Restaurant king who claimed to be worth $215 million probed
“John Gantes, who cost lenders hundreds of millions, is target of fraud investigators.”
The Orange County district attorney has opened an investigation into fraud allegations against bankrupt restaurant king John Gantes.
Gantes, who claimed a net worth of $215 million at the end of 2007, filed personal bankruptcy last December. The Laguna Niguel resident is trying to wipe out $374 million in debts, mostly in the form of personal guarantees to lenders.
The district attorney’s major fraud unit sent a form letter to some of Gantes’ lenders last week. According to a copy of the letter obtained by The Register, prosecutors are “conducting an investigation into the business practices of John Gantes and his affiliated companies.”
Three creditors confirmed they received the letter. DA spokeswoman Susan Kang Schroeder declined to comment.
Gantes’ spokeswoman, Jan Strode, said, “John Gantes has been an extremely successful businessman for the past 37 years. Many factors have affected his business, including the economy and market conditions. We believe this preliminary investigation has no merit whatsoever.”
Wayne and Kathy Riley of Bend, Ore., who loaned Gantes $795,000 in December 2007, said they got the letter Monday and talked with an investigator Tuesday. The Rileys are among a handful of creditors who are suing Gantes for fraud.
“He said it was a preliminary investigation, but he said he had got a lot of complaints,” Kathy Riley said. “I’m glad.”
But another lender who got the DA letter, George Wong of Palos Verdes Estates, said Gantes was simply caught up in the real estate bubble with many others.
Wong, who loaned Gantes $2 million in late 2006, recently foreclosed on a Burger King on 17th Street in Santa Ana. Gantes continues to operate the restaurant.
“I wish Mr. Gantes all the best,” Wong said. “If he does well, I’ll do well too.”
At his height in mid 2008 Gantes controlled 110 franchised restaurants stretching from Las Vegas to Washington State, including nearly two dozen in Orange County.
Beginning with his father’s restaurant in Buena Park, Gantes amassed a collection of Burger Kings, Applebees, Cocos, On the Borders, Famous Daves and other chain diners.
He typically would buy a carefully selected lot, build one or two restaurants, borrow against them and buy more land for more restaurants. The strategy worked well until credit tightened in late 2007.
By summer 2008 Gantes had stopped paying many loans and taxes. That November he filed the first of more than two dozen Chapter 11 bankruptcy reorganization cases to save his companies. In December he and his wife filed personal bankruptcy.
A court-appointed trustee recently concluded that Gantes has no assets to repay his creditors. That means a bankruptcy judge could wipe out his debts and give Gantes a fresh start.
For more information regarding this article please contact: