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Fraud Investigation

By November 6, 2021March 30th, 2022Insights

Initially engaged by the Secured Lender to investigate fraud at an Arizona-based publishing company in default of its debt obligation, MCA Financial carried out a detailed analysis, confirming embezzlement by one of the company’s principals.

In an attempt to prevent the appointment of MCA Financial as Receiver in Arizona, the company filed for Ch. 11 in New York. Lender’s counsel responded by applying to the NY Bankruptcy Court to appoint MCA Financial as the Trustee, or “responsible party,” blocking the Debtor from dodging its loan defaults. The Court agreed and appointed MCA to manage all aspects of the business and effectively serve as the company’s CEO.

Employing 500+ and generating $50MM in revenue, the company was losing money on its five weekly shopper publications in AZ, PA, and NY, which were delivered free-of-charge to homes and businesses in those territories. Additional funding from the Lender was paramount to the company’s survival and to eventual debt repayment.

MCA proceeded to secure the retention of key employees and advised senior management on a viable strategic plan. The Lender then agreed to increase the loan, triggering implementation of the strategic plan and a subsequent return to operational stability and profitability.

A court-approved credit bid allowed the Lender to acquire the company for the amount of its secured $20MM debt. MCA Financial sold the Tucson and Philadelphia publications by the end of the first year and operated the New York publications for an additional two years, before selling them.

The bank recovered 100% of its debt and interest, plus an additional 20%.