In a long and distinguished career, Jerry McHale had never worked on a case like the Palm Restaurant.
It’s taken him nearly 50 years, but Southwest Florida forensic accountant and bankruptcy trustee Jerry McHale says he’s finally worked the most stimulating case of his life. This from a grinder of the legal side of the financial industry with a dogged and down-home style that belie his glossy and polished resume. McHale has done everything from selling an Alaskan airline to finding a buyer for a repossessed yacht to recovering millions in stolen Ponzi scheme funds.
The stimulating case? Overseeing the bankruptcy-forced sale of intellectual property and other assets belonging to the parent company that ran the famed Palm Restaurant chain for generations. With 21 locations from Boston to L.A. and Miami to Mexico City, the company dates back to 1926, when Pio Bozzi and John Ganzi opened the first Palm, in New York City. The Bozzi and Ganzi families were into their third generation of ownership when, in 2013, things began to unravel. It started with an inter-family lawsuit that ultimately led the parent company, Just One More Restaurant Group, to file for Chapter 11 bankruptcy in March 2019.
That’s how McHale, owner and president of Fort Myers-based McHale P.A., got involved in the case. The judge, from the U.S. Bankruptcy Court for the Middle District of Florida in Tampa, named McHale chief restructuring officer of Just One More Restaurant and related entities.
A federal bankruptcy trustee for decades, McHale was intimately familiar with the minutiae of the system. But the complexity of the Palm case — and the sprint-like nature of prepping it for sale, leading to the edge of life before the pandemic, was something he considers a career capstone moment. “I like going into problematic situations and try to resolve them,” McHale says. “This was certainly one of the more interesting in cases in my career.”
Interesting enough that industry trade publication M&A Advisor chose the Palm sale, and McHale’s work in it, as its 2021 Distressed M&A Deal of the Year in the $50 to $100 million category.
People who have worked with the 76-year-old, folksy, snakeskin boot-wearing McHale say national recognition like that is long overdue. McHale has been a court-appointed trustee, liquidating officer, restructuring officer, accountant, examiner and expert witness on dozens of high-profile cases. The list includes the Brasota Mortgage Co. in Sarasota and Bradenton, which unraveled in a Ponzi scheme in the early and mid-2000s; Anchorage, Alaska-based PenAir Airways; and Twinkies manufacturer Hostess Brands.
“Judges like him because he’s straightforward and honest, and if he says he’s going to do something he does it,” says New York City attorney Michael Devorkin, who has worked on cases with McHale going back more than a decade. “Lawyers like to pontificate and go on and on and on. Jerry is a no BS guy who can work with lawyers, cut through the noise and come up with practical solutions.”
Michael Markham, an attorney with Johnson Pope in Tampa who has worked with McHale on cases for some 20 years, sees the same thing. He notes, too, that when McHale is called into a case, it’s usually because there’s a lot of wrongdoing, a lot of lost money and a lot of frustrated, angry and upset people. “That can be like a funeral director,” says Markham, who met McHale when they both spoke on a restructuring law panel in the late 1990s. “But Jerry has a way of not making them mad anymore. He has a calm way of dealing with people and a unique style of problem-solving.”
For McHale, the Palm case wasn’t only compelling work. It was affirmation of a lifetime of business lessons picked up during his career. One lesson? The value of having super-organized paperwork. Another? The nuanced significance of negotiating to win — not just to see the other side lose.
McHale entered the case after Just One More Restaurant’s March 7, 2019 bankruptcy, in which the judge called the case a “textbook example of fiduciary misconduct.” The creditor list was 50 parties deep, with liabilities up to $50 million, bankruptcy records show.
The genesis of the bankruptcy was the grandsons of the founders, Walter Ganzi Jr. and Bruce Bozzi Sr., faced a $120 million judgment in a civil case brought by some of their cousins. The allegations: the pair schemed to defraud the cousins of millions of dollars in royalties over 40 years. Bankruptcy, McHale says, was the pair’s best option out of the morass. Yet that didn’t make it less complicated. “It was a family feud that would not stop,” McHale says, “and to aggravate things they had a substantial cash flow problem.”
‘Any fool could cut costs, but the trick is to maintain revenue and grow it.’ Jerry McHale, McHale P.A.
One big issue was in accounting for the accounting issues at the Palm, says McHale. With locations in multiple states, there was a big pile of tax and other documents, which he says were in total disarray. “It took yeoman’s work to get them into a readable package,” he says.
A deep look at the books also led to discovery of another issue: what McHale called some $3 million in “deadwood on the payroll.” That led McHale to make some quick decisions, in an effort to make the bankrupt business attractive to buyers. At the same time, in another long-learned lesson, he knew to protect the company’s posh culture and refined customer service, with celebrity caricatures on the walls and martinis shaken, not stirred. “Any fool could cut costs,” McHale says, “but the trick is to maintain revenue and grow it.”
McHale’s next move was to hire Raymond James & Associates to facilitate the bankruptcy sale. The St. Petersburg banking giant, says McHale, did a tremendous job lining up a pool of possible buyers, with 50 or so in general and five or six serious entities. And it did that in three months. When down to the final possible buyer, McHale recalls being on multiple phone calls with a dozen or so lawyers and others until 3 a.m., all negotiating deal specifics. “Everyone knew they had to get the best deal for their clients,” he says. “There was really no gnashing of the teeth.”
The buyer was hospitality conglomerate Landry’s, run by Texas entrepreneur Tilman Fertitta. Landry’s brands include the Golden Nugget Hotel and Casino, Joe’s Crab Shack, Morton’s The Steakhouse and the Rainforest Café. Fertitta also owns the NBA’s Houston Rockets.
But there was one more hiccup: On March 7, 2020 Landry’s officials called McHale. They sought to slash $5 million of the agreed sale price — from $50 million to $45 million, plus the assumption of $25 million or so in debt. McHale, not wanting to lose the buyer but also knowing he faced a difficult payday looming given the Palm’s cash crunch, offered Landry’s a deal: yes to $45 million if Landry’s would move up the closing date — to a super-fast two days later. Getting the cash in hand, McHale reasoned, would be worth the $5 million. Landry’s executives agreed. On March 9, U.S. Bankruptcy Chief Judge Caryl Delano approved the bankruptcy sale. Landry’s paid $45 million in cash and assumed $23 million in liability for debt.
That March 9, 2020 date, of course, was crucial because four days later the world began to shut down from what’s now a 19-month pandemic. “We were very fortunate the sale occurred when it did,” McHale says. “If it didn’t there would probably not be a Palm Restaurant anymore.”
Both Markham and Devorkin, attorneys who have worked with McHale, say one of his strengths is getting a complicated entity like Just One More Restaurant ready for sale. “He’s really good at sizing up a business and (measuring) what it’s worth,” Devorkin says. “And he’s also really good getting the best dollar he can in the case, which is hard because everyone knows you’re desperate.”
McHale started his own firm in 1974 in Fort Myers. His story of how he got to Florida starts out typical: a native of Rochester, New York and then a recent graduate of Wilkes College in Wilkes-Barre Pennsylvania, McHale saw a help wanted ad in a newspaper from a Fort Myers real estate developer. The developer sought a CFO. “I didn’t even know where Fort Myers was,” says McHale, the first in his family to go to college, “but I thought I would give it a shot.”
That developer ran into some financial trouble and in less than a year McHale was on his own. He decided to focus on forensic accounting, and built his company slowly. McHale P.A. now has 10 employees and does about $2 million a year in revenue, says McHale, with an approach to not take “every case that walks in the door.” The company has had clients in New York, Virginia, Texas and California, and the staff includes his business partner, Veronica Larriva.
“I sort of fell into this line of work,” McHale says. “But I really enjoy the challenge. I think of it as a very involved chess game.”