Founders and lender fight as firm attempts revival. (Up Front).

Power Lift LLC, the renter and seller of heavy-duty forklifts that was started a decade ago and quickly became one of the nation's fastest growing companies, is back at the starting gate.

Founded by brothers C. Richard and Robert Cowen in 1993, the Pico Rivera-based company saw revenues reach $40 million-plus within a decade, only to crash into bankruptcy last year amid charges of mismanagement and self-dealing.

The company is set to emerge from Chapter 11 bankruptcy this week with the Cowens gone, its major creditor and supplier in control of the company and a messy pile of litigation still in place.

Under the plan of reorganization approved last month, Power Lift will become a unit of Mitsubishi Caterpillar Forklift America Inc. and renamed Southern California Material Handling.

"To be honest, it has been the toughest 12 months I've experienced in my entire career," said Daryl Kline, vice president of product support at Powe? Lift. "But I acquired an education through all this."

Kline, who will be part of the new management group, said he expects revenues to reach to $60 million in two years. In the meantime, there is a lot of litigation to sort through, starting with a face-off in federal court on May 13 between Mitsubishi and the Cowen brothers over who is to blame for Power Lift's troubles.

Good years

The company could not have taken a more abrupt turn.

Formed in 1993 when the Cowens signed a sales and service agreement with Mitsubishi, Power Lift became the authorized Southern California dealer of Caterpillar forklifts. Richard and Robert each owned 50 percent, with Richard Cowen serving as president. Company assets were later transferred to family trusts held by the Cowens and to a newly formed entity called Power Lift LLC.

Business in the early years was very good. Fueled in part by the 1994 acquisition of competitor Clark Lift, the company ranked first on the Business Journal's 1996 list of fastest growing private companies. Two years later, it was ranked the nation's second fastest growing private company by Inc. magazine.

But renting 3,000- to 80,000-pound forklifts for use in warehouses and distribution centers proved to be a low margin business and a round of cost cutting in 2001 resulted in the 270-person workforce being reduced by one-third.

"It was tougher and tougher for the company to repay and leverage the debt it incurred with the factory," said Kline of money owed to Mitsubishi. "It wasn't that we couldn't pay the bills to vendors. We didn't have the volume of business to leverage the debt with the factory."

In May 2002, the Cowens announced to the 12-person management team that Power Lift would be filing for bankruptcy protection.

At the time, Mitsubishi, its largest creditor, claims it was owed $42 million in unpaid equipment financing payments and other debt, according to court papers.

"The company was grossly undercapitalized," said Howard Ehrenberg, an attorney at Sulmeyer Kupetz Baumann & Rothman PC and U.S. trustee operating Power Lift since the bankruptcy. "They didn't get the capital infrastructure to support their growth in sales, especially following the acquisition of Clark Lift. Somebody had to finance the acquisition of inventory and parts and development, and that was Mitsubishi."

Litigation exchanged

While the bankruptcy announcement took some of Power Lift's senior management by surprise, the Cowens had been involved in litigation with Mitsubishi for some time. In August 2001, Mitsubishi sued Richard Cowen and his wife, Ziba, to obtain guaranteed loan payments.

In turn, Richard, Robert and another brother, Josef, filed a separate suit against Mitsubishi that October, containing 20 claims of breach of contract, misrepresentation and concealment. Mitsubishi counter-sued for breach of contract but added claims of fraudulent transfers, breach of good faith, misrepresentation and nondisclosure.

Mitsubishi claims the Cowen brothers diverted millions of dollars for their own personal benefit through the use of separate family businesses while Power Lift sank deeper into debt.

"The exercise of the control of Power Lift and the various business entities by the Cowen brothers has manifested itself in improper distributions, fraudulent transfers and illegal distributions," the counterclaim states. "All acts have been done at times when Power Lift was insolvent."

Ehrenberg said he dismissed Richard and Robert Cowen in late 2002 because of the alleged "self-serving transactions."

The Cowens declined to comment for this story through their attorney, Michael Fletcher at Frandzel Robins Bloom & Csato LC.

In court documents, Richard Cowen said Mitsubishi failed to live up to its obligations in a "side letter" it signed in 1997.

In the letter, Mitsubishi agreed to provide Power Lift with certain rebates, extended loan maturity dates and other concessions, according to court documents. Also, in the letter, Mitsubishi acknowledged the Cowens would have trouble paying off their debt because of external factors, including a downturn in the economy, the memorandum states.

Beyond the debt questions are Mitsubishi's charges of financial manipulation.

In addition to Power Lift, the Cowens have interests in R&R Real Estate LP, landscaping company Marina Landscape Inc. and Marina Investment Group Inc. All three are located at 100 E. Katella Ave. in Anaheim, according to filings at the California Secretary of State's office.

Mitsubishi claims that in 1996, Richard and Robert Cowen pulled out a $1.4 million loan from Power. Lift for R&R Real Estate to buy Power Lift's corporate building in Pico Rivera. Richard and Robert Cowen's family trusts each own 49.5 percent of R&R, with the remaining 1 percent owned by Marina Investment Group Inc.

Power Lift, which had already occupied the Pico Rivera property, was paying $24,000 a month in rent before R&R acquired the property. After the acquisition, Mitsubishi's counterclaim asserts, the rent jumped to $42,000 a month.

The Cowens, according to Mitsubishi's counterclaim, also used Power Lift money to pay for life insurance, trips, gym memberships and auto repairs.

"Under law, when you are insolvent, your responsibility, even if you're a private company, is to your creditors," said Bradley Brook, a sole practioner representing Power Lift's committee of creditors. "Your responsibilities, your fiduciary duties, are owed to the creditors."

But in court documents, the Cowens denied commingling business interests.

"Power Lift sold forklifts. Marina Landscape does projects such as Disneyland, freeways and the San Diego Padres Stadium. R&R owns and manages real estate. While the (hopeful) purpose of each is to generate income, they are not pursuing a 'common business purpose,'" according to the Cowens trial brief.

Further, the trial brief says, Mitsubishi was "intimately" familiar with the financial condition of Power Lift, and knew about the Cowens' other businesses.