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Ron Campbell: Untangling a collapsing financial empire

By Ron Campbell
Orange County Register

Orange County restaurant king John Gantes was a very wealthy man with 110 restaurants. And then, quite suddenly, he was bankrupt. His declared net worth sank from $215 million at the end of 2007 to a negative $374 million in mid-January 2009 – a $600 million reversal of fortune in little more than a year.

Because of the intricate structure of his empire – comprised of dozens of legally separate companies – Gantes stands an excellent chance of emerging from bankruptcy with most of his restaurants as well as his $2 million home in a gated neighborhood.

His creditors probably won't be so lucky. Dozens of them discovered that their loans were backed mostly by his now-worthless personal guarantee, which will be wiped out in court.

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How did you get started? (tip, editor assignment, etc.)

Like so many stories, this one began with a tip from somebody who was angry – a private lender who had loaned several million dollars to Gantes in the year before he went bust. Free tip: Always listen to angry people; you'll waste a lot of time, but every once in a while, one of those angry people will have a great story to tell.

What were the key sources? (people, documents, etc.)

Bankruptcy court is a gold mine for reporters. Gantes filed a personal bankruptcy and more than two dozen reorganization cases for his restaurant companies. Among the hundreds of documents filed in those cases, the most useful were the schedules of assets and liabilities; I summarized the assets and liabilities in each case in Excel and also tracked $24 million in loans to Gantes from his companies. Using land records and lawsuits – particularly the adversary actions filed by disgruntled creditors in the bankruptcy court – I documented how he borrowed tens of millions of dollars in 2007 and 2008, only to begin defaulting within months of taking the loans. I talked with several creditors, but only a few would go on the record. Most were too embarrassed to go public. Gantes himself has never talked with me, though his attorney has talked.

What was the biggest roadblock you had to overcome?

The Gantes organization is unusually complex. He controlled more than 100 companies. Some of those companies controlled real estate (and borrowed money against that real estate) while others operated restaurants and still others provided management services. Ownership of these companies, in turn, was divided among dozens of trusts. It would have been much simpler to reduce all the companies to a single name, John Gantes; clearly, his many creditors had done just that, and it had cost them dearly. But in order to explain why he was likely to keep most of his restaurants, I had to figure out the corporate structure.

Another roadblock was the unwillingness of most creditors to speak on the record. I have been gathering string on Gantes for months, and the only photos I have to offer my photo-crazy news organization are pictures of three Burger Kings. No photo of Gantes, no photo of any of his creditors. Very frustrating.

Do you have any advice for journalists working on a similar story?

Get to know your local bankruptcy court. There are always good stories lurking in the bankruptcy docket. Because of the recession, bankruptcy court will be a journalistic mother lode for at least the next two to three years. In addition, unless you work in the federal court and have an unlimited photocopy budget, get an account on PACER, the federal court system's online docket. If your organization already has a PACER account, try to persuade your librarian or editor to give you the password so that you can make daily checks on key cases.

Ron Campbell is an investigative reporter at the Orange County (Calif.) Register who specializes in covering business, white-collar crime and charities.

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