Ex-developer of troubled site files Chap. 11.

Randall Roth, who just a few years ago was cutting seven-figure deals amid plans for a business park that promised to galvanize the Northeast San Fernando Valley, is broke.

Roth has filed two Chap. 11 reorganization petitions, one personal and the other on behalf of his business, Randall Roth Capital Corp.

Randall Roth Capital Corp. claims $1.8 million in assets and $4.8 million in debts, according to documents filed in United States Bankruptcy Court for the Central District of California.

Roth' s personal petition shows assets of $771,450 and debts of $3,354,000.

Court records, along with conversations with a number of parties involved with Roth, suggest that he financed a lavish lifestyle built upon an engaging vision--to build an economic engine in the center of the economically depressed Northeast Valley that would clean up a toxic landfill, employ hundreds at good wages and offer community services to the neighborhood.

But after years in the making, Roth's SunQuest Development LLC failed to deliver on its promise, and last year Roth was removed as managing member of the development with loans still outstanding and a string of technical and other consultants holding the bag for services rendered.

The two Chap. 11 petitions were filed within one day of each other, on Mar. 31 and April 1.

Randall Roth Capital Corp. earned just $13,000 this year, the first year since he was removed from control of the SunQuest project, according to the documents.

His personal filing lists monthly income of $30,000 from unspecified wages, and $27,000 from "commissions on future transactions currently under contract."

Roth lists his employer as Randall Roth Capital Corp. in his personal Chap. 11 filing.

His expenses include a $9,500 monthly nut for rent or home mortgage payments, alimony and other support payments of $17,000 a month and transportation expenses excluding car payments of $1,000.

Roth has remarried and is believed to have a young child from that marriage in addition to two children from his previous marriage.

The personal filing lists no car payments, but the documents include a monthly expense of $2,900 described as "auto payment to ex-wife, approximate monthly for vacation."

Roth's personal Chap. 11 filing lists among its few assets a note from SunQuest totaling $625,000.

The balance of the personal property listed in the personal petition is utility deposits, furnishings valued at $105,000, artwork valued at $35,000 and clothing valued at $5,000.

Randall Roth Capital Corp. is also listed among the personal assets, but no valuation is attached to the company in the documents.

As for the corporate filing, the company's bank balances total $48, the documents say, and along with security deposits, computers and other office furniture and equipment from the company's current business headquarters in Westlake Village, Roth Capital Corp. has personal property valued at $35,448.

Seeking exemption

According to the filing, the company is seeking to exempt Roth's Calabasas home, the only significant asset listed under Roth Capital Corp. with a value of $1.9 million, from any judgment.

Among the creditors named is High Investments, believed to be a high-risk lender, that holds the first trust deed on Roth's Calabasas home, and Midas Resource Group, a Menlo Park-based group that was one of the original investors in the industrial park.

The documents show that High Investments is owed about $1.5 million and Midas is owed $1.6 million.

Although the corporate filing also lists among the company's creditors the Internal Revenue Service, Securities and Exchange Commission and the state's Franchise Tax Board, the documents do not itemize the amounts owed to these agencies.

The personal petition however, notes that Roth owes the IRS $330,000.

A hearing date is scheduled for May 11 on both petitions.

A Chap. 11 proceeding is used to restructure debt in order to return a company or individual to financial solvency. The reorganization typically involves a settlement with creditors that pays a portion of the amount owed, but the court and the creditors must approve the arrangement, and approval typically depends upon the debtor's ability to show sufficient income to meet the repayment obligations agreed upon.

Bankruptcy experts say that Roth's petition could run into trouble for several reasons.

"He has to show he has enough income to make mortgage payments and generate enough income to pay creditors," said Laurence D. Merritt, a Woodland Hills attorney who specializes in bankruptcy. Merritt was not personally familiar with Roth or the Chap. 11 petitions he filed, but he said that generally in these eases, courts closely scrutinize a petitioner's ability to repay debt, and they can shift a Chap. 11 filing into a Chap. 7 bankruptcy filing (which liquidates assets) or appoint a trustee if there is sufficient evidence to indicate that a repayment schedule cannot be met.

"The court will probably look at this (petition) skeptically from day one," Merritt theorized.

Calls to Warren Deutsch, a representative of High Investments, and Mark Boucher, who is listed as a contact for Midas in care of Menlo Park-based Investment Research Associates, were not returned.

Roth's Calabasas residence maintains an unlisted phone number. He filed both reorganization petitions without any legal representation, according to the documents.

Roth had previously defaulted on another residence in Calabasas, valued at $1.1 million, according to the Chap. 11 documents filed, and several court proceedings are pending against him, believed to stem from an acrimonious divorce from his first wife, Helena.

Grew to prominence

Roth first emerged as a prominent figure on the Valley's business scene in the late 1990s when he launched SunQuest Development LLC and announced plans to develop a 650,000-square-foot industrial park in Sun Valley.

The project was to encompass three separate parcels, including the site of the Branford landfill, although Sunquest Development only controlled one portion of the land involved, a 12.5-acre site adjacent to the landfill.

The plans were heralded for their potential to clean up a dump that had long blotted the Northeast Valley landscape and because they called for the development of a community center in an area known for its paucity of social and community services. Promising to bring an estimated 500 jobs to the economically depressed area and to abide by a living wage agreement that would raise the wages paid for those jobs, Roth and his proposal were quickly embraced by the community and city officials.

The San Fernando Valley Business Journal named Roth among 25 of those expected to lead the Valley's future in its June 25, 2001 issue.

Through SunQuest Development, Roth raised nearly $10 million from private investors to acquire the land and won tentative approval for another $10 million from federal and other agencies including some seed funding from Genesis L.A. Real Estate Fund LLC, for the project,

Numerous consultants and contractors signed on to help with the development work, including a number of local Valley companies.

As the project gathered momentum, Roth even hosted a party at Universal Studios, which is now listed as one of the creditors on his personal Chap. 11 filing to the tune of $28,000.

But under his tutelage, SunQuest Business Park turned out to be a house of cards that toppled.

After more than four years, no construction had begun on the site, and last year, amid charges that he bilked investors, misled city officials and brought the project to near-collapse, Roth was removed as the project's managing member.

The remaining and new investors formed a new entity, Sunquest Development II, under the management of The Summit Alliance, a Santa Monica-based group that specializes in turning around troubled companies, and the group has said that it is in the process of revising the site plan, selecting a new developer and finding construction financing for the park.

"Currently we're not pursuing him," said Cynthia Futter, president of Summit Alliance. "We do believe we have causes of action against him but our focus is on getting this project built and recouping the money from the investors who invested in it."

Troubled project

Although Summit Alliance officials did not publicly discuss the reasons behind Roth's dismissal from the project, court briefs they filed related to Roth's divorce, paint a troubled picture of the project and Roth's role in it.

According to the documents, Summit and the investors inherited a project on the brink of defaulting and the briefs charge Roth with gross mismanagement including the misappropriation of investor's funds for his own personal use.

"During their tenure as the management of the LLC the Roths took out literally hundreds of thousands of dollars for personal expenses unrelated to the LLC and borrowed from independent investors hundreds of thousands of dollars for things unrelated to the Project or the 12.5 acres," the Summit Alliance documents state.

According to the briefs filed earlier this month, Roth withdrew more than $308,000 for personal expenses while lenders were on the verge of foreclosing on the 12.5-acre portion of the development that Sunquest Development LLC controlled.

SunQuest's general ledger as of Dec. 31, 2003, shows, among other things a $1,552.37 payment to Jaguar Motor Credit along with payments to Roth's ex-wife, Helena Roth totaling $15,000 described as "personal debt."

The court documents claim that Roth and his related entities (several different LLCs were set up to finance SunQuest) owed the company more than $1 million on loans made to them through the LLC in addition to the other funds withdrawn.

Liens had been filed against the property and consultants as well as taxes went unpaid, the documents charge.

"All of the secured debt was in default, property taxes were unpaid and foreclosures were forthcoming, the trade debt was virtually all in default and creditors were threatening action, the City of Los Angeles was threatening condemnation of the property as the LLC had not lived up to its commitments to the city ... payroll taxes were collected from employees and not paid to the government, the LLC was in default of its tax filing and payment obligations (and the IRS has liens against the LLC and all its assets) ..." the documents say.

The documents suggest that the current owners and management, in taking over the project, decided to restructure the debt and write off the funds that could not be accounted for in order to move the project along.

Some of those involved with the project were unaware of the Chap. 11 filings until contacted by the Business Journal.

Interviews with a number of the companies listed in the ledger as having provided services to SunQuest, consultants, architects, engineers and others, also revealed that many of these vendors are still owed money from those assignments.

Among the local companies that did business with SunQuest are: Poliquin Kellogg Design Group, architects in Woodland Hills, The J. Byer Group, an engineering firm in Glendale, and Rosenheim & Associates, Woodland Hills land use consultants.

These company executives declined to be quoted publicly, (some wouldn't even come to the phone) but they said that Roth's ability to pull together a competent team of professionals for the project, along with his personable demeanor, helped him to win the confidence of many of those who signed on with him, despite the fact that none knew of any prior experience Roth may have had developing large real estate projects.

"One aspect is it was a reasonable project," said one such source. "Another part is Randy understood a lot of the technical aspects, which was interesting given his background. I have other clients who did that and it has worked out great."

It remains to be seen whether the SunQuest Business Park will ever be built, although the current management says it is confident that the project will be completed.