Industry News

[December 09, 2006]

Judge orders K's liquidator closed

(Paducah Sun, The (KY) (KRT) Via Thomson Dialog NewsEdge) Dec. 9--The former K's Merchandise in Kentucky Oaks Mall closed Friday after McCracken Circuit Judge Craig Clymer barred Springfield, Mass., liquidator The High Point Group from further sales because of deceptive advertising and improper licensing.

Clymer issued a temporary restraining order about 3 p.m. based on a lawsuit filed earlier in the day by Assistant County Attorney Mike Murphy. The company, doing business as H.P.G. Enterprises, was ordered to immediately close the store and stop advertising with K's name or any terms suggesting liquidation or going out of business.

"We had a letter from the attorney general authorizing us to proceed," Murphy said. "There's nothing improper about a liquidation sale, but you can't give the impression that it's K's Merchandise."

Within an hour of Clymer's order, manager Rob Wilson said the store was closing immediately. Asked if the company would seek a hearing to contest the ruling, Wilson referred that and other questions to High Point Group President and owner Ed Borowsky. An office worker in Springfield said Borowsky was traveling and unavailable for comment.

The closing meant job losses for some managers brought in from Springfield as well as about 40 of the 70 former K's workers rehired by H.P.G.

Financially troubled K's closed Nov. 7 after a two-month liquidation. The store reopened several days later as H.P.G., billed as a discount furniture and jewelry business. At that time, Borowsky said the store would remain open through the holidays and long-term if it performed well.

The sale and advertising drew concerns from competitor Louis Michelson, owner of Michelson's Fine Jewelry Gallery in front of the mall. He approached Murphy, who consulted the attorney general's office.

"Obviously I did it for myself," Michelson said. "But the consumers also need to understand these sales are not what they're cracked up to be. They're not giving away the merchandise. These are professional liquidators."

H.P.G. had been advertising discounts of 60 to 80 percent off the lowest ticketed price. Michelson said he understands advertising restrictions because of problems he encountered four years ago during a bankruptcy reorganization.

The lawsuit alleges H.P.G. violated state law through deceptive advertising and not having proper permits and licenses for a liquidation. The suit gives this background:

Boston-based Gordon Brothers Retail Partners, a subsidiary of longtime liquidator Gordon Brothers Group, acquired controlling interest in K's last spring. Retail Partners and former K's owners formed New K's Merchandise, with Retail Partners having controlling interest.

On Sept. 7, New K's got a county license to liquidate the store from Oct. 7 through Nov. 7, but the altered application failed to certify that the inventory had no consignment items.

H.P.G. "is a well-known liquidator of furniture and holds itself out as being a Gordon Brothers-financed company," the lawsuit contends. H.P.G. "offered essentially the same merchandise" sold by K's with new goods added. It didn't remove exterior K's signs and used many K's employees as well as K's cash register receipts.

The lawsuit also alleges that H.P.G. ran deceptive liquidation ads on WPSD-TV and in The Paducah Sun, both referring to the K's location. H.P.G.'s newspaper ads last weekend advertised a four-day liquidation sale implying the store would close Tuesday. Despite not having the proper license, the store closed Wednesday and reopened Thursday with new advertising of "Fine Jewelry & Furniture Disposal" with the last day being Monday, the suit claims.

Borowsky said earlier that he bought the K's inventory "at a tremendous value" and combined it with inventory from other liquidation sales, factory close-outs and other special buys. He called Gordon Brothers a financing arm of High Point.

Copyright (c) 2006, The Paducah Sun, Ky.
Distributed by McClatchy-Tribune Business News.
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