Persistent rumors that the end was near for Melchiori Construction Co. were confirmed Tuesday, as company President Mark Melchiori signed off on papers that executed a voluntary Chapter 7 bankruptcy for the once-storied enterprise.
The Santa Barbara-based company’s decline has been on full display since the death of its patriarch, Ugo Melchiori, in 2009, after which his son Mark was named president.
Exactly what business decisions were made behind closed doors leading to that decline are still unclear, but the company’s death throes have been quite public.
The Contractors State License Board issued a citation to Melchiori Construction earlier this year for failing to pay subcontractors that worked on Santa Barbara County’s new Emergency Operations Center.
That complaint came as dozens of subcontractors complained that they hadn’t been paid for their work on several large public works projects done by Melchiori.
Another blow came when the company was removed from a $6.5 million UCSB construction project when work was left unfinished after months of being behind schedule.
The gossip surrounding the company took on a new level of intrigue when a case was filed in Superior Court, detailing a lawsuit filed by Melchiori’s stepmother, who alleged that his divorce earlier this year was a scheme to hide assets from creditors his company owes.
Noozhawk began hearing rumors that the company had closed its doors in early September, and asked company Vice President Jean Mollenkopf whether they were true.
“False information,” she told Noozhawk in an email on Sept. 18. “We are still open.”
But on Tuesday, the building was dark and no cars were in the parking lot outside 809 De la Vina St. in Santa Barbara.
Neither Melchiori nor Mollenkopf responded to requests for comment about the bankruptcy filing.
With Chapter 7, businesses must liquidate what assets they have in order to pay creditors. But from the paperwork filed by the company, those creditors may not end up with much.
Court documents filed with the U.S. Bankruptcy Court in Santa Barbara listed assets the company currently holds at $50,000 or less, and debts of $1 million to $10 million.
The move came less than a half-hour before a scheduled hearing before Santa Barbara Superior Court Judge Thomas Anderle, in a case involving a lawsuit filed by Santa Barbara Bank & Trust alleging that Melchiori defaulted on a $6.3 million line of credit given by the bank.
Anderle’s tentative ruling states that the bank was entitled to appoint a receiver over the construction company.
“SBB&T contends that Melchiori Construction is insolvent, that it is in the process of closing down, and that it has been transferring monies, assets and property to other persons or entities to prevent SBB*T from recovering the amounts owed to it under the loan,” Anderle’s ruling stated.
That document even mentioned that the bank learned that Melchiori had no construction projects, and would be shutting down and terminating all of its employees by Oct. 15.
“Specifically, SBB&T has been told that Melchiori has been siphoning monies from construction projects to entities other than Melchiori Construction, and that he has transferred certain property interests belonging to him to his wife without any consideration,” the ruling states. “Melchiori has also allegedly taken action to pay himself excessive salary increases over the last couple of years without board approval.”
Based on that, Anderle’s tentative ruling granted the bank receivership over the construction company’s personal property, but it’s unclear what actions the bankruptcy filing will have on that ruling.
SBB&T is listed as a creditor in the bankruptcy filing submitted Tuesday.
Scott Miners, who said he had been a project manager with the company for 15 years, wasn’t surprised by the bankruptcy filing. He said the company had stopped making payroll earlier this summer.
Miners left the company about two months ago, and filed a suit seeking money he is owed, a situation that arose after Miners said he borrowed money from his 401(k) account to lend to the company.
He and others who did likewise were never repaid, he told Noozhawk.
“I think it’s a shame that Mark took this reputable company and ran it into the ground, and hurt a lot of people along the way,” he said.