BusinessCo-op on the verge
|More Business Stories|
State of corruption (7/7/2010)
Credit check (6/9/2010)
Michigan or Moroun? (6/2/2010)
|More from Curt Guyette|
Pot shots (8/11/2010)
Block out (7/28/2010)
Crude awakening (7/14/2010)
On a recent Friday night at the Cass Corridor Food Co-op, a few employees mill about the store and muse about the financial well-being of the longtime Detroit fixture.
They talk in terms of a medical crisis.
“The patient is on its sickbed,” says Bobby Peeler, a cashier at the cooperative for 12 years.
The condition, they all agree, is critical.
“It’s on a resuscitator,” adds Ellyn Gray, formerly vice president of the nonprofit’s board of directors. “People really need to come and visit the patient.”
Their concern is heartfelt. For many, the co-op is much more than a store. With a mantra of “Food for people not for profit,” it inspires an intense loyalty.
“I love this place,” says Gray.
While this conversation is under way, a self-described “rescue team” meets in a room at the back of the store, mapping out a treatment plan.
Long-timers say the 2,000-member co-op has seen other crises during its 32 years. But never anything like this.
Deeply in debt and shouldering a hefty mortgage, the cash-strapped store is struggling to put product on its shelves. The fruit and produce section remains well stocked. Milk, juice and eggs are in the cooler, pints of Häagen-Dazs and soy patties are in the freezer, but little more than herbal teas, organic tortilla chips and cans of tofu dogs and peanut loaf can be found on shelves that are otherwise largely barren.
Asked how bad the financial situation is, Dwayne Smith, hired late last year to run the co-op, is forthright: “The lights could go out during the middle of this conversation.”
The Internal Revenue Service is seeking about $70,000 in unpaid payroll taxes, according to Smith, a longtime co-op member with a history of running nonprofit organizations. The State of Michigan is seeking $48,000 in back taxes, both withholding and sales. In all, the member-owned cooperative has more than $200,000 in outstanding bills, says Smith. Attempts are being made to work out payment plans as part of the rescue attempt.
The situation was much different just a few years ago, when the co-op was doing a million dollars a year in business and had $100,000 in the bank.
“We’re going through the books, trying to figure out what happened,” says Smith, who assumed his job at the co-op two months ago after serving on its board for nearly a year. He says a private investigator and independent accountant have been brought in to determine if there’s been any wrongdoing.
“We need to find out what went wrong and fix it so that it doesn’t happen again,” says Smith.
Some of the blame is being laid at the feet of Gari Freeman, a longtime co-op employee who was fired from his job as general manager in October. Choosing his words carefully, Smith says Freeman was “inadequately managing” the business. Several board members, both current and former, tell Metro Times that Freeman withheld information regarding the co-op’s rapidly deteriorating financial situation following a 2001 move from a spot the co-op had long rented in the Cass Corridor to a building it bought at 456 Charlotte St. Freeman says he’s being made the “fall guy,” and that the problems are the result of the move and board mismanagement.
No one denies that the move was a costly one. The new store more than doubled the co-op’s retail space, from 1,700 to 4,000 square feet. But all that extra room came at a steep price. Not everyone agreed with the decision to move to a marginal neighborhood at the lower end of the Cass Corridor instead of staying near Wayne State University, where it was located for many years.
The move didn’t go smoothly. The building, purchased for more $210,000, needed work done before it could be occupied. A new roof alone cost $30,000. In all, according to information posted on the co-op Web site, between the mortgage, renovation and equipment-purchase loans, and moving expenses, the move cost $500,000. Because of delays, the co-op was paying rent at the old location while also paying a mortgage on the new building it was unable to move into. That situation lasted at least six months.
There was also a controversial agreement to pay Mutope A-Alkebu-lan, who was then president of the co-op’s board, $30 an hour to secure financing for the building purchase and move. According to co-op records, a verbal agreement was worked out between A-Alkebu-Lan and board members Ron Scott and Willie Johnson (currently the board’s treasurer and acting president, respectively). Although the arrangement was apparently approved by the board, it was never formalized in a written contract. A-Alkebu-lan says he can’t recall how much he was paid. Scott told Metro Times that it is his understanding that A-Alkebu-lan was not paid, but did receive free groceries in return for his work. In a June 2001 report to the board, the co-op’s bookkeeper noted that A-Alkebu-lan had received “payments inexcess of $15,000” for his services. A report listing checks totaling $15,950 is included in the file.
“I wasn’t aware of that,” said Scott when informed by Metro Times of the report.
In addition, A-Alkebu-lan submitted an invoice in March 2001, saying he was due an additional $28,000 for 950 hours of work. He resigned from the board when payment was refused.
“I’m still owed that money,” insists A-Alkebu-lan, who says he rues not having a signed contract. “I wish there had been a written agreement, because I got screwed on that deal.”
He also says the co-op was on a sound financial footing when he resigned. According to the bookkeeper’s report, the co-op’s finances were such that it could not afford to pay the $28,000.
Freeman, the former general manager, says the co-op’s downward spiral is a direct result of the move. Instead of paying $1,200 a month in rent at its old location on Cass at Willis, it was saddled with loan and mortgage payments that reached more than $4,000 a month. The predicament was further compounded by a move that can best be described as piecemeal. Instead of a big grand opening that let members and others in the community know about the new location, customers were caught between two worlds. For a while, merchandise was split between the two locations. Business slumped, expenses jumped and bill-paying became increasingly difficult.
Jim Embry, who joined the board about three years ago, says he was shocked by Freeman’s performance. At one point, he says, there were $8,000 in bank charges because so many checks had bounced. The fact that Freeman employed his sister as the co-op’s bookkeeper also raised concerns.
Although technically still on the board, Embry has stopped attending meetings.
When board member Gray resigned in 2002, she wrote, “I do not wish to be associated with a board with a poor attendance record, lack of guidance and participation.” She urged the board to cease “persecuting” Freeman and reflect on how “you can be better stewards of the Co-op.”
Although the financial difficulties were becoming evident at that point, members apparently did not get the message.
“At the 30th anniversary [in September 2002], they made it sound like everything was hunky-dory,” says Smith.
He says he doubts that he would have run for the board a few months later had he known how bad things really were.
At this point, Smith says he and a team of longtime co-op supporters are pursuing every avenue available to keep it open. Negotiations are under way with state and federal officials to work out a schedule for payment of back taxes. New financing is being sought. A major fund-raiser is being planned in the hope it will provide the cash infusion needed to put product back on the shelves.
“I believe we will survive,” says Smith.
Doing so is vital, he says. The co-op’s mission of providing wholesome food at affordable prices remains crucial. Just as important, he explains, is the need for a non-commercial institution that offers inner-city residents a gathering place where they can learn and exchange ideas that will allow them to lead healthier lives.
Smith adds that there is also an important philosophical value at stake: the idea that people in a community can control the means by which they obtain something as essential as their food. In that regard, the co-op’s ultimate resurrection will depend upon support from the people it serves.
“What the co-op needs most right now,” says Smith, “is for the community to rally around it.”
Beginning Feb. 13, a three-day festival of music, art and food will be held to raise funds for the Cass Corridor Food Co-op. The event will feature live music and poetry as well as an art show and auction. For more information, phone 313-832-4776 or 313-831-1109.
Curt Guyette is the news editor of Metro Times. Call 313-202-8004 or e-mail email@example.com.