Court-appointed receiver now in charge of Tony Packo's chain

8/20/2010

Instead, a court-appointed receiver, Ottawa Hills resident Steve Skutch, spent the day wrapping his arms around the operations of Tony Packo's Inc. and keeping its nearly 200 employees on the job, while a family dispute between the descendants of its namesake rages in Lucas County Common Pleas Court.

The business will keep operating in the short term, but the long-term fate is less clear.

The company president, Anthony Packo, Jr., has asked the court to name a liquidation trustee because of irreconcilable differences with another family member who is a company co-owner, and Fifth Third Bank wants its $2.7 million in loans back.

The spat has customers at its five area locations concerned.

Eating a Hungarian hot dog Thursday at The Andersons store in West Toledo, where Packo's has an eatery, John Jones said Toledo would suffer a setback if the business were to close.

"It's a piece of Toledo, with Jamie Farr and all," the Springfield Township resident said, referring to a star of the 1970s television series M*A*S*H, whose character Cpl. Max Klinger repeatedly longed for Packo's food.

Customer Jeff Hastings, enjoying a stuffed cabbage, agreed: "It would be a morale blow to the city."

What began as a Packo family legal feud less than a month ago has blown into potentially mortal combat.

Common Pleas Court Judge Gary Cook this week appointed Mr. Skutch, managing partner of Skutch Co., Ltd., of 2923 Hardale Blvd. to oversee the business operations of the Packo's enterprises. He was named after Fifth Third filed a foreclosure action this week because payments were missed on its millions in loans.

A one-hour court meeting between attorneys Thursday took place in judge's chambers, with no action in the courtroom and few comments made afterward.

Mr. Skutch told The Blade in an interview last night that he will follow the court order as it is written.

"It's my intention to keep the company operating as it has in the past," he said. "My responsibility is to maintain the status quo and that is what I intend to do."

Attorneys for Mr. Packo, Jr., the son of the restaurant chain's namesake and the firm's president, asked the court Thursday to allow Mr. Skutch to also act as a trustee to disband the various Packo corporate entities under the control of its two member boards, Mr. Packo, and his nephew Robin Horvath, who is the company's chief operating officer and treasurer.

A third board member, Jack Simonetti of Toledo, resigned his position on July 27, leaving Mr. Packo, Jr., and Mr. Horvath deadlocked. Mr. Simonetti could not be reached for comment Thursday.

"The parties ... are not capable of operating the business together," attorneys for Mr. Packo, Jr., argued in court filings.

"The appointment of a receiver [and liquidating trustee] will bring all of the assets under the control of the Court and allow the orderly sale of the business" that will allow creditors to be repaid and employees to keep their jobs.

James L. Rogers, attorney for Mr. Packo, Jr., and his son, Tony Packo III, said his clients "want to maintain the company as a financially viable company, which it is."

He said the receivership is "a necessary step to resolve the family dispute and all the pending litigation."

Mr. Packo III said after the court meeting that he and his father had no opposition to Fifth Third's request for a receiver, adding, "It is our intention to make sure Tony Packo's continues to be a corporation and to serve all the wonderful customers we've had over the years. We also want to make sure Tony Packo's remains a prosperous and successful business in Toledo ...

"We want to make sure that all our employees and key partners understand that this business is very successful on sound financial footing and will continue to operate as normal."

However, Mr. Horvath, in his court filings, has called the business "insolvent."

He filed a lawsuit last month against his uncle, Mr. Packo, Jr., and Mr. Packo III, who is a company manager, maintaining they withheld from him company financial records and needed to explain more than $100,000 in questionable disbursements.

It was co-owner Mr. Horvath who initially asked the court to place the business under the control of an outside receiver, prior to the business's loans being foreclosed upon. Fifth Third joined in the request for a receiver in its foreclosure action this week, stating in the filing that it thought the company's assets used as collateral for the loans were "at risk" because of the family dispute and the missed loan payments.

While Mr. Packo, Jr., initially opposed appointment of a receiver, his attorneys reversed course Wednesday and instead sought to broaden Mr. Skutch's authority to allow the business's sale or liquidation.

Mr. Skutch said on his business Web site that he "took his own injection-molding business through a six-year turnaround" and was named the court-appointed receiver in the liquidation of Timberstone Development Group Inc. this year.

Tony Packo's was started in 1932 by Hungarian hot-dog creator Tony Packo, Mr. Packo, Jr.'s father and Mr. Horvath's grandfather.

The signature "Hungarian" hot dogs and "secret sauce" have been as much a part of Toledo's Birmingham neighborhood as the churches and taverns that line its streets. The split-sausage hot dogs and sauce were a creation of Tony Packo, Sr., and the firm's secret hot dog sauce even made its way into space aboard the space shuttle in 1997.

The use of the label "Hungarian hot dogs" by the restaurant was determined by a court in 1962 to be not the exclusive property of the company.

Its original East Side restaurant at 1902 Front St. was honored in 1968 by nationally renowned steak connoisseur Maurice Dreicer, who gave a certificate of merit to the restaurant for its hot dog products. Mr. Dreicer's visit was the first recognition for the previously unheralded local eatery.

The business took on more prominent fame because of references to it in the M*A*S*H television show in the next decade. Its encased hot dog buns, signed by Hollywood and other national celebrities, added to its tourist attraction.

The secret sauce which tops the hot dog has had its own notoriety. A 1965 Blade story said the sauce was made from "unmarked drums of spices and herbs" in the basement of the original restaurant at Front and Consaul streets, the ingredients mixed and brought upstairs to be added to the meat in specially-made vats.

However, that description predates the broad commercialization of Packo's products, which brought cans of sauce, as well as its jars of Pickles and Peppers, to grocery stores across the nation.

It was not immediately clear Thursday how many family members are aware of the formula which Tony Packo passed on to his daughter, Nancy, before he died in 1963.

The company's products are still highly desired.

Debbie Crow, a spokesman for The Andersons Inc., which hosts in its general merchandise stores in Toledo and Maumee two of the five Packo's restaurants, said the eateries would continue to be part of The Andersons retail presence.

"We're going to continue to work with them and hope they can work through their issues. It's really no change for us," Mrs. Crow said.

An Arlington, Va., firm that specializes in disputes within family businesses said Thursday that such disputes become more commonplace the longer a firm is in business.

"Getting all the way to receivership is not so common, but conflicts in family businesses are more common than people imagine," explained David Gage, a mediator, clinical psychologist, and adjunct professor in American University's business school.

"Most family businesses can resolve them before the conflict becomes public. Mediation is such an appropriate approach to use for family businesses, because it allows them to settle all the disputes."

In court yesterday, Judge Cook consolidated the four lawsuits surrounding the family dispute and the bank loans into one case: the one originally filed by Mr. Horvath last month alleging that he had found questionable disbursements paid to Mr. Packo III or the firm's controller, Cathleen Dooley.

Fifth Third's case, also folded into the one case, said the company pledged as collateral all of its business assets, plus property at 1901, 1902-1912, 1918-2924 Front St.; 1940 and 1942 Front; 1933 and 1935 Consaul St., and 7 South Superior St.

Contact Larry Vellequette at:

lvellequette@theblade.com

or 419-724-6091.