Freaky Bankruptcy
Vendors claiming non-payment take Freaky Bean to court
By Chris Busby
A group of business owners who claim the embattled Freaky Bean Coffee Company owes them money for goods and services forced Freaky Bean into Chapter 7 (involuntary) bankruptcy proceedings in late February. Shortly after that legal action took place, Freaky Bean abruptly closed two of its four remaining locations.
Meanwhile, there are indications a group of company insiders may be maneuvering to save the business through a murky new corporation, called Bean Co., created last December. And as turmoil grows within the once tight and happy company, troubling details about cofounder Jonathan Stratton are coming to light.
According to bankruptcy court documents, Freaky Bean owes the Harry J. Acer Co., a coffee wholesaler based in New Jersey, nearly $23,000; the local Rosemont Market & Bakery is owed over $8,700; and The Sunrise Guide, a local eco-centric coupon book, is owed $250.
Randy Creswell, an attorney at Perkins Thompson who filed the bankruptcy petition on behalf of the three businesses, said additional vendors and suppliers have since signed on. He declined to name them, but confirmed that Central Maine Power is among them, though CMP has its own legal counsel involved.
Freaky Bean is required by the court to respond to the filing by March 17.
Multiple efforts to reach Stratton for comment were unsuccessful. The company’s main telephone line is out of service. And though the remaining Freaky Bean locations, on Route 1 in Scarborough and on Broadway in South Portland, have been open this week, calls The Bollard placed to both shops were unanswered during business hours, and neither location’s answering machine identified the number as being that of a Freaky Bean.
Skeletons in the closet
Freaky Bean was founded in 2005 by two former Starbucks baristas, Stratton and Andrew Kessler, who opened their first shop on Route 1 in Scarborough (since closed), not far from the new Route 1 location. The company expanded quickly and aggressively, opening a shop and micro-roastery in Westbrook (closed last week), acquiring the Maine Roasters Coffee shops in Yarmouth and Falmouth (sold back late last year), and opening a second Scarborough location in the Cabela’s retail plaza (also closed last week), in addition to establishing and expanding its wholesale coffee business.
Former employees and sources close to the company say Freaky Bean started skidding last summer. Though initially successful, business at the Maine Roasters shops soon declined as regular customers soured on decisions the new ownership was making, said a former employee granted anonymity by The Bollard as a whistleblower.
The employee said paychecks began bouncing late last summer, prompting Stratton to pay baristas and managers with money from the registers delivered in white envelopes. The two-week pay cycle was shortened to one week, apparently to ease a cash-flow crunch, the employee said. And instead of the easily identifiable bags of organic or Fair Trade coffee delivered to the shops, bags of unlabeled coffee employees half-jokingly referred to as “mystery blend” started showing up. The employee said superiors refused to say where the beans originated.
Angst over payment issues prompted the mass resignation of most staff at the Westbrook location in early September of last year, according to multiple sources.
In an e-mail message last week, Kessler, who claims to have left the company last November, declined to comment, citing “ongoing legal proceedings.”
Jason Weinberg, a manager at Starbucks when Kessler and Stratton worked there, said the loan that got Freaky Bean off the ground was provided by Kessler’s parents, but it was Stratton’s knack for raising capital that allowed the business to soar. “Jon had an incredible ability to get people to invest,” said Weinberg, who went on to start a short-lived coffee-cart business in Portland, called Excellent Drinks, and was one of Freaky Bean’s first wholesale clients and most prominent promoters.
But according to Weinberg, Stratton also had a troubling tendency to lose or mishandle money and get in big trouble for doing so. While in the Navy about a decade ago, Stratton committed bank fraud, allegedly by writing bad checks to cover gambling debts — “instead of ‘getting bodily injured,’ as he put it,” said Weinberg — and did time for the crime in federal prison. Despite Stratton’s criminal record, Weinberg, who was managing Starbucks’ Hay Building location at the time, said his superiors gave him the green light to hire Stratton.
Stratton excelled at his job and was being groomed for promotion, Weinberg said. Then Weinberg went on vacation. When he returned, he discovered what he called “some financial discrepancies” at the shop. He said Stratton claimed the discrepancies were “accidental,” but had attempted to cover them up, so “whether it was accidental or intentional, he was terminated.”
Weinberg expressed remorse for having helped Freaky Bean expand its business by introducing Stratton and Kessler to T and T Development, a South Portland-based company that has leased retail space to Freaky Bean. “I feel bad, because I knew some of this stuff [about Stratton’s past], but I myself wanted to believe in Jon, too, so I suspended some of my own safeguards,” he said.
Joyce Talbot, manager of T and T Development, declined to comment “at this point.”
Freaky Bean Co.?
An anonymous source with detailed, inside knowledge of Stratton’s past and Freaky Bean’s business practices contacted The Bollard in late February. The source tipped us off to the formation of a new corporation that the source said was created to take over Freaky Bean with a clean slate while leaving its past debts to the original corporation and its shareholders.
It’s unclear whether such a move would be legally possible. Attempts to identify and contact the source were unsuccessful.
Chris Chandler, an attorney with the Portland firm Curtis Thaxter who serves as the registered agent of the original corporation, The Freaky Bean Coffee Company, acknowledged involvement in the formation of a new corporation called Bean Co..
Asked if Bean Co. was formed to take over Freaky Bean and shed its debts, Chandler said the new company was not created “for Mr. Stratton.” Asked if Stratton was part of Bean Co., Chandler replied, “no comment.”
Articles of incorporation filed with the Maine Secretary of State’s office outline Bean Co.’s stock structure and state that the corporation will have up to seven directors on its board, but the only name listed as an incorporator is Chandler’s.
Asked what sort of company Bean Co. is, Chandler said, “I don’t really think that’s something I want to comment on.” Asked why he was refusing comment, Chandler cited the current bankruptcy filing against The Freaky Bean Coffee Company, though he had earlier stated that he was not representing the company in that matter — “at least not yet,” he said.
According to Freaky Bean, as of last December, there were seven people on its board of directors: Stratton, Gary Woodworth (the company’s coffee roaster), Jon Ricci, Jim Walsh, Jim McLaughlin, and Einar Seadler (a senior executive at Accenture who resides in the Phoenix area, according to his profile on LinkedIn).
According to the source who tipped The Bollard to Bean Co.’s formation, there will only be four members on its board: Stratton, Woodworth, Walsh, and Scarborough resident Barb Heyl, who apparently works in the medical field.
Woodworth did not return a call requesting comment (though it is not entirely clear the cell phone number The Bollard has for him is still his). A message left on Heyl’s home phone yesterday was not returned.
Walsh, a real estate broker who owns and serves as president of the Waterglen Group, a Portland-based affiliate of Weichert Realtors, referred questions about Freaky Bean and Bean Co. to Stratton. “He’s the spokesperson,” Walsh said, referring to The Freaky Bean Coffee Company’s board.
A spokesperson who doesn’t speak.
Freakin’ hypocrites
The bunker-like mentality that’s set in at Freaky Bean is in stark contrast to the company’s previous public face. Freaky Bean made its commitment to causes like the environment, diversity and the arts a major part of its marketing campaign, and still trumpets those causes on its Web site, freakybean.com.
For example, it’s still promoting a special blend of coffee from which a portion of sales proceeds allegedly benefit the Portland Music Foundation, an organization that supports and promotes local musicians.
Asked if Freaky Bean was still in partnership with the PMF, PMF board president Patrick May declined to comment.
Most of those allegedly burned by the company are also keeping mum. For example, Meg Acer, president and owner of the Harry J. Acer Co. — owed $22,976 and change, according to the bankruptcy filing — declined to comment. Rosemont Market owner John Naylor — who claims to be owed $8,754.44 — did not respond to a request for comment.
But Heather Chandler, owner and publisher of The Sunrise Guide, is speaking out.
Chandler said she’s made as many as 20 separate attempts to get Freaky Bean to pay for the two coupons they placed in her eco-friendly guide last summer: multiple phone calls and monthly statements sent via e-mail and the postal system, as well as those she hand-delivered to Freaky Bean shops.
Though her company is only owed $250, Chandler said she signed on to the bankruptcy action because “if it’s an opportunity to get part of it back, then it’s worth it.” She said the cost to her company to be involved in the case will be minimal, if anything.
“I certainly have no desire of hurting anybody’s business,” she said. “What’s really been difficult for me in dealing with the Freaky Bean is they haven’t made any attempts to deal with the [situation]. They have not returned calls…. It doesn’t feel like they’re being good community members.”
“So there’s a lot of talk these days about social responsibility and being committed to the community and the world,” reads a section on Freaky Bean’s Web site titled “Social Responsibility.”
“We walk the walk and talk the talk,” it states. “[S]ocial responsibility to us is not a soap box. Nor is it a clever marketing platform. Rather, it is inside all of us and each member of the Freaky Bean teams lives up to the commitment of doing something for the better of the whole, each and every day. As we like to say, we are all freaky beans in this world and we all need to look out for each other.”
