Fraud and Illegal Employment Lead to Multi-Million Dollar Bankruptcy in Arizona

Phoenix, Ariz. — Despite 13 branches of Phoenix-based Danny’s Family Car Wash chain being foreclosed and a Scottsdale investment firm winning a $24-million judgment against the company, the owner is still facing a number of other serious charges.

On Sept. 16, the same day that 13 of his Phoenix car-wash businesses were auctioned, the company owner was in court once more. That day, a U.S. district judge accepted a guilty plea the owner made in June regarding a felony charge of identity fraud relating to illegal works being given false identification. The case involves disregarding illegal hiring taking place at the car wash businesses.

On Aug. 13, U.S. Bankruptcy Court Judge Eileen Hollowell ruled in favor of Diversified Funding Group LLC. The investment firm, DFG, won a $23.9-million judgment against the car wash owner.

This is not the first time the company owner and DFG have been in court. In 2007, DFG loaned $7.8 million to a real-estate development company of which the owner was a partner. Part of the loan involved signing a personal promissory note related to the car-wash business.

The loan was intended for the Main Street Glendale development, which is located close to the University of Phoenix Stadium. The project was supposed to add hotels, a golf course, retail centers and offices to the location. The owner of Danny’s Car Wash and La Paz County offered a $1.2 billion bond to finance the plan, but it ultimately failed.

DFG sued the car-wash owner and his partners for fraud and breach of contract regarding that loan in 2010, and was awarded a judgment of $17.7 million. At the time, DFG also queried whether the car wash business was as valuable as the owner had quoted when requesting the loan.

In Feb. and Mar. 2010, the car-wash owner filed for bankruptcy. Mentioned in the filing were his car-wash businesses, some gas stations, convenience stores and restaurants.

The following year, in July, he also filed for personal Chapter 11 bankruptcy. By the end of 2011, both bankruptcy reorganizations had been approved, and 900 members of staff at Danny’s Car Washes had been let go.

In Aug. 2013, Immigration and Customs Enforcement raided Danny’s Family Car Wash businesses and indicted 14 managers and supervisors. Many of the employees were illegal workers who were hired using pseudonym. In early 2014, the company owner sold his Paradise Valley home to famous songwriter and singer, George Benson. The 13 Danny’s Family Car Wash businesses that faced foreclosure operated right up until the auction in September.

Formerly a Detroit police offer, the car-wash owner started his business early in the 1980s. By 2013, he owned more than 20 car washes in the Phoenix Metro area. Aside from Danny’s Family Car Wash, he has been involved in a number of other businesses, including Main Street, which is a multi-purpose retail, resort and office complex in Glendale, as well as various centers for luxury corporate jets.

Sources:

http://www.bizjournals.com/phoenix/print-edition/2014/08/22/lender-wins-24-million-judgment-against-owner-of.html

http://www.bizjournals.com/phoenix/news/2014/08/15/investment-firm-wins-24m-judgment-against-danny-s.html

http://www.walb.com/story/26543939/judge-accepts-guilty-plea-by-dannys-car-wash-owner

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