1989 - 2024 : CELEBRATING 35 YEARS WITH DOUGLAS WILSON COMPANIES
Court Appointed Fiduciary
Legacy Asset Management
Development Services
Land Entitlements
Asset/Property Management
Assignment for Benefit of Creditors
Turnaround Management
Receiverships
Chapter 11 Trustee
Brokerage & Disposition
Partition Referee
Forensic Accounting
Due Diligence
Chief Restructuring Officer
Special Master
Liquidating Trustee
Expert Testimony
Highest and Best Use Analysis
Assignment for the Benefit of Creditors (“ABC”) structure supports timely wind-down.
DWC is in the process of completing an orderly wind-down of former online giant Zulily, which at its peak logged $1.8 billion in annual sales and counted roughly 1,900 employees.
Just seven months after being acquired by Los Angeles-based private equity firm Regent, Zulily completed significant employee layoffs in early December and filed a lawsuit against Amazon, claiming Amazon had enforced pricing policies that led to Zulily’s demise.
The company’s late-2023 performance was a far cry from its heyday. Based on its “Best Price Promise,” the company, which originally launched in 2010, filed an IPO three years later and was acquired by QVC parent Liberty Interactive two years after that in a deal valued at $2.4 billion. It marketed itself as a flash-sale site offering deep discounts on shoes, clothing, home decor, toys and gifts.
Following the IPO and subsequent acquisitions by Liberty Interactive and
Regent, the company’s performance slid significantly, and by December it faced the need to liquidate its assets. On December 22, the company entered into an “Assignment for the Benefit of Creditors (“ABC”) with Douglas Wilson Companies as the assignee.
Under the assignment, Zulily ABC, LLC is a wholly owned subsidiary of DWC, which is tasked as a fiduciary with maximizing the recovery for Zulily’s creditors. The ABC is held in a special purpose entity created by DWC, which allows DWC a number of abilities as its owner and offers the benefit of protecting the assets and giving all creditors equal access to the recovery.
The structure also offers several other benefits, explains DWC Vice President Ryan Baker.
“In a Chapter 7 bankruptcy filing, the Court assigns a panel of trustees to
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oversee the bankruptcy estate,” Baker says. “In the case of an ABC structure, the estate has access to a skilled and experienced fiduciary, such as DWC. The recovery process can take significantly less time, as well, as it is conducted outside the Court system.”
A statute under some state laws, including California, allows for the ABC special purpose entity as a means to distribute property among creditors. While the entity is based in California, the property can be located in other states, as it is in the case of Zulily; the company held its headquarters in Seattle and maintained warehouses in Ohio and Nevada.
With clear advantages in a complex assignment involving the return of assets to creditors, the ABC structure can be applied in numerous scenarios.
“We see ABCs as being a significant part of DWC’s growth going forward,” says DWC Chairman and CEO Douglas Wilson. “We’ve had experience with ABCs and their benefits for many years, and the nationally significant case of Zulily demonstrates the opportunity for us to expand this area.”
As a third-party fiduciary, the DWC entity is tasked with liquidating all assets to achieve the maximum recovery and to go through the claims process for creditors. This includes
conducting outreach to all creditors to establish and verify the amounts owed, as well as establishing the value of all assets.
“We quickly evaluated the assets and determined how best to go about stabilizing and liquidating them,” Baker says. “This included a request for proposals and consideration of three major liquidators.
The DWC team currently is working to liquidate all assets, which fall into four main categories: physical inventory located in the company’s two major warehouses; mechanical assets and equipment; intellectual property, including the Zulily name, brand, trademarks, copyrights, domains, website and other proprietary platforms; and the outstanding lawsuit with Amazon.
In March, the entity sold the brand assets and intellectual property to Overstock and Bed Bath & Beyond parent company Beyond Inc. for $4.5 million, while currently the liquidation of the inventory and other assets is in process.
“We are very pleased with the progress we have made so far,” Wilson says. “This is an extremely complex case and we have been very successful in the recovery process, working closely with Zulily’s Chief Restructuring Officer as well as others with whom we have relationships, to assist in the wind down of the company.”
Recent promotions and personnel highlights
Kristine Cuevas has been promoted to the role of Director. As Director, Ms. Cuevas works with DWC’s executives and project teams on a variety of assignments and communications work.
Lisset Rocha has been promoted to the role of Senior Staff Accountant. As Senior Staff Accountant, Ms. Rocha manages DWC’s financial and administrative accounting functions and works closely with the firm’s controller.
Michael Wilson has been promoted to the role of Director. In his role as Director, Mr. Wilson works across DWC’s receivership and advisory services projects and assignments.
Monica Wilson has been promoted to the role of Director. As director, Ms. Wilson manages project organization, accounting and operations.
DWC President Michele Vives will speak on a panel discussing commercial real estate issues during the California Bankruptcy Forum’s 36th annual Insolvency Conference, to be held May 1619 in Santa Barbara, California. DWC is a sponsor of the event: “Navigating the Wave.”
You’ve completed roughly 1,200 projects and assignments over 35 years of DWC. Which ones were most memorable?
Some of the more memorable assignments go back to the company’s infancy when we started to do some large local projects locally in San Diego, where we are based. We did a couple of country club projects — Del Mar Country Club, Heritage and The Bridges in Rancho Santa Fe. That experience introduced us to some of the national lenders and allowed us to spread our wings beyond San Diego. In the late ‘90s, we then grew that into doing substantial real estate projects in other parts of the country.
One that’s very memorable was our China Basin Landing project in the late ‘90s. China Basin was a real estate advisory assignment for a family under our legacy practice. We stepped in on behalf of the family trust and repositioned this massive, 750,000 squarefoot, 100-year-old warehouse on the wharf in San Francisco just as the iconic Pac Bell Ballpark and South of Market (now “SoMa”) were in their infancy. We successfully sold the property to an operator funded by Blackstone, which is now the largest commercial real estate owner globally. That took us to an entirely new level.
As we grew our relationships with major banks, equity funds, pension funds, life companies, and others, we began to expand nationally and do very diverse work.
What’s the most significant change you’ve seen your business experience in 35 years?
It was when we realized we had to segue beyond real estate. We had gained the confidence of a lot of major lenders, and we had built institutional relationships in New York and nationally. We realized that these institutions had real estate issues, yes, but they also had other challenges: partnership disputes, and commercial and industrial loans for operating companies. We realized we could bring operations talent into our platform.
In the ensuing 20 years, taking over operations has been in excess of 50 percent of our revenues. We have been able to bring in talented people with skills sets we were able to buckle onto the infrastructure of Douglas Wilson Companies to take over complex projects. We have grown to handle every kind of product type — from cannabis, which today
is a very active market, to large SEC matters such as regulatory receiverships on billiondollar Ponzi schemes.
When you think about the history of DWC, what does this anniversary mean to you?
I’m proud of the business, and the ability to adapt it to successfully navigate and prosper through complex economic cycles. My success has been in realizing that I can’t do it all. We need to hire wonderfully talented people and allow them the opportunity to excel based on their talents.
What are your top lessons learned?
Preserve relationships. Never become complacent. Always adhere to the premise of quality in all of the work that we do. Humility is a good thing.
What advice have you never forgotten?
I’ve never forgotten the advice from the two long-term mentors I had in my 20s and 30s. Both were substantially older than I was and they taught me to not to be complacent. They taught me that if you want to be successful, you have got to put yourself in the place of opportunity, and you’ve got to be very efficient in allocating your resources in order to put yourself in front of the appropriate decision makers. We all have a finite amount of energy, so our success is dependent on how we allocate that energy and those resources.
The other lesson is that things always cost more in this business than you think they will. Whether you are running a business or building a building, always assume it will take more time and more money than you expect. What themes will define the next chapter of DWC?
Our leadership team will be focused on maintaining and adhering to our foundation
and the pedigree of the firm, building upon existing relationships and establishing new relationships in support of our growth.
I learned long ago that you’ve got to know what you don’t know. I’ve never had a business class, so I’ve had to hire people who know how to do things: how to finance, how to build buildings, how to perform different functions operationally. We will build our team with people who are smart and talented, giving them the opportunity and the leadership to be clear in their goals and never become complacent.
sets
I’m proud of our brand that is well respected throughout the industry. We are known to be a quality class player that understands how to deal with the best and the brightest, from the private equity firms on Wall Street to large banks and financial institutions and their lawyers, and we’re also entrepreneurial. We are practical business people who know how to come up with solutions that are based upon reality. We’ve achieved that reality and those lessons learned by picking up the pieces of roughly 1,200 projects involving 15 billion dollars — all of which had challenges.
What is your vision for DWC going forward?
We have put together a brilliant team of people to support the firm’s success in the next 35 years of DWC, including President Michele Vives, Chief Operating Officer Nich Wilson, Vice President Ryan Baker, Managing Director Joe Corcoran, along with our finance team, projects team and everyone who supports what we do.
The other thing I am very proud of is our vision to maintain our independence over these 35 years. We have had many opportunities to create ventures with various partners and many of them are no longer here. Adhering to our independence has been really important and unique.
The premise of the business is a countercyclical business model that can navigate all economic cycles. It isn’t just based on bad times and good times — we offer advisory services, we act as a principal, we’ve done countless projects.
We’ve set the table for the opportunities ahead of us and we are positioned to now go and execute on that.
DWC continues to recover funds in its role as court-appointed Receiver in a case involving a $735-million Ponzi scheme that defrauded investors based on fabricated movie deals with HBO and Netflix. DWC President Michele Vives was appointed as Receiver in the case in early 2022 upon the request of the U.S. Securities and Exchange Commission, which investigated the scheme and brought the case against its perpetrator in 2021.
Under the scheme, which took place from 2014 to 2021, perpetrator Zachary J. Horwitz (who also aliased as Zach Avery) acting under the entities 1inMM Productions and 1inMM Capital used investment funds issued for fabricated movie deals to pay back earlier investors and fund his lifestyle. Through his companies, which purported to be in the business of film distribution, Horwitz raised investment via promissory notes through five main aggregators comprising more than 200 individual investors. Those private investors were falsely promised returns of 25% to 45% at set maturity dates with the understanding that their capital would be used to acquire regional distribution rights to specific films and then license the rights abroad to streaming services like Netflix and HBO. In reality, their investments were used to pay back earlier investors and for Horwitz’s private use. Horwitz has since
been sentenced and is serving a 20 year term in federal prison.
As Receiver, Vives’s role has been twofold: first, continue to oversee the legitimate business operations of the film entities involved in the scheme; and second, to maximize the recovery from assets on behalf of the scheme’s victims including a full analysis of transactions with five principal aggregators and other entities that perpetuated the fraud. This is in an effort to make the defrauded investors as whole as possible.
Vives and her in-house associates at DWC, including two forensic accountants, took a comprehensive approach to the case, conducting account analysis spanning the review of more than 2,900 bank statements encompassing more than 24,000 transactions, five major aggregators and numerous sub-aggregators. There were no accounting records in the case, which meant the Receiver and her team had to reconstruct the entirety of the account history for the 1inMM entities.
“Due to our in-house expertise in forensic analysis, including two CPAs — one of whom has 14 years of forensic accounting experience — we are very well suited for this type of fiduciary work,” Vives said. “It’s a major benefit for the matter to be able to conduct this analysis among our in-house team.”
As Receiver, Vives reached numerous settlements on behalf of the Receivership Estate, and continues to pursue more. These include several lawsuits that were filed against the managing members of the aggregators by various investors. In one recent example, the Receiver worked to claw back $1.2 million in a movie deal featuring Johnny Depp. Vives urged a California court to enforce an arbitral award against two production companies that owed distribution guarantees to the receivership estate. In many instances, recoveries have amounted to well above industry averages based on the Receiver’s analysis and pursuit of arbitration, mediation, and resolution.
With many federal and state agencies such as the SEC, FTC, states Attorneys General and Office of the Comptroller of the Currency pursuing receivership as a path to recovery, the case is the most recent among DWC’s several dozen regulatory receiverships.
“Involving more than $1 billion in transactions, this has been an extremely complex regulatory receivership and we are very pleased with the ongoing recoveries in the case,” Vives said. “We will continue to pursue all settlements and recover the maximum value to the receivership estate, which will in turn go to benefit the defrauded investors.”
This year marks DWC’s 35th year in business. In celebration of this milestone, we have all been doing a lot of reflecting on the past. But as important as it is to look back at where we’ve been, it’s equally as important to look forward at where we’re headed next.
Throughout the year, the company will be commemorating our 35 years by sharing highlights from the history of Douglas Wilson Companies as well as an outlook for the years ahead. In this Spring 2024 Newsletter edition, you will find a Q&A section. There, with questions from our team, I take a look back on three and a half decades for the company, including what it means to celebrate 35 years in business, my biggest career lessons learned, and where DWC is headed as it embarks on the decades to come.
As we celebrate 35 years in business this year, we take pride in the vast array of projects and assignments we have completed — from development to turnaround management, fiduciary work, receivership and more. But more importantly, we celebrate the people behind our success: the extremely talented individuals who make DWC what it is today. With that in mind, we’ve never been more excited about what is yet to come.
Sincerely,
Douglas P. Wilson dwilson@douglaswilson.com (619) 906-4312
