Co-owner says Packo's is insolvent, requests court action

8/12/2010

Fifth Third Bank's attorneys on Friday sent demands for payment of the loan to Tony Packo's and two company executives, including co-owner Robin Horvath. Mr. Horvath wants a receiver appointed for Tony Packo's and associated companies, according to a filing Wednesday in Lucas County Common Pleas Court.

The filing on behalf of Mr. Horvath, who last month initiated a lawsuit alleging relatives and the firm's controller have withheld company financial records that are needed to explain questionable disbursements of funds, says, in part, "it is indisputable that Tony Packo's Inc. is now insolvent; it cannot pay $2,683,290.83 by Friday the 13th."

Yet an attorney representing Tony Packo, Jr., who is the firm's president and Mr. Horvath's uncle, along with Mr. Packo's son, Tony Packo III, manager of a subsidiary, said Wednesday that the firm is negotiating its debt with Fifth Third.

The Packos are opposing the appointment of a receiver, but it will be up to Judge Gary Cook to decide, added their attorney, Jim Rogers.

"Tony Packo's is a financially viable company that they believe is going to be in business for many years," Mr. Rogers said on behalf of his clients.

The firm, which has about 190 employees, was started in 1932 by Hungarian hot dog creator Tony Packo, Mr. Packo Jr.'s father and Mr. Horvath's grandfather. Its original East Side restaurant at 1902 Front St. became a tourist attraction because of references to it in the 1970s hit television series M*A*S*H and its collection of celebrity-autographed hot dog buns.

Fifth Third Bank attorney Timothy Konieczny declined to comment regarding the loan, saying it was a private matter between the bank and its debtors.

Mr. Horvath declined comment, referring questions to his attorney, Tom Matuszak, who could not be reached.

Nationally, about 95 percent of family business legal disputes are settled before reaching trial, said Henry Krasnow, a business lawyer in Chicago who is not involved in the Tony Packo case.

"It always ends up being resolved with money," Mr. Krasnow said. "And whether or not the people involved admit it, there is usually a dispute about someone buying out somebody else."

Another Chicago lawyer who works with family-owned businesses, Jared Kaplan, said court is not a good place to come up with constructive solutions for problems and usually makes relations even more tense. Both Chicago lawyers are members of the Family Firm Institute in Boston.

Family disputes, especially those about control, can result in selling or dissolving the business, Mr. Kaplan said.

"Usually, it's not a good ending," said Mr. Kaplan, who also is not involved with the Packo case.

On July 23, Mr. Horvath filed a lawsuit claiming that in February he discovered more than $100,000 in questionable transactions paid to Mr. Packo III or the firm's controller, Cathleen Dooley. He tried to investigate up to $300,000 in questionable transaction documents, but records were kept from him by the Packos and Ms. Dooley, he alleged.

The lawsuit seeks company shares held by the Packos sold to Mr. Horvath for $100,000; the release of financial records; an accounting of any funds wrongfully dispersed and placed in trust, and unspecified damages.

Eight years ago, descendants of Tony Packo, including Mr. Horvath's now-deceased mother, Nancy Packo Horvath, settled a legal family feud by reorganizing the firm's board of directors and agreeing to other measures.

Mrs. Horvath in 2002 had filed a lawsuit in Lucas County Common Pleas Court accusing her brother, Mr. Packo Jr., of libel, breach of duty, and trying to force her out of the business. The Packos soon after countered with their own lawsuit and demanded a receiver to oversee the firm's sale.

In a court filing Wednesday for the latest lawsuit, Mr. Horvath alleges his relatives threatened July 6 that they would cause the firm to default on its debts to Fifth Third - all of which are personally guaranteed by Mr. Horvath and Mr. Packo Jr. - unless he "did their bidding." The lawsuit does not elaborate.

Mr. Horvath has alleged Mr. Packo, Jr,. is "largely uncollectable" while he has managed his personal finances responsibly and is "collectable."

Mr. Rogers, the Packos' attorney, said his clients deny they are purposefully allowing the firm to go into default on its loans so Mr. Horvath would have to pay.

A hearing was scheduled for Monday after Mr. Horvath, the firm's chief operating officer, first asked on July 28 that a receiver be appointed.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.