BELLEVILLE, Ill. -- James R. Gibson, former owner of a now-defunct supermarket chain, National Food Stores, St. Louis, has been accused in a civil suit filed in Circuit Court in Madison County, Illinois, of diverting as much as $100 million from clients of the investment company he owned to acquire and prop up National.
National filed in April for Chapter 7 bankruptcy liquidation. According to papers filed in U.S. Bankruptcy Court, St. Louis, at the time, National was losing approximately $1 million per month in its final year of operation.
The civil suit also alleges Gibson used the diverted funds to pay for his house here, luxury boats and personal expenses. Gibson could not be reached for comment.
Gibson and his fellow defendants -- including his wife, daughter, investment counselor, the investment counselor's former employer, an accounting firm, security brokerage and a bank -- are expected to respond to the charges by Nov. 7, SN was told by Thomas Ducey, the lawyer here who filed the suit against Gibson on behalf of a local woman, Martina M. Stone, who said the former supermarket operator diverted the roughly $300,000 she had given him to invest.
In addition to filing a suit for Stone, Ducey has filed a class-action suit on behalf of the roughly 75 other clients whose money he said was diverted by Gibson. Ducey explained that the court will determine whether the case will be tried as a class-action or as a series of individual suits.
Ducey is seeking $100 million in actual damages plus $300 million in punitive damages from Gibson and his co-defendants. Ducey told SN he has no idea what, if any, assets Gibson has at present.
No criminal charges have been filed against Gibson and the others.
According to Ducey, Gibson's investment firm, SBU, was in the business of setting up trust accounts for people who received large lump-sum payments from insurance companies. SBU would buy U.S. Treasury bonds, then arrange structured settlements under which its clients would receive regular monthly or quarterly payments for up to 30 years.
However, according to the suit, Gibson cashed in the bonds and used the money for himself.
Some of the funds, the suit alleges, were used to meet payments on Gibson's 6.5-acre estate here, which, according to a local newspaper, is currently up for sale at an asking price of $779,000.
Far more cash, the suit charges, went to purchase and prop up National.
In 1996, Gibson acquired for an undisclosed price 23 of the 24 St. Louis-area supermarkets Schnuck Markets, St. Louis, was required to sell when it acquired 57 National stores from Loblaw Cos., Toronto.
Gibson had no prior supermarket experience, according to Ducey, who said Gibson entered the industry only "because the opportunity presented itself."
In the fiscal year ended this February, National Markets lost $13 million, compared with a $10 million loss the previous fiscal year, according to papers filed last spring in bankruptcy court.
Court papers also disclosed that National had assets of $15.8 million and liabilities of $31.9 million when it ceased operations in April.
A St. Louis newspaper estimated that 1,000 people lost their jobs that month when the 17 remaining National stores closed.