Freaky Bean defunct


Gone silent: The roaster
Gone silent: The roaster at Freaky Bean's former Westbrook location. photo/The Fuge

Freaky Bean defunct
Creditors could be screwed by broke coffee company 

By Chris Busby

The Freaky Bean Coffee Company is closing its two remaining locations, in South Portland and Scarborough, today, and has opted not to fight an involuntary bankruptcy action a group of creditors initiated in late February.

But that doesn’t mean those creditors will get a dime.

Roger Clement, an attorney with the Portland firm Verrill Dana who’s representing Freaky Bean in the bankruptcy proceeding, said it’s not apparent to him that the company has any assets that can be sold to pay outstanding debts. “It looks like nothing, frankly,” Clement said. “It’s a few fixtures and some tables and chairs.”

A former employee noted that Freaky Bean has espresso machines and other equipment worth many thousands of dollars, but Clement said he believes most of that equipment was leased. The company has been leasing its locations in Scarborough and South Portland, as well.

Reflecting on the possibility the creditors will walk away empty-handed, Clement said, “I think it’s gonna end with a whimper, not a bang.”

The initial Chapter 7 filing was made on behalf of three creditors: the Harry J. Acer Co., a coffee wholesaler based in New Jersey that’s allegedly owed nearly $23,000; Rosemont Market & Bakery, which claims over $8,700 in unpaid bills; and The Sunrise Guide, a local eco-centric coupon book whose owner said she’s out $250. Since then, several other creditors have joined the action, including Central Maine Power, the Paul G. White Tile Co., and T&T Development and the L&J Company, two related entities that leased retail space to the Freaky Bean.

The total amount of the claims is now over $81,300, according to court documents.

Though Freaky Bean may not have physical assets that can be sold to repay debts, lawyers representing the creditors said there are other mechanisms by which the creditors may be able to recover some money. 

The trustee appointed by the bankruptcy court can look at payments Freaky Bean made to other creditors in the three months before the late-February filing. If payments can be classified as having been “avoidable,” it’s possible the court could order the recipient of the payment to give back some of that money, which would then be distributed among the creditors involved in the Chapter 7 case, said attorney Steven Cope, who is representing CMP.

Attorney Randy Creswell, who is representing several other creditors, said the trustee can also look into payments made in the year before the filing to “what’s considered ‘an insider’” — such as an investor or company official — and money may be recouped from those individuals. Creswell added that there are additional mechanisms, as well, including one that involves any fraudulent payments the company may have made over the past two years.

Freaky Bean is required to provide the trustee with detailed information about its assets and past financial transactions in the coming weeks. Only then will attorneys representing creditors have a sense of how much, if any, money their clients will receive.

On a related note, Clement, Freaky Bean’s lawyer, said he believes Bean Co., the mysterious corporation formed in early December of last year, was not an attempt by a group of board members to shed the original company’s debts and start anew, as a source alleged to The Bollard. Clement said his understanding is that Bean Co. was formed so some Freaky Bean shareholders could put money into it that was subsequently loaned from Bean Co. to Freaky Bean in an attempt to keep the company going.

“The shareholders put a lot of new money in in December,” said Clement. “It’s gone. It was spent on creditors, it went to pay down debts, and it wasn’t enough.”

Attorneys for the creditors involved in the bankruptcy action said it’s those sorts of late-stage payments to other creditors that the trustee will examine. If the trustee determines some of those payments were “preferential,” the court could order the recipients to pay back some of those funds which, again, would then be distributed among the creditors involved in the Chapter 7 case.

For example, as the Westbrook American Journal has reported, a judge ordered Freaky Bean to pay $13,000 to the Baker’s Bench, a Westbrook bakery, last December. Although that court-ordered payment seems unlikely to be classified as “avoidable,” it speaks to the concept of a “preferential” payment, given that Rosemont Market & Bakery was apparently not paid for similar goods.

A note on the door of the South Portland location announcing today’s closure read, “This unfortunate event is due in part to a failed expansion plan, and the downturn in the economy. As a result of these unforeseen events the Freaky Bean can no longer honor its obligations to its creditors and we must close to resolve these issues.”

The American Journal reported having received an e-mail from Freaky Bean co-founder Jon Stratton in which Stratton specifically cited the bankruptcy filing as the impetus for the business’ demise. He wrote that Freaky Bean’s owners and employees are “deeply saddened by this course of events, particularly in light of their tireless efforts over the last several months to obtain the necessary capital to avoid bankruptcy and honor the company’s obligations to its many vendors, who showed patience and understanding,” the paper reported.

“Patience and understanding” may be an overstatement.

A former employee described a near constant stream of calls and visits from creditors and collection agencies last fall. In one example, the employee described visits from “thugs” who showed up to get cash owed to a third bakery, and how after repeated visits during which checks that had been promised were not there, they became increasingly angry and intimidating. (The employee was granted anonymity by The Bollard because the worker still fears some individuals who came to collect.)

Besides having lost their jobs with no notice, the employee said the emotional strain of having to endure those collection calls is a lasting source of anger employees still feel toward Freaky Bean’s owners. 

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