution," said Campbell, 92. "I admire its goals."

Leon Despres, former 5th Ward alderman, was there at the start. One cold day in December 1932, a young man was on his doorstep selling memberships in a food cooperative.

With all the isolationist talk about how much will be lost if profit-oriented chain grocers are "allowed" into the Special Economic Protection Zone known as Hyde Park (special mention here should be given to one Diane Schirf, who loves the Co-Op, hates chains except when they are in Ann Arbor, and doesn't like being called "stupid"), a few things should be pointed out.

A towering irony in this drama is the fact that one of the principle protagonists in the Co-Op's decline into insolvency is a cooperative that is acting like a rent-seeking monopolist. Certified Grocers, the Co-Op's landlord at 47th Street, is itself a cooperative which acts as a distributor to smaller and independent grocery stores. Certified's mission statement declares the wholesaler to be "a conscientious corporate citizen and ethical partner with our suppliers, customers, and employees."

As everyone concedes, Certified's position vis-a-vis the probable debt workout, or "Sorry Charlie" Option B outlined in Keystone Co-Op #5, remains a mystery. What is known and verifiable is that, unlike the Co-Op's landlord the University of Chicago, Certified has displayed very little of the "cooperative spirit" in its unwillingness to cut the Co-Op slack in its rent obligations over the last several years, and in its caginess regarding its participation in any debt buyout.

Certified has made money off an empty store for years now, and hasn't budged on the stranglehold lease at the 47th Street location, despite being approached several times since 2004. The U of C, during the same period, has lost money.

From Certified's perspective -- derived purely from the Rochdale Principles of 1844, no doubt -- it's not such a bad deal letting the rent checks come in from a drowning operation on the South Side, without lifting a finger to help solve the problem. Why should they? They have a sweetheart deal on the lease at 47th Street, and have every incentive to get the University -- the other non-profit in the equation -- to shoulder the problem so Certified can keep the rent checks coming until 2023.

If that's the spirit of cooperatives, then I'll take profit-seeking. At least the customer gets something out of it.

As the Herald sees it, and reminds us fairly often (Editorial of November 14, 2007), "We cannot assume a for-profit business will provide the sort of community support we have enjoyed with the Co-Op."

What kind of support might that be? Certified certainly doesn't seem to care about the Hyde Park community. So why would a Dominick's, or any other grocer, be worse?

Competent management and reliable operations are the most basic services that a business can provide a community. You can be altruistic with what's left over after you've paid your bills and don't owe anybody else -- including your shareholders -- money. But if you don't take care of those essentials, you can't do anything for anybody.

The propagandists at the Herald see it a different way -- that "support for the community" means support for managerial ineptitude and bad strategic decisions, and a tolerance for chronic and worsening indebtedness, declining quality, and poor service. That, and the delivery of some other magical combination of altruistic services besides what customers want, which is a competitively priced, well-stocked, and reliably run grocery store.

I can take or leave the full-time home economist or the sad variety of potato salads at the current deli counter. What I'd much rather have is a supermarket that doesn't lose the deli cook it hired from Whole Foods after a few months due to inadequate kitchen facilities.

Real community support should theoretically include allowing the membership to access the financials in a timely manner. Instead, complete and audited financials for fiscal 2007 were still not available as of November 10. Nor has any public explanation been given of how a legitimate vote can and will be taken based on out-of-date and corrupted membership data.

Support for the community should also include making Hyde Park a desirable place to live for newcomers to the community, including working people with families, not just the folks who were around when the Co-Op was founded during the Great Depression or have the time to run a major commercial institution.

The economy itself has changed in the intervening 8 decades, as well as the organizational structure of businesses and non-profit institutions alike. In the retail foods sector, the changes have been especially dramatic, weighing heavily against smaller-scale operations. This strikes directly at the core of the cooperative's initial competitive advantage, which was to buy and sell in bulk at a discount. While it may be possible for that model to function adequately in other sectors, in retail foods where volume is the name of the game, it's an uphill battle where even a small mistake can lead to disaster.

The surest way for Hyde Park to get over the malaise it has endured for nearly half a century is to become the hub of a rejuvenated South Side, a place where new people want to live and new business wants to locate. Not because it is sticking to institutions invented to solve the problems of the Great Depression or Urban Renewal over half a century ago, but because it is making the neighborhood the place where the best there is to offer from everywhere else wants to be.

Keystone Co-Op #5 : The Moment of Truth

posted by deep throat

Is Time Almost Up for the Co-Op?

It looks like the Co-Op board has finally run out of time -- denial of the crushing financial problems and strategic mistakes has ceased to be an acceptable public relations strategy. Now, the current board (and the membership) face some very tough decisions.

Unfortunately, none of the alternatives is particularly attractive for the Co-Op. On November 18, a community meeting will be held and the board will present its recommendation on a course of action, and the membership will vote Yay or Nay on the board's suggestion.

From our perspective, it's about time. The status quo and on-going cash burn situation have turned the Co-Op into a sinking ship.

While some folks might have hoped for the luxury of time to let the 55th Street store continue to generate profits that would be siphoned off to pay for the on-going lease obligations at the 47th Street location and various vendors, the Co-Op has been digging itself into a deeper financial hole as each month passes because what it owes still far outstrips the cash it is able to generate.

Now the board is finally entertaining the drastic solutions that this type of situation calls for.

The board must choose from four options, two of which will allow the Co-Op's 55th Street store to remain in operation, and two that will shut that store down.

Before we assess the four approaches, we have one large caveat that must be voiced. If the board endorses an alternative that allows the 55th Street store to continue operations, the members are being asked to take a leap of faith that this board will govern responsibly, and avoid making the types of bone-headed decisions made by multiple previous boards.

That long history of bad decisions by previous Co-Op boards is what landed the Co-Op in its current situation in the first place. In our view, it is incumbent on this board to demonstrate that it can do differently, before asking for a vote.

Option A - "The Good Samaritan" - Debt Consolidation
This is similar to the low production-value, late-night television ads that offer to help those who are drowning in late payments to the utility companies, credit card companies, and other consumer lenders. It involves consolidating all the Co-Op's various debts to landlords and vendors, and then working out a plan to chip away at that mountain of debt over a long period of time.

This approach would require an entity, like a bank, to step up and take over all the Co-Op's debts and then receive payment little by little. It would also allow the Co-Op to avoid going to bankruptcy court and to continue operating the 55th Street store.

We're skeptical that any bank would actually be stupid enough to take on the consolidated debt of the Co-Op, unless management and the current board truly show that they, unlike previous boards, are ready to make difficult decisions and smart choices going forward.

Option B - "Sorry Charlie" - Creditors Left Holding the Bag
The Co-Op would negotiate with creditors to buy out the Co-Op's current leases, and shut down operations at the 55th Street store. This would not involve the bankruptcy courts.

Option C - "The Lindsay Lohan" - Going into Rehab
Like LiLo going to rehab, the Co-Op would file for Chapter 11, gain the bankruptcy court's protection, get time to reorganize its financial affairs, get its hydra-heads as straight as possible, and eventually emerge from bankruptcy in a (hopefully) healthier state.

This alternative isn't wholly unlike the 12-step program and having to apologize to those you have hurt in the past. It involves working out a new plan for paying off creditors, negotiating with every vested party (e.g., vendors, landlords, creditors, unions), and getting their agreement to the new plan.

As a result, this approach tends to involve a lot of lawyers and take a fair amount of time. But, it would allow the 55th Street store to continue operations. When the Co-Op leaves bankruptcy, the pre-petition shareholders (i.e., current members) will likely have no claim on the Co-Op, and it will instead be owned by the post-petition creditors.

In other words, whatever current members paid to buy their shares will almost certainly never come back to them.

Option D - Just Plain Vulture Food
The Co-Op would file for bankruptcy, shut down the 55th Street store, and liquidate all remaining assets. This is usually the best choice when a business is worth more dead than alive.

The Upshot
We believe Options B and D are unlikely to really happen. As with mortgage lenders when they are faced with foreclosing on a home, creditors are generally very reluctant to take ownership of the actual assets, and then put the time and resources into selling them at fire-sale prices, or worse, actually operating them. Banks want to be in the lending business, not the residential real estate business.

Banks only foreclose when it becomes clear that they'll never get their money back. We suspect that Certified and the University don't want to be on the hook for a bunch of leases with empty store space. It would be in their best interest to work out a new payment plan, which may involve smaller payments stretched over a longer period of time.

One rule of thumb: when shareholders equity is negative (as it is in the Co-Op's case), bankruptcy and reorganization is often favored. Another consideration is whether the Co-Op's assets would be put to better use elsewhere.

If so, then liquidation is the best bet for paying off creditors. In this case, it's not clear that many other parties would have use for the Co-Op's assets, which include refrigerator cases, inventory, shelving, and equity in other co-ops.

After weighing these factors, we're laying odds on the board recommending rehab. Britney, Lindsay, move over: here comes the Co-Op.

Keystone Co-Op #4: How Come We're Not Moving?

posted by deep throat

[deep throat left this comment in a previous discussion, and we decided to reproduce it in full here.]

RE the rent situation on 47th Street: though the Co-Op owes $90,000 per month to Certified on that space, it is not clear whether the Co-Op has been able to keep up on those payments, or some portion thereof. And, if there is back-rent due, where is it sitting on the balance sheet? I've noted that there is $960,000 lumped into "other current liabilities" as of the end of FY 2006. Maybe this contains some of the back rent that the Co-Op hasn't been able to pay. However, I doubt the FY 2006 numbers have captured an accurate picture of how much the Co-Op owes its landlords based on President Poueymirou's comments at the annual meeting. He pointed out that the Co-Op's main creditors in that year were vendors (which likely includes Certified). In FY 2007, he contends the mix of creditors has changed (even though the absolute level of debt hasn't shifted materially) such that half is owed to vendors and the other half is owed to landlords (Certified and the University?).

Then, there is the on-going lease commitment on 47th Street that the Co-Op is locked into through FY 2023. That's another 16 years of $1 million in annual rent. There is absolutely no evidence of this liability on the balance sheet because the financial statements only require the Co-Op to recognize a single year's rent expense in each fiscal year.

Yes, it does seem to me that there's a viable business in the 55th Street store. But, whether the new general manager can revive that business and churn out enough profits to satisfy the Co-Op's creditors in a timely manner remains to be seen. In situations of financial distress, time is really the name of the game. The entity will try to bargain for enough time to shed the sink holes and polish up the remaining healthy businesses.

Based on Treasurer Lowenthal's financial report at the annual meeting, it looks like even the 55th Street store has trailed industry benchmarks for the last few years. For example, revenue growth from that store has essentially been flat from FY 2003 through FY 2007. (This was shown in bar chart form, so I don't have actual figures yet).

Just for perspective, supermarket sales typically grow in line with GDP -- unless there have been some changes in the local trading area, like an increase in population. So, we would expect the Co-Op's sales to grow about 2% a year, and we'd throw in another 1% in food inflation (though we expect food inflation to be higher this calendar year thanks to higher feed prices and a worldwide surge in demand for dairy). So, in the absence of any big change in population or nearby competitors, we should be seeing the 55th Street store rack up sales growth in the neighborhood of 3% annually. At the very least, I would have expected to see some modest bump in 55th Street sales in FY 2005 when the 47th Street store closed and shoppers would have shifted to the original location.

We've heard from Neo, the Peapod Guy, that Peapod's business in Hyde Park has increased significantly. So, I would surmise that Peapod is grabbing more share of the Hyde Park stomach.

Elizabeth raises some really good questions about why Certified would put up with this situation or why it hasn't forced the Co-Op into bankruptcy. From what I can tell, there are a lot of intertwining relationships between the two entities. The Co-Op owns some of Certified's common stock, but it also owes Certified over $1 million in notes payable (long-term debt) at the end of FY 2005. Please keep in mind that this LT debt is separate from the $1 million in annual rent the Co-Op owes Certified on 47th Street.

It is sort of a neat little cycle: The Co-Op sells Certified's products, and then sends most of its profits back to Certified in the form of rent, repayment on debt, and payment for inventory.

Certified may have come to the conclusion that it is better off working out some sort of more lenient repayment plan with the Co-Op, than kicking it to the ground.

Then there is also a brothers-in-arms dynamic because Certified itself is a co-operative organization (which is why the Co-Op owns shares). Certified may be willing to cut the Co-Op some more slack in the name of solidarity, even if it takes longer to receive payment.

If it makes people feel any better, I'm lost with the Co-Op's murky financials. And I pick apart financial statements to diagnose companies for a living. This is some of the worst disclosure I've ever run across. The Co-Op is not a privately-held entity where financial conditions can be kept quiet -- it is accountable to its 22,000 members who have an ownership stake in the business.

Keystone Co-Op #3: Dissecting the Debacle

posted by deep throat

Having attended the Co-Op's annual member meeting on Sunday, I have to say that it was heartening to see that the severity of the organization's financial distress has finally begun to penetrate the outer-most layers of the membership. While this dawning realization does not diminish the serious financial issues, at least more members are getting a clue.

I am still in the process of sorting through the historical financial statements, and the very poor disclosure has substantially hampered my efforts. I've got plenty of questions about where the Co-Op is classifying its rent expense, where its liability in back rent payments to the University shows up on the balance sheet, what its debt covenants are, which ones the Co-Op has violated and the ensuing penalties, specific detail on payroll expense, sales/marketing expense, and interest expense, among others. Let's hope the audited financial statements for fiscal year 2007, which should be available after 11/10/2007, will provide a much clear picture of what's going on with the Co-Op.

There has been some disagreement on this blog about just how profitable or unprofitable the Co-Op is. On the one hand, the Co-Op reported net income of $809,299 in fiscal 2006 from continuing operations, which basically means the 55th Street and 53rd Street stores. The audited financial statements did not disclose net income by individual store, so I cannot find any evidence of the $1 million in profits that has been mentioned on the blog before. (If anyone does have knowledge of where I can find these numbers in the audited financial statements, then please point me in the right direction!)

Now, any credit or equity analyst worth his/her salt can tell you that net income is easily manipulated through the various accounting rules. For example, the Co-Op has classified the 47th Street store as a "discontinued operation" back in fiscal 2005, so the on-going and significant rent obligation on that space is not part of the calculation to arrive at last year's $809,299 profit. Unfortunately, just because the Co-Op has discontinued operations doesn't mean it can also discontinue rent payments to Certified. If you disregard the discontinued operations and solely focus the continuing operations of the Co-Op (the 55th Street store), yes it is profitable. However, I would argue that it is simplistic to look at the 55th Street store in isolation. The money-suck originating from the 47th Street store has been sitting in discontinued operations from FY 2005 through FY 2007, and the first three months of FY 2008 – and it doesn't look like this will change any time soon based on President Poueymirou's comments at the Annual Meeting. For this reason, it would be irresponsible to ignore the discontinued operations sink hole when evaluating the financial health of the Co-Op. If you count all the on-going obligations associated with discontinued operations, then the Co-Op is clearly in the red. Obviously, the $809,299 in earnings last year is just a profit on paper – otherwise, it would show up as cash on the balance sheet, as a positive contribution to retained earnings (which drives membership equity toward positive numbers), and the Co-Op should be issuing a nice dividend check to its members.

One key number that seemed to bring the situation home to members at the annual meeting is the Co-Op's negative shareholders equity. For those who aren't accountants, shareholders equity (membership equity, in the case of the Co-Op) can also be thought of as the Co-Op's net worth, or tangible book value. Technically, it is calculated by taking total assets minus total liabilities -- $4,823, 219 in assets - $6,496,066 in liabilities, which leaves -$1,672,847 in membership equity (based on the FY 2006 balance sheet). In this case, since it is negative, that essentially means that the value of the Co-Op's assets have fallen below the value of the liabilities used to obtain those assets. This is analogous to the situation that some homeowners find themselves in, after having bought their homes at the top of the market and taken out big mortgages to finance the deal, but now struggling to pay on a mortgage that exceeds the market value of their home as the housing market dips. Based on the Co-Op's operating performance over the last few years, I am expecting membership equity has slipped further into the red in FY 2007.

Because it's so easy to manipulate the calculation of net income, I prefer to look at the statement of cash flows, where it is generally harder to sweep ugly things under the rug and you can get a better picture of what cash is coming in and going out. Leeway in accounting rules can create paper profits (and provide false reassurance), but its only cash that counts when the music stops because that's how you pay off your obligations and secure what you need to continue operating. The Co-Op generated $296,000 in cash from operations in fiscal 2006 – which is considerably smaller than the $809,299 in profits from continuing operations. This is a major red flag to me. In well-managed entities, cash flow from operations typically exceeds net income, and importantly, growth in cash flow exceeds growth in net income. Since I have not yet received 2003-2004 or 2007 financial statements, I can't comment on the growth trend, but clearly, cash flow from operations is trailing net income in absolute numbers.

Humor me with one last calculation that can provide insight into the financial health of this organization – the cash burn rate. The Co-Op burned through $13,016 each month of fiscal 2006 ($295,971 cash flow from operations - $77,159 in capital expenditure - $375,000 in debt paid off during the year/12 months) = -$13,016). Ideally, this number should be positive, which would indicate the entity is generating net cash and can shoulder investments necessary to improve the business. But, in the Co-Op's case, it's in negative territory, which means the entity is spending $13,016 more than it is generating in cash. In general, unless this condition is corrected, the Co-Op will not be able to pay debts when due, including the upcoming $529,711 portion of long-term debt that must be paid in fiscal 2008.

Since the Co-Op is already insolvent, a discussion of the nuts and bolts of bankruptcy might be helpful in the next installment.

Keystone Co-Op #2: Extent of Financial Disaster Revealed (Again)

posted by chicago pop with deep throat

By the end of Sunday afternoon's Annual Meeting of the Hyde Park Co-Op Society, the membership had started to get it: they may lose their money. And the Co-Op as an ongoing business. And the community that bought into it. All of it. Because, if the Co-Op declares bankruptcy -- which could happen as soon as any of its many creditors smells blood in the water -- they're out of luck. The only thing keeping the doors open at this shop is a set of very lenient vendors and landlords.

Several members wondered why it had taken this long for a Co-Op Board to outline the gravity of the situation in plain terms, suggesting that previous Boards had been less than forthcoming. A few of them even chided the Board for not publicly putting all options -- including bankruptcy -- on the table. Some of their current accounting practices strike us here at HPP as "aggressive," as we'll explain below -- meaning that they put the best legally possible face on what seems to be a very tenuous financial situation.

Optimists will argue that the 55th Street store just needs to be made to sing, and then the Co-Op will pay down its obligations. Take one look at the magnitude of the abyss that has opened up on 55th Street, however, and you may change your mind:

$3,900,000 Negative Equity

This is the amount the Co-Op is in the hole. Between interest payments and rent expense, the Co-Op is in an extremely precarious situation. If vendors or big landlords demand payment, the Co-Op could hit a liquidity crisis. In other words, they wouldn't be able to pay their bills. Unless someone fronts them money, the only alternative at that point would be bankruptcy.

$18,000,000 [estimated] future obligation on 47th Street rent to 2025 that does not show up on the Co-Op balance sheet

As with a lot of information pertaining to the financial health of the Co-Op, this number is nowhere plainly indicated. We've had to get at it from nuggets buried in different issues of the Evergreen -- another reason why some shareholders are upset with what they feel is a lack of forthrightness and transparency.

This number represents our estimate of the 25-year lease (there are 3 different sources suggesting the lease ends in 2023, 2025, and 2029), assuming a start-date of 2000 for the 47th Street store, and that the Co-Op owes Certified Grocers a rent of $1,000,000/year.

Generally Accepted Accounting Principles do not require that this not-so-hidden liability show up on the balance sheet. As it is, the Co-Op only shows one year of rent as its liability at 47th Street, each year. If the Co-Op is serious about transparency, the total amount of this liability ought to be clearly visible in its financial statements.

How long are members willing to wait while management tries to lease out the 47th Street location? They've been trying for 2 years now. Membership is starting to get a clue, and is rushing to cash out shares. The Co-Op currently owes more to members withdrawing shares than it is taking in from new shareholders. From September, 2006 through to June, 2007, Co-Op members withdrew $39,710.41 worth of shares. For that same time period, net membership transactions -- new shares bought versus old shares cashed out -- ran to -$30,286.27.

This is a rush on the bank. A new tenant for 47th Street is nowhere in sight. Operations at the 55th Street store are a black hole. The Co-Op is a store that can no longer, despite the belief of some of its remaining members, function as a true cooperative buying in bulk and selling at a discount. The organization owes it to Hyde Parkers to make all the numbers public and put all the options on the table.

Keystone Co-Op: New Feature!

posted by chicago pop

In preparation for the upcoming annual meeting of the Hyde Park Co-Op this Sunday, we thought it would be appropriate to roll out our latest feature: Keystone Co-Op! Offering you comic relief in the form of occasional reports on just how bad it really, really is. Even some of the Board members can't believe it, and neither will you!

After going round and round in various discussions about the abysmal state of neighborhood grocery shopping, we found ourselves coming up against the same few statements: the Coop earns $1 million a year, the only problem is the dumb quarter-century lease we signed on 47th Street (which costs $90,000 a month); the produce is lame (because the Co-Op's key vendor canceled some produce shipments); the service is less than stellar (a whooooole separate story, folks); and the prices are high (they don't have buying power so they pay more, and charge you more). Opinions as to why all of this is so are many, of course, and passions run high; and we're not even including all the juicy tidbits we've come across.

But what is really going on inside this organization? Well, the truth is, nobody really knows, and the lack of transparency is a point of contention even within the organization. But, with the help of some professional financial analysis of the Co-Op's business performance, from a source we'll call DEEP THROAT, and a stack of the Co-Op's publicly accessible Evergreen newsletters, we're here to help cut through the spin of exactly how this business loses so much money.

Here's just a taste of this season's hit comedy sketches:

• The buzz from management is that the Co-Op earns $1,000,000 in net income a year. In fact, it's $809,299. More importantly, the Co-Op's cash flow for fiscal 2006 is only $296,000. This is the actual money they have to pay their bills -- which is why they can't -- and it's the figure that analysts look at to assess the health of a business entity. It's harder to manipulate than net income.

• The Co-Op has 3 or 4 people who are supposed to scan for discrepancies in accounting and receipts. None of them noticed when a senior cashier at the former 53rd St. store was processing refunds of $250 to $350 to herself -- basically emptying the cash register -- each day she worked. The Co-Op has not revealed the total amount embezzled.

• When the Co-Op installed a new, "state of the art" front-end system in October, 2006, it marked the first time in over 3 years that all 12 of the cash registers were operational in the 55th Street store.

• Because "the ownership database is so corrupted," Co-Op management and the Board have no idea what percentage of members are active shoppers, and what percentage of shoppers are members.

And, because you should always save the best for last, the following:

• The "original disks for the accounting software were destroyed during a cleaning operation." Did someone put them in the dishwasher?

So there's our teaser. Stick around. There will be more!