Xavier Cervera Undermined Restaurants in Take-Over Bid Say New Owners’ Lawyers

Xavier Cervera Undermined Restaurants in Take-Over Bid Say New Owners’ Lawyers

Update:  Full Text of Cervera’s Statement in Response to the Claim

by Larry Janezich

According to a report by Katy Stech of the Wall Street Journal Bankruptcy Blog on Thursday,  lawyers for the current owners of the Hawk ‘n’ Dove and seven other restaurants recently owned by Xavier Cervera claim that Cervera, in his role of consultant, undermined the profitability of several of the restaurants so the new owners would default on monthly payments thereby returning ownership of the restaurants to Cervera and his partners.  The new owners filed for bankruptcy on March 28, 2014, forcing the issue of Cervera’s accountability into the courts.  Capitol Hill Corner reported Cervera’s reaction to the bankruptcy filing here:  http://bit.ly/1dC2dLY

The lawyers did not say how the alleged deceit was effected, but according to court documents, the new owners fear the funds were diverted for other purposes.

Cervera and his Florida-based partners sold their nine restaurants to a Boston investment firm in December of 2012.  Cervera was brought in as consultant last August after revenues at the chain’s flagship restaurant – Hawk ‘n’ Dove – fell off sharply under the manager for the new owners, Richard Cervera (Xavier’s brother).  Richard Cervera was removed as manager of the eight restaurants and Xavier Cervera was reported to have resumed control of the day to day operations of the restaurants on behalf of the new owners.  (The ninth restaurant, Willie’s Brew and Que near National’s Ball Park, which was part of the deal, is still under construction.)  Richard Cervera’s tenure as manager was marked by an effort to take the Hawk ‘n’ Dove to a new upscale level and a management style which reportedly alienated long time employees.

Update:  In response to the report, Xavier Cervera authorized the  release of the following statement:  “Xavier Cervera had no ownership, management, or financial control over any of the Debtor’s operations at any time following the sale.  Any and all financial decisions and disbursements were those of the buyer, and Mr. Cervera never even had access to any of the buyer’s bank accounts or cash funds.

His only role was pursuant to a consulting agreement with the new owner, where he was called upon from time to time to express his opinions and assist in specific tasks that the new owner assigned to him

One of those requests was to assist and advise  the new owner in attempting to reverse a steady decline in sales and loss of key personnel that had occurred while the restaurants were under the control of Richard Cervera prior to Richard Cervera’s termination by the buyer last fall.  Sales at the venues were increasing steadily after Richard Cervera’s departure and prior to the bankruptcy.

All decisions as to management and financial control — and all aspects of the buyer’s finances and disbursements — were solely those of the buyer and any attempts to blame Mr. Cervera for the actions or inactions of the buyer’s management that led to the bankruptcy are without merit.

This includes any payments made by the new owners with respect to the construction of their new restaurant – Willie’s – which was almost ready to open prior to the filing.  In particular, Mr. Cervera has no “contractual obligation” to fund construction of Willie’s, as the new owners allege.

The purchasers have also asserted in the bankruptcy that Mr. Cervera kept control of a couple of items following the sale that they now claim should belong to the Company and not to him personally  The ownership of these few items is very much at issue and will likely be determined at some point as part of a court proceeding.”

Part of the purchase deal with Xavier Cervera was that he would not open a restaurant on Capitol Hill for ten years.  But Xavier Cervera is planning a new gastropub in Shaw’s Blagden Alley close to the trendy restaurant, Rogue 24.

For the entire WSJ post, see here: http://on.wsj.com/1pvy85W