Lender Sues Bankrupt Distributor Inland Financial Says Psc Wrongly Diverted Payments

Inland Financial Corp., a Valley financing company that took a risk on a bankrupt Spokane food distributor, may be stuck with $1 million in debt.

Inland Financial last week sued the owners of defunct PSC Food Service, alleging they had violated a financing agreement by diverting payments from PSC customers into company and personal accounts rather than to Inland Financial.

PSC owners were Spokane brothers John, Patrick and James Cooper.

Inland Financial said in the lawsuit filed June 2 in Spokane County Superior Court that it was owed $1.025 million as of April 29. However, as much as $200,000 may have been collected since that time, said Richard George, Inland Financial’s attorney.

Inland Financial is seeking a judgment against the Coopers and former PSC manager, Randy Schwartz, to cover potential losses.

“There are a lot of people looking for a way to cut their losses in this bankruptcy - everyone from the guy who drove the forklift, to my clients and the bank,” George said.

The Coopers have not yet responded to the suit and their attorney, Dan O’Rourke, was unavailable for comment.

PSC in November sought Chapter 11 bankruptcy protection from creditors while it reorganized. To cover its expenses, PSC negotiated a $1.25 million line of credit with Inland Financial in exchange for PSC’s accounts receivables, or the bills that PSC customers would pay the company in the future.

The Cooper brothers personally guaranteed the repayment, the suit said. Schwartz also agreed to be responsible for customer checks getting to Inland Financial.

However, PSC abruptly shut down April 18 when a proposed sale to Alliant Food Service Inc. fell through at the last minute.

Sources close to the deal said Alliant, a giant Chicago-based distributor, pulled out of the deal because of concerns it would have to assume liability for environmental damage at one of PSC’s old properties.

The lockout put 75 employees out of work, costing them up to three weeks pay. It also left PSC with no means to generate revenue and repay hundreds of creditors, a prospect that quickly forced the company into the more serious Chapter 7 bankruptcy liquidation.

Bruce Boyden, a Spokane attorney assigned as trustee in the case, said employees will get paid if there is money left over after satisfying claims made by PSC’s bank, Washington Trust Bank, Inland Financial and a handful of creditors who sold PSC perishable food. The food suppliers are protected under an obscure federal perishable food law.

“Employees are high up on the food chain,” Boyden said.

Boyden said PSC’s building on the West Plains recently was sold to a group led by investor Dane Armstrong. Other possible sources of money include an income tax refund and collection of overpayments to creditors.

Alliant, meanwhile, continues to explore options for a distribution center in the Inland Northwest, said spokesman Terry Dunn.

, DataTimes