Goodwill Toronto files for bankruptcy in attempt to restructure

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Goodwill's defunct Toronto-based chapter, which suddenly closed last month and threw its 430 employees out of work, is filing for bankruptcy in an attempt to restructure and even reopen some of its thrift stores.

But the move appeared at odds with word from the United States-based umbrella group Goodwill Industries International, which released a statement on Friday saying it had "disaffiliated" the Toronto-based chapter and banned it from using Goodwill's name and trademarks. It called the sudden shutdown on Jan. 16 and the accompanying resignation of Goodwill Toronto's entire board "egregious acts."

The two developments are the latest twists in the saga of Goodwill's troubled Toronto-based branch, which has 16 stores and 10 donation centres. Its chief executive officer, Keiko Nakamura, blamed a "cash-flow crisis."

According to a statement from Ms. Nakamura posted on its website on Monday, Goodwill Industries of Toronto, Eastern, Central and Northern Ontario has voluntarily filed for bankruptcy under the Bankruptcy and Insolvency Act, in an attempt, the organization says, to restructure while preserving its assets to pay its creditors, most of whom are its former employees.

While workers were initially left in the dark about whether they would receive their final paycheques, Goodwill said on Jan. 22 it was able to pay the wages for the organization's final weeks, a bill estimated at $500,000 to $750,000.

However, the Canadian Airport Workers Union (CAWU), which represents most Goodwill employees, estimates that its members are still owed as much as $4-million in termination and severance pay.

Goodwill Toronto's statement on Monday said it may make a proposal to its creditors – presumably in the form of demands for financial concessions from the union – which if approved, "would annul the bankruptcy and allow the corporation to reopen some stores, continuing to serve the surrounding communities and offering a source of gainful employment."

In an interview with The Globe and Mail on Monday, her first since the shutdown last month, Ms. Nakamura said the organization had struggled for years before what she called a cash-flow crisis forced her to take drastic action. She said she had closed six stores and reduced staff since taking over in 2011 in an attempt to turn the ailing charity around.

Ms. Nakamura, who was forced to leave her previous post at the helm of Toronto Community Housing Corp. after a scandal over lax spending, said she hoped the bankruptcy process could result in the reopening of some of the Goodwill stores, even under another name.

"I have been very committed in doing what I can do to help us navigate through this really challenging time. I really would like to see employees back working and where we are back in communities offering the services, accepting donations from the public and doing the good that I know we can," she said

CAWU lawyer Denis Ellickson said the union supports the process and is prepared to enter talks on reviving at least some of the stores.

But he acknowledged that it appears any such rebirth would have to happen with another brand name, since Goodwill Industries International's "very disappointing" decision to sever ties with its Toronto-based branch.

Goodwill Toronto wanted a commitment that the union would be open to concessions, Mr. Ellickson said, and the union agreed: "They are prepared to do whatever it takes to get any of the stores reopened. So that's a goal. I appreciate there's a number of challenges to doing that."

As part of the bankruptcy filing, a trustee, Angela Pollard of Pollard & Associates Inc. in Richmond Hill, Ont., has been appointed to assist Goodwill Toronto and oversee the process. The trustee is supposed to contact creditors within five days of Monday's filing, Goodwill said.

A spokeswoman for Goodwill Industries International, which is based in Rockville, MD, said in an e-mail that her organization recognizes that Goodwill Toronto will need to keep its name during the bankruptcy process, but said that at "the appropriate point in the process, the organization will no longer carry the 'Goodwill' name."

The organization's chairman, Brian Itzkowitz, said in a statement on Friday that its board had decided to strip Toronto of its membership after "a thorough review."

But Goodwill's international arm also held out hope the charity could return to Canada's largest city and the other Ontario communities the branch served, saying it would appoint a team and consult with the six healthy Canadian Goodwill branches, which were unaffected by the shutdown.

Mr. Itzkowitz's statement also alluded to the Toronto chapter's long history of problems, saying it had received a "variety of consultation and recommendations" from the United States-based umbrella group and had been under review by the international group's membership standards committee for many years.

A Globe and Mail investigation last month revealed that Goodwill Toronto had been in difficulty for more than a decade, closing stores and selling assets to try to stay afloat.

Other Goodwills in Canada have not had the same issues. Michelle Quintyn, president and CEO Goodwill Great Lakes, which is based in London, Ont., said she hopes to help revive Goodwill in Toronto.

She sits on Goodwill's international board, but said she recused herself for the recent discussions on Toronto's problems because she had worked with the Toronto chapter over the years.

"I think there's a deep interest in seeing Goodwill emerge in the future again," Ms. Quintyn said.

Goodwill's Toronto-based chapter was still listed as a charity on the Canada Revenue Agency's website as of Monday.