Royal Guard
security firm
files for Ch. 11The company lost several large
contracts following Sept. 11, 2001
Honolulu security firm Royal Guard Security Inc., dealing with several financial setbacks, has filed for Chapter 11 bankruptcy protection and intends to emerge as a stronger company.
Royal Guard Security, owned by retired Honolulu police detective Clarence "Rags" Scanlan, has lease troubles, a million-dollar tax liability and lost some key business in the past couple years. The firm's insurance costs have also been rising in the aftermath of the Sept. 11, 2001, terrorist attacks, said John Bischoff, who was recently hired as a consultant to help Royal Guard restore its financial credibility.
Bischoff is chairman and chief executive of the Bisch Group Inc., an international security services firm based in Las Vegas.
Royal Guard had been planning for a couple months to use the bankruptcy as a step toward rehabilitating long-term problems, Bischoff said. "We will come out the other side a much improved security company," he said.
Filing Chapter 11 allows Royal Guard to reorganize its finances without the threat of lawsuits by creditors.
Eugene Goo, a former airline manager, joined the company in February and has been named president, replacing Scanlan, who has become chairman.
"We are still a player," Goo said. "We are not in danger of going belly up."
Royal Guard, founded in 1989, has about 400 employees. Its assets and debts each run between $1 million and $10 million, according to the company's bankruptcy petition, which was filed Friday in U.S. Bankruptcy Court.
In 1996, the state hit the firm with a $811,177 tax lien, covering unpaid general excise taxes back to 1989. Goo said Royal Guard had been mismanaged at the time and Scanlan was left holding the bag.
Since then, Royal Guard has paid down part of its state tax debt, and now owes the state $312,343, according to its bankruptcy petition. But Royal Guard also owes $903,456 to the federal government, its largest unsecured creditor, for unpaid payroll taxes.
Other large unsecured creditors include Lyle S. Hosoda & Associates, owed $91,328 for legal fees and costs, as well as the landlord of the Royal Guard's headquarters at the Coral Commercial Center in Kakaako, which is owed $57,320 in back rent.
Royal Guard's roof began leaking in January, and the landlord just put a new roof on last month, Goo said. At the same time, Royal Guard has been seeking a smaller office space, and feelings between the landlord and tenant were ruffled, Goo said.
The landlord, Limit LLC, sued over back rent in April and won a judgment.
Royal Guard plans to find a more affordable office to lease, Bischoff said. The company also plans to upgrade its equipment as part of the process of rebuilding itself.
A year ago, Royal Guard lost a security contract at Pearlridge Center.
Royal Guard had also provided port security for cruise ship firm American Classic Voyages Co., which filed bankruptcy after the terrorist attacks and exited the isle cruise business.
"Sept. 11 may have had a lot to do with it but in the end it's the economy that dictates what happens," Scanlan said last year.
Royal Guard and Scanlan have also had positive moments.
The company provided security for the peaceful 2001 Asian Development Bank annual meeting at the Hawaii Convention Center.
Scanlan was part of the team that handled security for the Olympic village in Atlanta in 1996.
Royal Guard aims to preserve its customer base, bid for new work and keep its employee base, Bischoff said. The bankruptcy will not disrupt business.
Royal Guard is represented in the bankruptcy by Honolulu attorney Steven Guttman.
Scanlan declined comment for this story.