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Jeunique Files for Chapter 11 Bankruptcy

The marketer of intimate apparel, based in City of Industry, plans to emerge from creditor protection by fall.

June 07, 2004|Debora Vrana | Times Staff Writer

Every spring, Mulford J. Nobbs, founder of intimate-apparel marketer Jeunique International, likes to reward his top 200 sales representatives by taking them on a cruise to Mexico.

This year, before handing out kudos, Nobbs delivered less welcome news: The City of Industry company would have to seek Bankruptcy Court protection.

Last week, the privately held concern filed to reorganize its finances under Chapter 11 of the U.S. Bankruptcy Code.

"I'm confident we will come out of it successfully," Nobbs, 87, said Friday.

A direct sales company, Jeunique has more than 4,000 active representatives in the U.S., New Zealand, Canada and Europe. The mostly female sales force operates much like sellers of Tupperware or Avon products -- hosting private parties to peddle Jeunique's line of custom-fitted foundation garments and other apparel. As the representatives gain more customers, their share of the proceeds grows.

Nobbs blamed Jeunique's financial woes on some nonprofitable acquisitions. "It seems the best thing to do is reorganize." He declined to elaborate.

The company expects to continue operating normally during bankruptcy proceedings and plans to be out of court by fall. "We expect no disruption," said Jeunique's attorney, Mark Horoupian. "It should be business as usual."

Sales representative Ruth Beaner, 78, is counting on it. The Culver City resident has been selling Jeunique products for 29 years and has a customer base of more than 2,000 clients. She took Nobbs' words to heart when he told her and others that the bankruptcy would be "just a momentary thing."

Jeunique's bankruptcy filing isn't its only problem. The company faces a possible trial in federal court in Idaho stemming from a 2001 lawsuit filed by Beauty for All Seasons, a firm that had merged with Jeunique the year before.

The suit alleges that Jeunique and its top executives, including Nobbs, committed fraud and breach of contract and misrepresented its financial position during the merger.

A trial date is expected to be set this month, said Winston Beard, an Idaho Falls attorney who represents John Galazin, former chief executive of Beauty for All Seasons. "In some ways," Beard said, "this bankruptcy filing by Jeunique looks like an effort for them to get out of our suit."

Nobbs and Horoupian declined to comment on the suit.

Separately, a $28,968 federal tax lien was placed on Nobbs' Hacienda Heights home last July, according to federal records. Nobbs' attorney declined to comment.

In its bankruptcy filing, Horoupian said, Jeunique claimed as much as $30 million in liabilities on as much as $5 million to $10 million of assets.

The largest company creditor listed is the Nobbs Family Trust, for $22.1 million. The second-largest is Hacienda Holdings, a unit controlled by Nobbs, which lists $4.9 million in liabilities. Mulford Nobbs is the largest individual creditor at $532,321.

Jeunique saleswoman Pat Abbott was unfazed by the recent turn of events. The 70-year-old said she planned to continue doing what she had been for the last 30 years -- selling custom-fit bras out of her Houston home.

"I know I'll be doing this," she said, "for the rest of my life."

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