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Thomas Kinkade firm seeks bankruptcy protection

The filing for Pacific Metro, the artist's production company, comes one day after a $1-million payment is due to two former gallery owners who had won a judgment.

June 03, 2010|By Kim Christensen, Los Angeles Times

One of Thomas Kinkade's companies filed for bankruptcy protection Wednesday, a day after a $1-million payment was due to former gallery owners who have tried for four years to collect on a judgment they won against the self-styled "painter of light."

The Chapter 11 petition was filed in U.S. Bankruptcy Court in San Jose in the name of the Kinkade production arm, Pacific Metro of Morgan Hill, Calif. It allows Pacific Metro to reorganize and puts an automatic stay on the collection of all judgments, including one for $3 million owed to Karen Hazlewood and Jeff Spinello.

"Kinkade is a … deadbeat," said their lawyer, Norman Yatooma, who accused the artist and his Los Angeles attorney, Dana Levitt, of "breaching their agreement" to pay up. "Kinkade's word is as worthless as his artwork. His lawyer is no better."

Neither Levitt, who represented Kinkade and his wholly owned company in the arbitration case, nor the lawyers who filed the bankruptcy action Wednesday returned phone calls and e-mails. Messages left at the company's executive offices also went unanswered.

In 2003, Hazlewood and Spinello sued the artist and his company, then called Media Arts Group Inc., alleging that he'd used his Christian faith as a tool to fraudulently induce them to invest in a Thomas Kinkade Signature Gallery. At one time, there were 350 of the independently owned stores, licensed to deal exclusively in Kinkade's luminous landscapes and street scenes.

Their lawsuit, which mirrored those brought by other failed Kinkade dealers, also alleged that the couple, later divorced, had been stuck with unsalable merchandise, were forced to open stores in markets that couldn't sustain them and were undercut by discounters who sold the artist's prints at prices they were not allowed to match.

From 1997 through May 2005, as many of the galleries failed, Kinkade reaped more than $50 million from his prints and licensed product lines, according to testimony in the case. By then, the number of Signature Galleries had dwindled to fewer than half of what they once numbered.

In 2006, three years after the first of the couple's two galleries in Virginia went under, an arbitration panel found that the company and one of its executives fraudulently "failed to disclose material information" that might have dissuaded them from investing $122,000 in the business.

Kinkade was not singled out in the panel's fraud finding, but it noted that he and others at the company created "a certain religious environment" designed to get prospective gallery owners to trust the company.

The panel awarded $860,000 to Hazlewood and Spinello. The award was later increased to $2.8 million with interest and legal fees, prompting an appeal and setting off a legal battle that reached the U.S. Supreme Court this year.

But the high court denied Kinkade's petition to set aside the award, and ordered it reinstated.

Kinkade agreed to pay the award after moving vans hired by the plaintiff's lawyer, Yatooma, showed up at the company's headquarters to take artwork to satisfy the judgment. The company had made one $500,000 payment and was due to pay $1 million Tuesday, Yatooma said.

The next day, after Yatooma said he threatened "to come get it," he received an e-mail from Levitt, Kinkade's lawyer.

"The Thomas Kinkade Company filed for Chapter 11 protection today and the automatic stay is now in effect," read the e-mail.

Yatooma said he plans to send the moving vans again.

kim.christensen@latimes.com

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