Golden Temple CEO Kartar Singh Khalsa and the company's management group, which includes Khalsa and five other top company executives, have filed for Chapter 11 bankruptcy .
Khalsa and the other executives sought the protection of the bankruptcy court in anticipation of large claims being filed against them after they lost a lawsuit in December.
Multnomah County Circuit Judge Leslie Roberts ruled that Khalsa breached his fiduciary duties to the Sikh religious community founded by the late Yogi Bhajan and that he and other Golden Temple Management members were unjustly enriched, when they gained ownership of 90 percent of the prosperous company in 2007.
The company grew out of a bakery founded by members of the local Sikh community in the 1970s, for the community's benefit. It evolved into Golden Temple, producer of Peace cereal and Yogi Tea, among other products, which were long a cornerstone of Lane County's natural foods industry.
Golden Temple sold its cereal division in May 2010 for $71 million to Hearthside Food Solutions. The Illinois-based baker continues to make Peace Cereal, Sweet Home Farms granola and other cereal products at its plant in Eugene.
Khalsa and Golden Temple Management were in court-ordered mediation on Thursday with U.S. District Judge Michael Hogan in an attempt to craft a reorganization plan that most of the creditors would support and that would provide a dividend to unsecured creditors, according to court orders filed Tuesday.
A meeting of creditors is scheduled in Eugene on March 19.
The bankruptcy filings are the latest twist in the legal troubles that for more than two years have wracked the local Sikh community, Golden Temple and Khalsa, a former Eugene resident and prominent business leader who chaired the Eugene Area Chamber of Commerce.
In both bankruptcy filings, the assets listed greatly exceed the liabilities listed. Khalsa listed assets of $30.95 million and liabilities of $1.27 million, and Golden Temple Management listed assets of $49 million and liabilities of $10.4 million. What drove the company managers to take this step were the many claims of "unknown" amounts from creditors, such as the Sikh religious leaders and Oregon Attorney General John Kroger, who sued Golden Temple Management in Multnomah County Circuit Court.
In a statement released Thursday, Golden Temple Management said it found it necessary to file for Chapter 11 bankruptcy protection because of "ongoing litigation and uncertainties involving claims against it."
"The bankruptcy court is the best place to efficiently and fairly administer claims against GTM (Golden Temple Management) and allow for an orderly administration of its assets to preserve GTM's ongoing value," the statement said.
The statement stressed that the bankruptcy filing is only for Golden Temple Management, the management company of Golden Temple of Oregon LLC, the makers of Yogi Tea. Golden Temple of Oregon itself is not a party to the bankruptcy, and the Golden Temple Management filing "does not affect the day-to-day operations of the Yogi Tea business," the statement said.
Golden Temple continues to pack Yogi Tea at its 50-employee plant in Springfield's Gateway area.
Golden Temple of Oregon "continues to thrive as a growing and financially healthy business," the statement said.
That is borne out by recent tea industry market research by Mintel Group Ltd., which reported that Yogi Tea, with sales of $12 million last year in natural supermarkets, is the leading brand of bagged/loose tea in that market.
Despite the legal problems of its owner, Golden Temple of Oregon, Yogi Tea sales in natural supermarkets rose 10 percent from 2009 to 2011, according to Mintel's figures.