It appears pickings will be slim for clients seeking satisfaction from Toronto-based Ritchies Auctioneers, which even before being forced into bankruptcy in late October was in severe financial distress.
On Monday, documents presented by the trustee in bankruptcy at the Toronto Office of the Superintendent of Bankruptcy Canada show that the company has assets of just under $1.8-million while liabilities total $8.53-million. Of these, close to $8-million is owed to "general consignors (identity unknown)." To date, close to 100 unsecured but identified creditors have filed claims for a total of $192, 297.84. Ritchies' landlord, as preferred creditor, is seeking almost $131,000 in unpaid rent while Ritchies' two secured creditors, Toronto-based Fleet Street Financial Corp. and the Bank of Montreal, have claims totalling just over $250,000.
It seems likely most creditors, especially consignors whose possessions were sold but who have yet to receive payment from Ritchies, are going to come out of the proceedings empty-handed. According to yesterdays' preliminary report by the bankruptcy trustee, the money Ritchies collected from auction sales was not put in a separate trust account for consignors. "Instead all funds were commingled in the general accounts." By late October, the company's "bank accounts were either overdrawn or had minimal balances."
Yesterday's report presents a damning portrait of Ritchies' operations, especially its finances and inventory control. "No financial statements were prepared by the company or its external accountants after June, 2008," the report notes. Its electronic database "was not maintained," with the result that the company's records "do not include an accurate listing of the inventory." Two other auctioneers hired to estimate the value of Ritchies' inventory put it at only $375,000 to $600,000. But "until the claims process is completed," the trustee report warns, "it is unknown whether there will be any inventory available for sale for the benefit of creditors generally."
The report further notes that Ritchies chairman and CEO Ira Hopmeyer has "advised" the trustee that the company has been "unable to identify the owners for a substantial amount of inventory" because of poor recordkeeping. As of June this year, Hopmeyer, Ritchies' majority shareholder and its sole director/officer at the time of bankruptcy, owed Ritchies close to $1.4-million in shareholder loans. However, Hopmeyer has told the trustee that he has repaid these "shareholder loan advances and, to the contrary, is now owed approximately $100,000" by Ritchies. The trustee says he "awaits documentation" confirming the repayment.