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Shopko job losses top 1,700; Investigation continues into dividend, consulting payments

in Biz Briefs

By Shereen Siewert

The Wisconsin Department of Workforce Development says Shopko’s closure will result in the loss of more than 1,700 jobs. Meanwhile, as recently as March 1, a two-person committee continued investigating dividend payments made by the parent company of Shopko Stores Operating Co. to its equity holders, including Sun Capital Partners Inc., according to the Milwaukee Business Journal.

Shopko and its affiliates filed for Chapter 11 bankruptcy protection in January. Before that, in December 2017, court records show, Shopko’s board of directors appointed Steve Winograd and Mohsin Meghji to review the company’s strategic alternatives.

At issue is more than $170 million in dividend payments made to equity owners since Shopko was acquired by Sun Capital in 2005. Court documents show Shopko’s parent company borrowed money at least five times to make those payments. Winograd and Meghji were tasked with determining whether Shopko’s estates may have any claims regarding a conflict of interest related to the transactions, according to the Milwaukee Business Journal report.

In addition, Shopko reportedly paid Sun Capital an annual fee of $4 million for consulting services.

While Shopko was paying millions in dividends, the company was also racking up debt to the state of Wisconsin. According to a claim filed by the Wisconsin Department of Revenue, Shopko owes a total of $13.5 million including $8.2 million in sales and use taxes.

Shopko was founded by pharmacist James Ruben in Green Bay in 1962. Before the closures, the chain had operated about 360 stores in 24 states.

A combined 105 people in the Wausau and Rothschild locations will lose their jobs as a result of the closure. The largest single-store layoff is in Eau Claire, where 94 people will lose their positions.

Ashwaubenon-based Shopko announced March 18 that the company will shutter all its stores, which are now in the liquidation process.

All stores are expected to be permanently closed within about two months.

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