Friday, April 4, 2008

Bankruptcy forces Sunny’s Surplus stores to close, again

Outdoor goods chain donates inventory to Goodwill

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Sunny’s Surplus has quietly closed the three stores that had reopened last year to revive the struggling chain.

Stores in Annapolis, Frederick and Westminster reopened in the fall under the name New Sunny’s LLC, but all three closed by the end of March. The reason for the quick closures with no liquidation sales is unclear; top executives, their attorneys and a majority investor did not return phone calls seeking comment.

Based in Elkridge, Sunny’s Surplus was founded in 1948 by Morris Weinman to resell military surplus war equipment. Its merchandise included military uniforms, camouflage clothing, combat boots, dog tags and tents, but Sunny’s eventually took on Scout uniforms, brand-name camping gear and Baltimore Ravens items.

At its peak, Sunny’s Great Outdoors Inc. had 15 locations in Maryland, Delaware and Virginia, including branches named Sunny’s Surplus, Sunny’s: The Affordable Outdoor Store and Sunny’s Great Outdoors, before it hit financial trouble again in 2006.

Sunny’s Great Outdoors filed for bankruptcy protection in January 2007, then liquidated merchandise and closed all locations. It managed to reopen three locations last fall, including one in Frederick in a plaza along West Patrick Street’s Golden Mile. That shop has been empty for at least two weeks and its phone line, along with those in Westminster and Annapolis, is disconnected.

No one has answered the company’s main line in Elkridge and both Web sites — www.sunnysonline.com and www.sunnyssurplus.com — were operational on March 28, but closed the following Monday.

Benjamin Gilbert, president and CEO, who has a history of embezzlement, misappropriations, income tax evasion and fraud, did not return calls, nor did Sunny’s attorneys from its 2007 bankruptcy proceedings, who are with Shapiro, Sher, Guinot and Sandler.

Majority stockholder Michael Weinman of The Morris Weinman Co., a commercial real estate company in Baltimore with roughly $13.5 million in annual sales, will be out of town until June, said his administrative assistant Mary Long, who also said no one else at the company could discuss the closures.

When Sunny’s filed for Chapter 11 last year, it owed more than 200 creditors a total of between $1 million and $100 million, including roughly $3 million to its 20 largest creditors, according to court documents.

After liquidation and closure of the 15 stores, Michael Weinman purchased the company’s remaining assets and branding for roughly $30,000, then reopened the Annapolis, Westminster and Frederick stores, with plans to continue expanding

Gilbert returned as CEO and president. In 2002, Gilbert pleaded guilty to defrauding Hartz & Co., a now-defunct Frederick clothing manufacturer where he was CEO, of more than $200,000 and filing false federal tax returns, according to the U.S. Department of Justice. He was sentenced to three years in prison and ordered to pay $272,000 in restitution.

In 1994, Gilbert was convicted of embezzling nearly $700,000 from Easton (Pa.) International Hosiery Inc., according to the prosecutors.

Sunny’s did not liquidate before closing last month, but donated remaining inventory to nonprofit Goodwill Industries in Baltimore and Frederick.

Wayne Hatcher, director of retail for Goodwill Industries International, said Sunny’s executives offered to donate the three stores’ inventories as well as cash registers, clothing racks and other fixtures. Goodwill workers cleaned out the Sunny’s stores about three weeks ago and merchandise from the Frederick and Westminster locations is now on sale at four Goodwill shops in Frederick and Carroll counties in special ‘‘Sunny’s” sections. The Annapolis inventory was donated to Goodwill Industries in Baltimore.

‘‘This is absolutely unusual and wonderful for us,” Hatcher said. ‘‘They offered, and we accepted. It’s an excellent opportunity for our organization to continue its mission in the community.” Goodwill provides education, career services and job training for people with disabilities or disadvantages.

Goodwill, which has already interest in the merchandise, kept Sunny’s Surplus tags and reduced prices by 25 percent. When most of the items are sold, the rest will be merged with other Goodwill inventory. Hatcher said he did not place a value on the total donation.

60 years of Sunny’s Surplus

1948: Morris Weinman, owner of a commercial real estate firm, founds Sunny’s Surplus in Elkridge, selling surplus military equipment.

1990: Sunny’s Surplus adds camping gear and other outdoor products, as wartime supplies are depleted and outdoor sporting interest increases.

1994: Benjamin J. Gilbert, later president and CEO of Sunny’s Surplus, is convicted of embezzling nearly $700,000 from Easton (Pa.) International Hosiery Inc.

2000: Sunny’s Surplus files for bankruptcy protection and emerges about a year later, renamed Sunny’s Great Outdoors Inc.

May 2002: Gilbert pleads guilty to defrauding Hartz & Co., a now-closed clothing manufacturer in Frederick, of $200,000.

October 2002: Gilbert is sentenced to three years in prison, starting Jan. 15, 2003, to let him work at Sunny’s during the holiday season.

Jan. 26, 2007: Unable to purchase inventory and owing its largest 20 unsecured creditors roughly $3 million, Sunny’s Surplus files for bankruptcy protection and liquidates its assets.

March 2007: All 15 stores close in Maryland, Delaware and Virginia, including one in Frederick.

October 2007: Michael Wienman purchases remaining assets for $30,000 and reopens three stores under New Sunny’s LLC. In addition to Frederick, Westminster and Annapolis, other reopenings are planned. Gilbert remains CEO.

March 2008: The three new locations close and inventory is donated to nonprofits.

Source: Baltimore District Court documents, Maryland Department of Assessments and Taxation, U.S. Department of Justice