The Daily Parker

Politics, Weather, Photography, and the Dog

Welcome home, Attila

The former owner of Chicago restaurant Embeya has returned to the city to face charges he misappropriated $300,000 of the restaurant's money:

Attila Gyulai hasn’t been seen in Chicago since traveling overseas in 2016 shortly after shuttering Embeya — then one of the city's most illustrious restaurants. At the time, Gyulai blamed family obligations and the demands of running a restaurant.

But his partners, Thai and Danielle Dang, filed a lawsuit alleging he had been looting the business. And more than a year and a half later, federal prosecutors charged Gyulai with wire fraud, alleging he had misappropriated at least $300,000 “by means of materially false and fraudulent pretenses, representations and promises.”

Gyulai was arrested in late December in Valencia, Spain, where he’d traveled from Ecuador on a 10-day vacation. He waived extradition in March and was finally brought back to the U.S. to face the charges this month, court records show.

An upscale Vietnamese restaurant on the highly competitive Randolph Row, Embeya opened in 2012 to praise for polished cooking by chef Thai Dang and the artfully designed dining room.

Yet the charges alleged that Gyulai, who with his wife owned 56.5 percent of the restaurant and handled the finances, was engaged in fraud from as early as August 2011 to just after Embeya closed.

When the Dangs raised concerns about how the restaurant was being managed, Gyulai fired them and brought in a new chef.

The Dangs prevailed in two court cases against Gyulai, one for $90,000 in unpaid wages and another for breach-of-fiduciary duty among other claims, winning a $1.4 million default judgment in May 2017, according to a previous Tribune report. 

I guess $300,000 doesn't go as far as it used to. Maybe he's just done running? Or maybe he forgot Spain and the US cooperate on law enforcement?

How many lawsuits is Eddie Lampert party to?

Two made the news this week. First, Lampert has sued Sears (which he owns) for not conveying property that his investment firm bought from the doomed retailer:

Lampert's Transform is accusing the Sears estate, a bankrupt shell entity that is winding down under court supervision, of multiple wrongs including breaking the agreement by holding on to the chain's headquarters in Illinois. The estate is also intentionally delaying payments to vendors and trying to shift $166 million in accounts payable costs, according to the Transform complaint filed on Saturday.

The allegations mirror those made in court filings from Transform earlier this year. The Sears estate also sued Lampert, U.S. Treasury Secretary Steven Mnuchin and others last month, claiming they wrongly transferred $2 billion of company assets beyond the reach of creditors in the years leading up to the retailer’s bankruptcy.

Meanwhile, in another case, Lampert filed court documents in which he threatens not to pay $43m in severance payments he promised to make:

Lampert also denied that he is responsible for making some payments to creditors he says Sears Holdings is trying to force him to pay, according to the filing. Sears Holdings is the bankrupt remnants of the old Sears. It exists only to settle claims against it involving its few remaining assets.

Lampert had previously agreed to pay the severance to workers who lost their jobs before and during Sears' bankruptcy. Creditors objected to Sears paying severance to people laid off before the bankruptcy, so those workers never received an exit package.

Lampert's attorneys told the bankruptcy court that Lampert and his hedge fund ESL were the best owners to help workers who lost their jobs in various rounds of store closings.

But in the latest court documents, ESL said it wouldn't make the severance payments because Sears didn't give the hedge fund all of the assets it spelled out in ESL and Lampert's agreement to buy Sears. That included the amount of store inventory originally promised by Sears, as well as the company's headquarters in suburban Chicago.

Wow, he really wants to win Worst CEO of the Century, doesn't he? And remember, Lampert never cared about Sears as a going entity; he has always and only wanted the land Sears owns. What a schmuck.

What. The. Fuck?

Burger King has decided to embrace the suck:

Sir, this was a Burger King commercial. Part of a partnership with the nonprofit Mental Health America — as well as an unsubtle dig at the McDonald’s Happy Meal — the nearly two-minute “short film” promotes a limited-time, select-city product called “Real Meals,” which correspond to a customer’s “real” mood: Blue, Salty, Pissed, DGAF and YAAAS. In place of information about where to seek help if you’re experiencing feelings of depression, which would usually appear at the end of a public-service announcement, title cards explain: “No one is happy all the time. And that’s O.K.,” followed by an image of each of the Real Meals, jarring pops of color after the gloomy video. (No matter which mood you announce to the cashier taking your order, or to the touch screen that has replaced her, each box contains the same thing: a Whopper, fries and a drink.)

Insulting both the customer and the product might seem like a bad strategy for selling stuff. But it’s consonant with a broader shift in advertising, fueled by social media, whereby brands have felt compelled to veer dramatically off-script and imitate the most attention-seeking people online: Netflix recently ranted on Twitterabout the sexist connotations of the term “chick flicks”; inspired by a negative comparison, Vita Coco threatened to send one hater a jar of urine; Steak-umm has cultivated a bizarre, meme-fluent Twitter presence that breaks the fourth wall to discuss the difficulty of social media marketing and refers to the company’s core product as “frozen beef sheets.” All this antiadvertising has succeeded in doing is making our world feel yet more corporatized. Even our friends’ cheerful recommendations for miracle skin-care products or life-changing apps can sound as if there’s something in it for them. Everywhere is an Arby’s, sir.

“Life sucks — you might as well eat Burger King” is a reasonable attitude for an individual to espouse in this situation. ... [But] Burger King is not a person; life sucks at least in part because of Burger King.

I hope this trend stops soon. Of course, having studied marketing in a data-oriented school, I can tell you that no one really knows if marketing works. So Burger King and the other brands taking these bizarre turns in marketing will continue to do so because they won't have any data telling them not to.

I keep thinking of Robert Heinlein's novel Friday, in which Heinlein's own expy says this: "A dying culture invariably exhibits personal rudeness. Bad manners. Lack of consideration for others in minor matters. A loss of politeness, of gentle manners, is more significant than is a riot."

In other news...Therexit!

Burger King's brand implosion aside, other, more important news came out in the last couple of days:

  • This morning, UK Prime Minister Theresa May announced she would step down on June 7th, having lost the confidence of the right-wing crazies holding her majority together. The likely outcome of this will be Prime Minister Boris Johnson, who is actually less popular than May, forcing a general election through incompetence by the August bank holiday.
  • The heads of NOAA and NASA have raised the alarm that the proposed 24 GHz frequency band proposed for 5G wireless will mask the existing 23.8 GHz frequency of passive microwave energy which weather forecasting systems need to actually forecast weather.
  • Since February 2017, when he took his first of over a hundred golf trips as president, Donald Trump has cost us more than $100 million playing golf.
  • San Francisco's KPIX-TV Broadcast Operations Manager Eliot Curtis apparently gave himself an LSD trip while repairing a 1960s-era synthesizer.

Must be Friday.

Is it time to break up Facebook?

Facebook co-founder Chris Hughes thinks so:

America was built on the idea that power should not be concentrated in any one person, because we are all fallible. That’s why the founders created a system of checks and balances. They didn’t need to foresee the rise of Facebook to understand the threat that gargantuan companies would pose to democracy. Jefferson and Madison were voracious readers of Adam Smith, who believed that monopolies prevent the competition that spurs innovation and leads to economic growth.

A century later, in response to the rise of the oil, railroad and banking trusts of the Gilded Age, the Ohio Republican John Sherman said on the floor of Congress: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.” The Sherman Antitrust Act of 1890 outlawed monopolies. More legislation followed in the 20th century, creating legal and regulatory structures to promote competition and hold the biggest companies accountable. The Department of Justice broke up monopolies like Standard Oil and AT&T.

For many people today, it’s hard to imagine government doing much of anything right, let alone breaking up a company like Facebook. This isn’t by coincidence.

Starting in the 1970s, a small but dedicated group of economists, lawyers and policymakers sowed the seeds of our cynicism. Over the next 40 years, they financed a network of think tanks, journals, social clubs, academic centers and media outlets to teach an emerging generation that private interests should take precedence over public ones. Their gospel was simple: “Free” markets are dynamic and productive, while government is bureaucratic and ineffective. By the mid-1980s, they had largely managed to relegate energetic antitrust enforcement to the history books.

This shift, combined with business-friendly tax and regulatory policy, ushered in a period of mergers and acquisitions that created megacorporations. In the past 20 years, more than 75 percent of American industries, from airlines to pharmaceuticals, have experienced increased concentration, and the average size of public companies has tripled. The results are a decline in entrepreneurship, stalled productivity growth, and higher prices and fewer choices for consumers.

The same thing is happening in social media and digital communications. Because Facebook so dominates social networking, it faces no market-based accountability. This means that every time Facebook messes up, we repeat an exhausting pattern: first outrage, then disappointment and, finally, resignation.

Hughes makes excellent points. Just because the industries look different than those in the 1890s doesn't mean they haven't consolidated too much. History doesn't repeat itself, but it does rhyme.

The fart of the deal

Everyone knew that Donald Trump lost millions on bad business deals and bad management in the 1980s and 1990s. But we never knew how badly he dealt and managed until now. The New York Times obtained official IRS data on Trump's tax returns from the years 1985 to 1994, showing he lost a staggering $1.17 billion during that period—equivalent to more than $2 billion today:

Mr. Trump appears to have lost more money than nearly any other individual American taxpayer, The Times found when it compared his results with detailed information the I.R.S. compiles on an annual sampling of high-income earners. His core business losses in 1990 and 1991 — more than $250 million each year — were more than double those of the nearest taxpayers in the I.R.S. information for those years.

Over all, Mr. Trump lost so much money that he was able to avoid paying income taxes for eight of the 10 years. It is not known whether the I.R.S. later required changes after audits.

The new information also suggests that Mr. Trump’s 1990 collapse might have struck several years earlier if not for his brief side career posing as a corporate raider. From 1986 through 1988, while his core businesses languished under increasingly unsupportable debt, Mr. Trump made millions of dollars in the stock market by suggesting that he was about to take over companies. But the figures show that he lost most, if not all, of those gains after investors stopped taking his takeover talk seriously.

Jennifer Rubin finds five takeaways from the report, and Trump's non-denial of it. Her final point is spot-on:

Finally, do not expect the revelations to dim the Trump cult’s reverence for its leader. If he isn’t really as rich as he said, they will commend him for pulling a fast one (even on voters). If the story is false, it’s one more bit of evidence for their media paranoia. Sadly, the Fox News and talk-radio crowd long ago jettisoned any concerns that they’ve invested their hopes in a con man, someone who has lied and finagled his way through life and into the White House. To admit that would be to recognize they were dupes, victims of another Trump scam. That, they will never do.

The Trump cultists have gone this far and they will go farther. As Matt Ford says, we have not even begun to approach "peak Trump." It's going to be a very long 18 months until the next election.

The Art of the Possible, Illinois marijuana edition

Yet another Chicago-based medical marijuana company has merged with an out-of-state company ahead of an expected legalization of recreational pot this summer:

Chicago’s Cresco Labs on Monday unveiled a $120 million merger that allows it to expand into Florida, where analysts predict demand for medical marijuana will significantly grow in the coming years. By 2022, the market for medical pot could reach a whopping $1.7 billion, according to analysts’  projections.

Under the agreement, Cresco will acquire Florida marijuana grower and retailer VidaCann, a move that will allow Cresco to operate 30 medical dispensaries in the nation’s third most populous state. The company aims to significantly expand its operations by the end of the year, in part by doubling the size of its medical marijuana cultivation center. It also plans to have 20 dispensaries open by year’s end.

Last week, a Phoenix company announced one of the largest pot deals in U.S. corporate history by taking over Chicago-based Verano Holdings for $850 million.

If Cresco’s ownership of VidaCann is approved, Cresco could surpass another major marijuana player based in Chicago — Green Thumb Industries, which currently has 11 cultivation centers.

A vote on legalizing recreational cannabis could come as early as July, and is expected to pass.

What about RICO?

Author Garrett M. Graff, writing for the Times, suggests that Rudy Giuliani's approach to prosecuting cases under the Racketeering-Influenced and Corrupt Organizations Act (RICO) could provide the model for dismantling the Trump Organization:

Fighting the Mafia posed a uniquely hard challenge for investigators. Mafia families were involved in numerous distinct crimes and schemes, over yearslong periods, all for the clear benefit of its leadership, but those very leaders were tough to prosecute because they were rarely involved in the day-to-day crime. They spoke in their own code, rarely directly ordering a lieutenant to do something illegal, but instead offering oblique instructions or expressing general wishes that their lieutenants simply knew how to translate into action.

Those explosive — and arresting — hearings led to the 1970 passage of the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, a law designed to allow prosecutors to go after enterprises that engaged in extended, organized criminality. RICO laid out certain “predicate” crimes — those that prosecutors could use to stitch together evidence of a corrupt organization and then go after everyone involved in the organization as part of an organized conspiracy. While the headline-grabbing RICO “predicates” were violent crimes like murder, kidnapping, arson and robbery, the statute also focused on crimes like fraud, obstruction of justice, money laundering and even aiding or abetting illegal immigration.

The sheer number and breadth of the investigations into Mr. Trump’s orbit these days indicates how vulnerable the president’s family business would be to just this type of prosecution. In December, I counted 17, and since then, investigators have started an inquiry into undocumented workers at Mr. Trump’s New Jersey golf course, another crime that could be a RICO predicate; Mr. Cohen’s public testimony itself, where he certainly laid out enough evidence and bread crumbs for prosecutors to verify his allegations, mentioned enough criminal activity to build a racketeering case. Moreover, RICO allows prosecutors to wrap 10 years of racketeering activity into a single set of charges, which is to say, almost precisely the length of time — a decade — that Michael Cohen would have unparalleled insight into Mr. Trump’s operations. Similarly, many Mafia cases end up being built on wiretaps — just like, for instance, the perhaps 100 recordings Mr. Cohen says he made of people during his tenure working for Mr. Trump, recordings that federal investigators are surely poring over as part of the 290,000 documents and files they seized in their April raid last year.

Indicting the whole Trump Organization as a “corrupt enterprise” could also help prosecutors address the thorny question of whether the president can be indicted in office; they could lay out a whole pattern of criminal activity, indict numerous players — including perhaps Trump family members — and leave the president himself as a named, unindicted co-conspirator.

Of course, the President could try to pardon everyone but himself, even if that leaves himself open to state charges in New York and elsewhere. But for the time being, the Southern District of New York and other bodies seem to be laying out the larger RICO case just fine. Can't wait to see it.

Amazon abandons its HQ2 site in New York

The company announced today that it has given up on building out its new headquarters in Queens:

[T]he agreement to lure Amazon stirred an intense debate about the use of government incentives to entice wealthy companies, the rising cost of living in rapidly gentrifying neighborhoods, and the city’s very identity.

Amazon’s decision is a major blow for Gov. Andrew M. Cuomo and Mayor Bill de Blasio, who had set aside their differences to bring the company to New York.

But it was a remarkable win for insurgent progressive politicians led by Representative Alexandria Ocasio-Cortez, whose upset victory last year happened to occur in the district where Amazon had planned its site. Her win galvanized the party’s left flank, which mobilized against the deal.

State Sen. Michael Gianaris, a vocal critic who was chosen for a state board with the power to veto the deal, said the decision revealed Amazon’s unwillingness to work with the Queens community it had wanted to join.

“Like a petulant child, Amazon insists on getting its way or takes its ball and leaves,” said Mr. Gianaris, a Democrat, whose district includes Long Island City. “The only thing that happened here is that a community that was going to be profoundly affected by their presence started asking questions.”

In its statement, Amazon said it has no plans to re-open the search for a second campus.

I'm actually glad they pulled out, as I expect so are many people in New York. The concessions Amazon secretly extracted from the state and city were worth more than $3 billion, with only the company's promises guaranteeing 25,000 new jobs in Queens. (Ask Wisconsin what a company's promises are worth.)

Sears lives to die another day

On Thursday, a court accepted Eddie Lampert's $5.2 bn bid to keep Sears running and himself as its head:

Lampert’s purchase, made through his hedge fund, ESL Investments, is intended to keep 425 Sears and Kmart stores open, preserving some 45,000 jobs. It was the only bid submitted in an auction that would have kept the once-mighty department store giant in business and avoid liquidation.

Lampert’s plan was opposed by a committee of unsecured creditors skeptical that Hoffman Estates-based Sears will be any more successful after exiting bankruptcy. The committee pushed for a liquidation, arguing that shutting down the company and selling its assets could recover more of what Sears owes.

Still unresolved is a dispute between Sears and ESL over which is responsible for paying $166 million for inventory received after Sears filed for Chapter 11 bankruptcy on Oct. 15. Although Drain did not have jurisdiction to decide the issue, he gave an advisory opinion in favor of Sears’ claim that ESL is responsible for those liabilities.

The judge’s decision saves Sears from liquidation, but still unanswered is whether Lampert can reinvigorate a retail chain that many consumers have fond memories of, but no current relationship with. Lampert has said he wants to invest in smaller stores and those that are profitable, with a focus on popular categories like appliances and repair services.

I'm not a bankruptcy attorney, so I don't know whether this is a good ruling. I, personally, would have preferred that Sears stay open and Lampert stay far away from it. But at least it's not dead yet.