Upper Crust has abruptly closed most of its restaurants, let go about 140 employees, and will shut down permanently unless the gourmet pizza chain gets a cash infusion in the next few days, according to a trustee overseeing the Boston-based company.
At a hearing in US Bankruptcy Court Tuesday, the trustee, Mark G. DeGiacomo, said Upper Crust shut restaurants Monday night because it had just four days of supplies and only $14,000 in cash after company executives paid themselves a month’s salary in advance.
The business, which filed for bankruptcy protection last month, needs $120,000 to keep doors open. If the company can obtain funding within few days, it could avoid a permanent shutdown. So far, Upper Crust has closed 10 of 16 locations.
“We do hope that if an investor comes forward, the stores could re-open,” DeGiacomo said. “As a trustee, my job is to sell the business any way – either sell it open or sell it closed.”
No one answered the phones at Upper Crust locations on Newbury Street in Boston, Hingham, Lexington, and Wellesley. Some restaurants, including those in Boston’s Fenway and South End neighborhoods, are routing orders to locations in Beacon Hill and Brookline, which are operated separately by company founder Jordan Tobins and are not part of the bankruptcy. Four other franchise stores in Newburyport, Plymouth, West Roxbury, and Portsmouth, N.H., remain open as well.
Tobins, who opened the first Upper Crust store in 2001 in Beacon Hill, was placed on leave earlier this year. The chain’s co-owners, Brendan Higgins and Joshua Huggard, sued him for allegedly misusing company funds. Tobins—with the help of a separate business partner—is attempting to get funding to re-open the other stores and is making a proposal to the trustee, according to Tobins’ attorney, Rick Mikels.
“It’s terrible what’s happened. We’d like to see the stores re-open immediately,” Mikels said.
Lawyers representing Huggard and Higgins did not respond to messages seeking comment.
The turn of events marks a swift unraveling for the pizza empire, which gained a loyal foodie following and expanded to more than 20 locations across the region. But the company cut corners with expenses and relied on a supply of immigrant workers from the impoverished village of Marilac in Brazil, according to a Globe investigation published in 2010. The Brazilian employees claim they were underpaid for long work weeks and faced tough working conditions.
The US Department of Labor first investigated the company in 2009 and ordered Upper Crust to pay workers about $350,000 in back wages. Several employees, in a class-action lawsuit, said they were forced by company executives to give back the federally-mandated payments or lose their jobs.
Upper Crust now owes workers about $850,000 in back wages and damages, according to court records filed recently by the Department of Labor. A second federal investigation of pay practices at the Boston business between 2009 and 2011 found it violated minimum-wage and overtime laws and failed to pay 67 employees roughly $425,000 during that period.
Upper Crust, which defaulted on a TD Bank loan in late September, said it owes at least $3.4 million to creditors, including more than $500,000 to ZVI Construction Co. in Brookline, about $235,000 to a food distributor, and $230,000 to a former Massachusetts attorney general, Thomas F. Reilly, who represented the business after leaving office, according to a list filed last month in court.
After filing for bankruptcy, company executives said they had enough money to continue operating but later drastically revised the amount of cash on hand. DeGiacomo said Tuesday that the company had not made employee health insurance payments since August, and did not set aside money for state meals taxes. He also said the co-owners, Huggard and Higgins, and the company’s chief financial officer paid themselves a month’s salary in advance on Nov. 1.
“It’s just disgraceful,” said Shannon Liss-Riordan, who represents the workers in the class-action lawsuit and sits on the creditors committee. “It’s a further reflection of their lack of regard for their workers that they would pay themselves first and put 140 of their workers on the street.”Jenn Abelson can be reached at firstname.lastname@example.org. Follow her on Twitter @jennabelson.