June 8, 2020
Dear Mr. DiNovi and Mr. Sperling,
Since Art Van stores closed on March 19, 2020, over 3,100 Art Van employees have faced incredible challenges and hardship. The difficulties of losing our income and health insurance has only been exacerbated by the COVID-19 pandemic. We write to you as a group of concerned Art Van employees who have been meeting to discuss Thomas H. Lee’s (THL) role in Art Van’s bankruptcy and reiterate our call that THL provides meaningful financial support to our coworkers through the coronavirus crisis.
On April 21, over 500 of our coworkers signed a letter calling on THL to provide health insurance to all employees for 90 days and to provide a fund for out-of-pocket costs incurred by employees. Since then, a small group of coworkers have spoken with your firm about the fund. We are grateful that THL committed to establish a $1 – $1.25 million fund, but the fund only amounts to a one time check of only $320 to $400 per person. Thus while we welcome the opportunity to work with THL on the fund, THL’s commitment to date is grossly inadequate. THL’s fund offering is far below the average three-month cost of family health coverage on the open market. Family medical coverage is of tantamount importance, especially in the middle of the current pandemic and recession. Lastly, THL’s commitment is far lower than the precedent set by Robert Levin, who contributed over $1,500 to each of his former employees, who lost their jobs and health care along with all of us, when Art Van closed.
The financial challenges faced by Art Van employees now are severe. For example, since his health insurance was cut in March, Rusty Haworth, a 29-year warehouse manager at Art Van’s Warren, Michigan, distribution center, is facing a $5,000 monthly prescription for his wife. This is a dramatic increase from the $5 a month he had been paying prior to losing his job and medical insurance. Fadhil Tawfeeq of Harwood Heights, Illinois, a 3-year Art Van sales associate had to undergo a life-saving surgery one week after losing his job and health insurance. He is now thousands of dollars in debt to the hospital and cannot afford his monthly $1,350 rent payment and bills. James Klingerman, Regional Franchise Sales and Operations Manager for 29 years in Schoolcraft, Michigan, has struggled to afford basic health insurance in the marketplace after losing his job, which became all the more compounding after his wife contracted COVID-19. Many of us are holding off on having needed medical procedures because we cannot afford it. Art Van’s sudden closure has touched Art Van employees across all stores and positions and all of us deserve relief.
Compared to the acute hardship facing Art Van employees, THL is in a position to make a real difference to these and all former employees. THL purchased Art Van in March 2017 in a leveraged buyout of $612.5 million from its founder, Art Van Elslander. As part of the purchase, THL sold off much of the company’s valuable real estate in lease-back agreements and took on debt obligations totaling more than $200 million. A year later, THL expanded Art Van’s holdings with the acquisition of two other furniture companies: Sam Levin Inc. Furniture and Wolf Furniture Company.
Under THL’s ownership, Art Van came to owe hundreds of millions of dollars to investors and creditors. By the end of 2019, Art Van’s net income was negative for the year (March 9, 2020 Chapter 11 bankruptcy filing). Prior to THL’s purchase, Art Van had been a growing business, reporting $800 million in revenue in 2017.
According to press reports, “THL terminated or accepted the resignation of upward of 22 Art executives in the first two years of its ownership,” including Art Van’s long-term CEO, who was replaced in 2018 with Ronald Boire; ranked by Yahoo Finance ranked as the “the worst CEO of 2016” for his short tenure at Barnes and Noble. Boire had previously been an executive of the now-defunct Toys R’ Us and Sears/Kmart. Many Art Van employees had to bear the brunt of Art Van’s diminishing reputation. Tyler Parsley, a delivery specialist for 5 years from Comstock Park, Michigan, observed that during his last three years at the company, customers increasingly spoke to the deteriorating service and challenges of getting their orders, a marked shift from the satisfied customers he served at the start of his career.
By March 8, 2020, Art Van Furniture announced it would close or sell its 169 stores and lay off 3,100 employees in a bankruptcy filing that shocked employees and the founders of the two furniture companies it purchased in its expansion. In three years, THL managed to destroy three furniture companies that had been in business for a combined 300 years. Art Van—worth more than $600 million when THL bought it—could not even afford an orderly Chapter 11 liquidation. Doug Wolf, former CEO of Wolf Furniture spoke to the controversy in March, saying: “We never thought in a short period of time it could end up in shambles. This is a classic business story that is very, very wrong.” (Altoona Mirror, March 31, 2020)
Art Van’s reputation suffered a new low during the liquidation process, described by many employees as the worst experience of their lives, as they were left to handle irate customers who had ordered thousands of dollars worth of furniture they would never receive. Laura Virgo of Rockwood, Michigan, had a gun pulled on her in the store by one customer and the security guard in her store walked off the job because of unsafe working conditions. Weroud “Ruth” Sinawi, a 29-year sales manager from Novi, Michigan, had a customer whose $35,000 order went unfulfilled after Art Van declared bankruptcy. Although the liquidation seemed to have 2 been planned in advance, employees’ safety was not considered. Laura believes that Art Van continued to take deposits on merchandise they knew customers would not receive and feels that she and her coworkers unknowingly helped Art Van rob thousands of people, only to be abandoned by Art Van in their most challenging moment. In the months leading up to the liquidation, Beverly Fisher of Onaway, Michigan, was assured that Art Van would survive and was told to push customers to set up deliveries, purchase warranties, and make purchases which contributed to a much more stressful liquidation process when the orders went unfulfilled.
THL’s purchase and subsequent management of Art Van has been typical of private equity’s approach to retail businesses: finance the purchase of a company by encumbering its assets with huge amounts of debt that leave the company unable to compete because it is hamstrung by debt, unable to raise needed working capital, and no longer led by executives with proven experience in the company’s specific culture and market.
Even though THL’s behavior is right out of the private equity playbook, we were still shocked to learn that we would lose our jobs and our health care with virtually no notice. Losing our health care insurance as a pandemic hit has been particularly painful for us and our families, especially as many employees have contracted COVID-19. For example, Weroud Sinawi of Novi, Michigan, was hospitalized for 8 days with a severe case of the virus. Weroud learned during her 8-day hospitalization that two customers she had interacted with in the liquidation process had died of coronavirus. She was also informed in the hospital that her health insurance had been cancelled three days early. Shirley Smith, a sales manager of 23 years in Taylor, Michigan, struggled to afford her prescription medication after she was told by her pharmacist that her medical insurance had been cancelled.
In February of this year, when the impact of COVID-19 on Art Van became clear, THL walked back from its efforts with others to invest in Art Van to save it. It did not do anything to spare Art Van’s workforce from the full brunt of the tidal wave about to hit them. On March 4, Art Van told its employees they would continue to work and be paid until May 5. On March 9, it filed for Chapter 11 bankruptcy and ten days later terminated without notice its workforce on March 19. In April, the case converted to a Chapter 7 bankruptcy, which put any prospect of employees receiving financial support in a reorganization or restructuring at even further remove.
THL has been down this road before with other companies, and Art Van is not the first private equity firm to claim that COVID-19 is responsible for an outcome that should be blamed on its own mismanagement. Instead of meeting its ethical obligations and skirting legal ones, THL and Art Van have thrown thousands of workers out of work during a public health emergency and skyrocketing unemployment. These workers deserve a sliver of the pie that is being divided up by billionaires. In sum, many of us have been with Art Van for decades. We have weathered tough times before and come out on top. One need only look at the recent purchase of 27 of our former Art Van stores by Loves Furniture (scheduled to reopen in June 2020), to know that our business was and remains viable.
We’re calling on THL to take responsibility for the losses of livelihoods left in your wake. We are left with no income, severance of our healthcare insurance during a global pandemic and economic recession. Funding for healthcare coverage for a few months will not bring our jobs back or help us land new jobs, but it will give us peace of mind and allow us to help pay off healthcare bills and allow us to take our children to the doctor or dentist while we search for new jobs.
We’re calling on THL to contribute at least $1,500 per former Art Van employee (or $500 a month which would defray less than half the cost of minimal insurance) to help us ensure that Art Van’s employees can protect our own health and our families’ health during this crisis. THL executives boast of having invested $335 million of their own capital in THL’s newest funds and THL is one of the largest private equity firms in the world having raised over $26 billion in equity capital. This is a nominal amount for THL and its executives, but would make a significant difference to our families.
We look forward to your timely reply.
Art Van Committee
Sterling Heights, MI
23 years at Art Van
14 years at Art Van
13 years at Art Van
Schoolcraft , MI
22 years at Art Van
Battle Creek, MI
20 years at Art Van
Grand Rapids, MI
5 years at Art Van
Lansing , MI
25 years at Art Van
Detroit , MI
23 years at Art Van
28 years at Art Van
Royal Oak, MI
6 years at Art Van
30 years at Art Van
Charter Township of Clinton, MI
16 years at Art Van
Canton/Auburn Hills, MI
6 years at Art Van
Swartz Creek, MI
25 years at Art Van
34 years at Art Van
Waterford , MI
10 years at Art Van
7 years at Art Van
6 years at Art Van
Sheena E. Simmons
5 years at Art Van