Pittsburgh Food & Beverage Company facts for kids

The Pittsburgh Food & Beverage Company was a business group started in 1991 by a person named Michael P. Carlow. He wanted to help two well-known but struggling companies in Pittsburgh, Pennsylvania. These companies were D. L. Clark Co., which made the famous Clark Bar candy, and the Pittsburgh Brewing Company, known for its Iron City Beer.

The company grew to include other businesses. It added L. E. Smith Glass Company from Mount Pleasant, Pennsylvania, Wayne Candies, Inc. from Fort Wayne, Indiana (which made Bun Bars), and Pittsburgh's City Pride Bakery. However, the company faced big financial problems and closed down in 1995.

How the Company Started and Grew

In 1991, Michael P. Carlow was a 39-year-old businessman. He had a history of helping companies that were having a hard time. He had successfully turned around two furniture businesses before.

• In 1991, he bought the D. L. Clark Company. This candy company had started way back in 1886. The previous owners, Leaf Candy Company, had stopped making the main product, the Clark Bar. They felt it wasn't selling well outside the Pittsburgh area.
• Carlow's purchase, which cost about $22 million, included other sweets made at Clark's factory near Pittsburgh. It also included older candy brands like Black Cow and Slo Poke.

Iron City beer in its unique "space-bottle."

Later that year, Carlow also bought the Pittsburgh Brewing Company. This company made Iron City beer and had been around since the 1860s. It also made Samuel Adams Boston Lager for another company. Carlow created Pittsburgh Food & Beverage as a main company to manage both Pittsburgh Brewing and D. L. Clark Co. He finished the $15 million deal for Pittsburgh Brewing in February 1992.

Just a few months later, in April 1992, another company joined Pittsburgh Food & Beverage. This was Wayne Candies of Fort Wayne, Indiana, which made Bun Bars. Carlow had also bought L. E. Smith Glass Company in 1986, and it was also managed by Pittsburgh Food & Beverage. Carlow and his father, Frank, owned most of the company.

Carlow kept trying to make Pittsburgh Food & Beverage bigger. In 1993, he tried to buy other companies like Whitman's Chocolates. He successfully bought City Pride Bakery in the spring of 1993. This bakery was the last one still operating in the city of Pittsburgh.

Reports said that Clark candy company started making money again in 1993. This was partly because they got contracts to make products for other big brands. Pittsburgh Brewing also grew its sales in the local area. Because Carlow seemed to be saving local companies, people saw him as a "corporate white knight" or a hero. Even when City Pride Bakery closed in February 1994 after losing money, people still thought Carlow was doing good things for the area.

It looked like the company would keep growing. In October 1994, a company called Borden announced they would sell Wise Foods (known for their potato chips) to Pittsburgh Food & Beverage. However, this big purchase would soon reveal the financial problems that led to the company's downfall.

Financial Problems Come to Light

Carlow had paid a large deposit of $6 million to buy the Wise Foods brands. He had also arranged for money to buy them, but this money depended on Clark candy company making a profit for the next six months. It quickly became clear that Clark was having trouble. They faced shutdowns because suppliers weren't getting paid. This meant Carlow's money lenders pulled out of the deal.

It was later discovered that Carlow and another owner, Larry Ousky, had been doing something called "check kiting" since late 1993. This is a way of using bad checks between different company accounts to make it look like there's more money than there is. It's done to delay paying debts and hide money being taken from the company. One bad check would seem to be paid by another bad check from a different company account.

Carlow paid Borden an extra $2 million deposit to get more time to find money for the Wise purchase. He also tried to make the Clark plant work extra shifts. They sold the extra candy to a company the Carlows had formed to export beer and candy to Russia. To pay for all this, the "check kiting" got much worse. Even though the companies made about $76 million a year, they wrote checks worth $560 million. Most of these checks were between different accounts at the same bank, leading to huge fees. The owners were also found to have written checks to themselves for millions of dollars.

Pittsburgh Food & Beverage and Pittsburgh Brewing were also found to have reported less payroll than they actually had to save on insurance costs. There were also problems with employee payments for Social Security and credit unions that went missing. Some money from the Pittsburgh companies was used to pay off debts from Carlow's previous businesses.

When the deadline for the Borden deal arrived, Carlow still couldn't get the money. A regular check of the company's finances by their bank, PNC Bank, found the pattern of improper financial actions. PNC Bank accused Carlow of causing them to lose a lot of money. The bank told the FBI and the U. S. Attorneys. Borden immediately stopped the sale and kept the $8 million Carlow had paid.

PNC Bank made Carlow hand over control of Pittsburgh Food & Beverage to a business expert named William A. Brandt on February 7. Brandt faced many challenges, including not being able to process payroll because the company's bookkeeper refused to give over the financial records.

What Happened Next

Brandt soon said that the Clark candy company was in deep trouble and would have to close if no buyer was found quickly. Clark also owed $3 million to Leaf North America from when Carlow bought the company four years earlier. On February 17, the Clark plant closed, and most of its 180 workers lost their jobs. A small group stayed to ship out the remaining candy.

Days later, Leaf took back its trademarks, accounts, and equipment. However, the workers stopped Leaf from taking everything, and they reached an agreement. Leaf could take the candy, but the equipment stayed while a new buyer for Clark was sought. On the same day, PNC Bank asked for Pittsburgh Food & Beverage to be put under Chapter 11 bankruptcy protection. This means a court helps the company try to reorganize its debts.

A judge decided that the company would have to be broken up and sold off. After looking at offers for all four companies:

• Clark and Wayne Candies were sold to a businessman named James Clister for $3.2 million and $1 million. Most of the money from Clark went to pay off the company's debts.
• Wayne Candies' factory closed, and its operations moved to Clark's facility. The new company, Clark Bar America, later sold the rights to Bun Bars in 1998. It also sold the old Leaf brands, Slo Poke and Brown Cow. Clark Bar America then went bankrupt in 1999, and its remaining assets were bought by another company.
• L. E. Smith Glass Co. was sold for $5.9 million to American Glass Company.
• Keystone Brewing Company bought Pittsburgh Brewing for $28.5 million. They also took on the company's debts and kept its 325 employees.

PNC Bank had filed a large lawsuit against Michael Carlow and his father, Frank, in May 1995. However, they dropped the lawsuit later, believing that the bankruptcy process and government investigations would leave no money for them to get.

Michael Carlow admitted to financial wrongdoings. In August 1996, he was sentenced to 8 years in prison and ordered to pay back money. He served 6 years. Later, it was said that even while in prison, he continued to move money around to avoid paying taxes. He was found guilty of this in 2013 and sentenced to another prison term. Frank Carlow also faced many charges and was sentenced to prison in 1998, but he died two years later. Several other employees also faced jail time because of the financial problems. Fortune Magazine even wrote about this case in their 2009 book about famous business scandals.