Next Tuesday, the final item on the agenda of the Merced County Board of Supervisors will be a letter from the corporate office of Mi Pueblo Food Centers in San Jose, notifying the board according to directives in federal and state law, that it will close its store in Atwater on August 31, terminating the employment of 91 people.
This rude shock to Atwater is made more insulting because Mi Pueblo recently secured the financing it needed to avoid bankruptcy, having filed for Chapter 11 last year, claiming a "very difficult creditor," Wells Fargo Bank, had made the filing necessary.
However, there is another story that may have had something else to do with Mi Pueblo's 2013 situation. A year earlier the federal Immigration and Customs Enforcement Administration (ICE) conducted an audit of Mi Pueblo employees. Mi Pueblo was compelled to fire 80 percent of their workforce (around 2,560 people from 21 stores) for lack of proper paperwork. This caused higher payroll costs, since evidently the undocumented workforce Mi Pueblo was employing did not require as much money to live as documented workers did, and the higher costs changed the company's loan terms with Wells Fargo Bank, which led to the Chapter 11, the reorganization, the new infusion from Chicago-based Victory Park Capital, the emergence from Chapter 11 and, presumably, the loss of 91 jobs in Atwater.
The United Food and Commercial Workers played some part in Mi Pueblo's problems but it is not terribly clear. The union, while attempting to organize the company's workers, seems to have been supporting the policy of hiring undocumented workers on the argument that since most of the company's customers are undocumented, Mi Pueblo should spread the benefits around the pueblo. In any event, UFCW appears to have failed to organize Mi Pueblo or gain higher wages for the undocumented workers it was trying to organize. Instead, those workers were fired by means of an e-Verification federal audit.
We have often noticed the incredible lengths employers, bankers, judges and politicians go to obfuscate the exploitation of labor. The hypocrisy is apparently inculcated in the cribs where "leaders" are spawned. And the less legal protections the workers have the greater the feeding frenzy on them and the more adamant the denial of it. -- blj
Mi Pueblo set to emerge from Chapter 11
Mi Pueblo Food Stores, San Jose, Calif., expects to emerge from Chapter 11 bankruptcy by the end of the week, a company spokeswoman told SN Tuesday.
She said she was not sure if the 21-store chain would emerge intact or with fewer units, but she did confirm the company would receive financial help from Victory Park Capital, a Chicago-based firm that invests in middle-market companies.
Earlier reports indicated the chain would be able to secure a $7.5 million letter of credit to support its workers’ compensation insurance policy as part of the reorganization plan, which has been approved by a bankruptcy court judge...
Mi Pueblo contemplates liquidation
Mi Pueblo Food Centers, San Jose, Calif., said Wednesday that unless the U.S. bankruptcy court approves its reorganization plan before the end of May, the company might have to liquidate.
According to a court filing, the 21-store chain said its reorganization plan, including capital infusions by a third party, “is currrently the best measure of [its] value and provides … the best chances of a successful reorganization.”
If Mi Pueblo cannot emerge from Chapter 11 by the end of May — and if it is unable to acquire sufficient funds to post cash to secure a $7.5-million letter-of-credit to support its workers’ compensation insurance policy — it will incur additional legal and other administrative costs, which could result in “a cessation of operations that will necessarily occur after June 1,” the company said in the document.
“Any delay in the consummation of the [reorganization] plan may have a negative impact on the operations and financial performance of Mi Pueblo, including higher administrative costs and its inability to meet certain income forecasts. The alternative to the plan is a liquidation … [in which case] the recovery to creditors is very uncertain but is almost certainly worse than that contemplated in the proposed plan.”
The third party committed to helping Mi Pueblo is Victory Park Capital, a Chicago-based firm that invests in middle-market companies, which the court document said is offering enough financing to allow the chain to erase its debts and continue operations.
Mi Pueblo filed for Chapter 11 bankruptcy in July, citing a dispute with Wells Fargo, its primary lender, which had reportedly sought to change the terms of its loans to the chain after it became concerned about the chain's debt-to-credit ratio and its forecast on revenues.
A chain spokeswoman said at the time, "It's not an issue with payroll, and it's not an issue with sales. Mi Pueblo is dealing with a very difficult creditor. We're at an impasse, and we're seeking protection from the court. We're working very, very hard to reorganize and come out stronger."
The bankruptcy also followed by several months an audit of the chain’s employees by the Immigration and Customs Enforcement Service , which resulted in the company having the let 80% of its work force go.
Mi Pueblo Files Chapter 11
SAN JOSE, Calif. — Mi Pueblo Food Centers here, a 21-store operator, has filed for Chapter 11 bankruptcy protection.
The privately owned company cited a dispute with Wells Fargo, its primary lender, according to local reports. In its bankruptcy petition, Mi Pueblo listed assets totaling between $10 million and $50 million and liabilities in the same range.
The company could not be reached for comment.
Mi Pueblo intends to keep all 21 of its stores open and will use the bankruptcy as an opportunity to reorganize, the local reports said. A chain spokeswoman told a local newspaper, "It's not an issue with payroll, and it's not an issue with sales. Mi Pueblo is dealing with a very difficult creditor. We're at an impasse, and we're seeking protection from the court. We're working very, very hard to reorganize and come out stronger."
Local reports said Well Fargo had sought to change the terms of its loans with Mi Pueblo after the bank became concerned about the chain's debt-to-credit ratio and its forecast on revenues. An attorney for Mi Pueblo told local sources the requests "weren't realistic. They weren't achievable."
Silicon Valley Business Journal
Why Mi Pueblo filed for bankruptcy - it's not what you think
Mi Pueblo Foods had every appearance of a healthy company. It was bringing in cash, opening stores and boasted a balance sheet that was in the black.
So why did the San Jose-based chain, which says it did $350 million in sales in 2012, file for Chapter 11 bankruptcy protection on Monday?
The answer, according to Mi Pueblo, lies at least in part with dramatically increased labor costs after a federal immigration audit required the company to replace workers who had questionable documentation. Those increased costs put Mi Pueblo out of compliance with its lender, Wells Fargo Bank, on certain profitability targets.
After failing to renegotiate the terms, Mi Pueblo went the bankruptcy route.
The revelations are contained in pages of court documents filed Monday. Meanwhile, Mi Pueblo said it would continue to operate as normal and was not shutting stores or laying off workers.
"It's business as usual," spokeswoman Perla A. Rodriguez said in a phone interview. "We're going to continue to operate the stores with all of our employees."
The filing is the latest punctuation point for Mi Pueblo and its founder, Juvenal Chavez, who started the company with his wife in a 5,000-square-foot store called Country Time Meats 22 years ago and became a community leader. Today, the family-owned company counts 21 supermarkets and $350 million in revenue.
The company's bankruptcy is perhaps also a warning shot for companies who may employ workers with questionable work status, though Mi Pueblo has maintained it did not knowingly hire people who were in the country illegally, according to previous published reports.
On Tuesday, a Wells Fargo spokesman issued a statement that read: “Wells Fargo was disappointed to learn about the bankruptcy filing by Mi Pueblo and its related entity, Cha Cha, on Monday. Wells Fargo has been working patiently with Mi Pueblo for several months to give the company time to address its financial challenges. Wells Fargo was in discussions with the company as late as Friday and nothing was said about being at an impasse.”
Mi Pueblo's filing steams from what's called a "covenant default," a relatively rare reason for bankruptcies. Usually, bankruptcies result from nonpayment. Covenants are additional stipulations in addition to the payment schedule.
Wells Fargo is owed roughly $19.6 million between a $7.3 million revolving line of credit and $12.5 million in term debt, according to filings, which also state that Mi Pueblo is current on its payments. Mi Pueblo listed total liabilities of $65.3 million and total assets of $85.5 million.
"Due to an ongoing audit by (Immigrations and Customs Enforcement), Mi Pueblo has been directed to replace a number of employees whose documentation is under review," Mi Pueblo said in a filing. "The result has been substantially increased payroll expenses and some dislocation as new workers are trained or leave themselves and have to be replaced in turn."
Rodriguez said the company would be submitting a reorganization plan to the court for approval in the next few weeks.
"The filing gives us a framework within which we can all talk," said Robert G. Harris, a partner at the Santa Clara-based law firm Binder & Malter LLP. "There's a breathing spell with the automatic stay. Everyone will be sitting down at a table to try to work out what this lending relationship is going to be going forward."
The filing also allows Mi Pueblo to reject a lease for a 35,000-square-foot store in Turlock at 1300 West Main St. and 301 Soderquist St. Mi Pueblo never took over the space and believes the lease to be void, but the owner has filed an "unliquidated claim" for roughly $26 million.
News about the immigration troubles at Mi Pueblo first made headlines last October, when the company disclosed it was under a federal audit related to workers' immigration status. The audit came after Mi Pueblo joined E-Verify, a voluntary system that screens immigration status for new employees. Mi Pueblo said at the time that it required employees to provide documentation of their legal status and did not knowingly hire people who are in the country illegally. (Read more about the situation here.)
On Monday, Mi Pueblo filed motions to continue operations as normal as it moves through the bankruptcy reorganization process.
“Filing for bankruptcy gives our company a unique opportunity to reorganize ourselves in a manner that will make us stronger and more competitive,” CEO Chavez said in a news release.
Mi Pueblo Food Center, California Latino Grocery Chain, Feels Pressure From Federal Immigration Audit
By GOSIA WOZNIACKA
FRESNO, Calif. (AP) — Two decades ago, Mi Pueblo Food Center began modestly as a small butcher shop run by an illegal immigrant. Now, the supermarket that caters to the Latino immigrant community has grown into a popular chain of 21 stores in California.
But with growth and success have come scrutiny from federal immigration authorities and clashes with a union that wants to represent Mi Pueblo's 3,200 workers and is leading a consumer boycott.
The predicament is thorny for a family-owned firm that relies almost exclusively on Latino immigrants for its workforce and its customer base.
The company is under pressure from an ongoing immigration audit and its decision to use a controversial federal program that screens the eligibility of new employees to work in the United States.
"We are feeling what is happening to us in a way that most companies might not, because we are founded by an immigrant and depend on immigrants to survive," said Perla Rodriguez, spokeswoman for the San Jose, Calif-based company.
She said the company did not knowingly hire any illegal immigrants.
To San Jose-based United Food and Commercial Workers Local 5, which has been organizing Mi Pueblo workers around the state, the company's move to E-Verify in mid-August meant one thing only: the self-styled immigrant-friendly employer was cooperating with ICE.
The Obama administration has increasingly relied on workplace audits as an alternative to immigration raids in which agents with weapons handcuffed workers and placed them in deportation proceedings.
But the move toward the so-called "silent raids" — which have increased from 254 to 2,736 in the past five years —has carried unintended consequences for some employers. They have to fire workers who lack employment authorization, but they also can face the ire of labor unions.
Experts say immigration audits can cause a particular dilemma for companies that cater to immigrants.
"There's a great irony for companies who serve immigrant communities, because of the possibility that many of their customers are undocumented. They can serve them, but they're not supposed to hire them," said Aarti Kohli, an immigration policy expert at the University of California, Berkeley.
"I think sometimes community members feel, here is a company that wants us to buy their services and in return, what are they doing for us?"
In response to the audit, Mi Pueblo defended itself on the radio and in community meetings, and launched a campaign to promote immigration reform.
Mi Pueblo officials say they were "forced" to use the E-Verify program by immigration officials after the government started conducting an audit of the company's hiring records to ensure Mi Pueblo was not employing illegal immigrants.
U.S. Immigration and Customs Enforcement officials would not confirm the audit, because the agency releases information only if an investigation results in fines or criminal convictions.
ICE spokeswoman Virginia Kice said audits are usually triggered by leads or complaints from various sources and that investigators don't force companies to use E-Verify, which is a voluntary program.
The early journey of Juvenal Chavez, founder and CEO of Mi Pueblo, may mirror that of some customers and workers. A former teacher from the Mexican state of Michoacan, Chavez came to the U.S. illegally in 1984 at age 24.
He did odd jobs — working as a janitor and bartender and washing glassware in laboratories at Stanford University. He took adult education classes to learn English, and his company says he gained legal status.
Chavez helped his brother run a small Mexican market in Redwood City. By 1991, he had saved enough to open his own butcher shop in a storefront in San Jose. Over the next decade, Chavez opened 10 more stores. In Spanish, Mi Pueblo means "my village" or "my home."
In the stores, ranchera music belts from speakers, the decor shines in bright primary colors and bilingual employees wear badges with their hometown printed below their name. Mounds of tomatillos, cilantro, fresh tortillas and Mexican baked goods are for sale.
Since 2009, Mi Pueblo has doubled the number of stores and today grosses more than $300 million annually.
The 52-year-old Chavez, who lives in a sprawling house on the outskirts of San Jose, touts his work in helping workers achieve their version of the American Dream. Mi Pueblo runs in-house training and leadership programs for employees and awards thousands of dollars in college scholarships.
Through a company spokeswoman, Chavez declined to be interviewed, citing ongoing legal issues.
Union organizers have accused the company of wage, overtime and other violations. In the past three years, the UFCW and the International Brotherhood of Teamsters have won two court decisions against Mi Pueblo for violating labor laws. Both cases are under appeal.
The union is encouraging people not to shop at Mi Pueblo until the company stops using the E-Verify program. The union also wants ICE to stop the audit.
To defend itself, the company hired a prominent labor lawyer and an immigrant rights activist. Mi Pueblo officials also met with dozens of city officials, church leaders and immigrant advocacy groups to talk about immigration reform.
"Undocumented individuals who have demonstrated their commitment to America by being good citizens, working and paying taxes ... should be provided legal status to work and pathways to citizenship," said Julie Pace, a Phoenix lawyer representing Mi Pueblo.
But to the union that has been organizing the company's workers, such statements do not blunt the anger at the company's use of the employment verification program and the effects it could have.
"Mi Pueblo is a traitor," said UFCW organizing director Gerardo Dominguez. "When you have customers and workers who are recent immigrants from Latin America and Mexico, by checking the immigration status of prospective employees what are you telling your community? You can't give me a job, but you want my dollars?"