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Jan. 29, 2022

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Christensen Shipyards trying to leave recent troubles in its wake

Vancouver yacht-builder a smaller operation with different leadership

By , Columbian Business Reporter
6 Photos
Vancouver's own luxury yacht builder was abuzz with workers in January as the 160-foot Silver Lining drew closer to completion. Christensen Shipyards is back in business after a spell of legal and financial troubles that nearly sunk the 33-year-old business for good.
Vancouver's own luxury yacht builder was abuzz with workers in January as the 160-foot Silver Lining drew closer to completion. Christensen Shipyards is back in business after a spell of legal and financial troubles that nearly sunk the 33-year-old business for good. (Photos by Amanda Cowan/The Columbian) Photo Gallery

Inside a white fiberglass hull not far from the Columbia River, Jesse Castro is working on the final sheen that will one day bear the reflections of the rich.

As he polishes the walls and cabinets that today hold his own 26-year-old reflection, one imagines Castro is smiling. He’s doing what he loves. And someone is going to pay some $35 million for a piece of that.

“Being a part of the boats — saying you did that to that boat, it feels good,” said Castro, who finishes interiors on superyachts built here in his hometown, Vancouver. “It’s just knowing you’ve taken part of something big.”

When it’s christened weeks from now, the Christensen Shipyards product will be as long as a 16-story-building is tall. It likely won’t linger in the Columbia River for long, its custom finish bound for warmer seas.

Castro won’t be sailing away on the 160-foot yacht, but he’s just happy he got the call to come back to work on the boat at all.

“It helps out a lot, being back at work,” he said — especially with a fiancĂ© and two young children.

Castro’s bosses want to buff out the years of squabbles between millionaires and billionaires and the companies that create their luxurious toys. Hundreds of workers have paid the price of alleged mismanagement and insider deals at a company that ties Vancouver to the world of the wealthy.

The old Christensen is wrecked at the bottom of an ocean of debt and litigation. The new shipyard is a leaner operation with new leadership — separate, somewhat, from the receiver-held entity that owes millions to suppliers and creditors.

The old company that employed up to 350 people at its peak found itself $40 million in the hole. It sputtered in late 2014 before yacht construction came to a halt early last year. The new company, owned in part by a previous half-owner from Tennessee, opened debt-free last May and employs 115 local workers.

Christensen’s former president, Joe Foggia, has moved to Florida and has no comment. The interim president says he sees nothing but good things in Christensen’s future.

“Folks working here have nothing to concern themselves with other than building beautiful boats,” said Jim Gilbert, who was named interim president in January. “To have lost their jobs suddenly, without warning — we feel a big responsibility to make sure that doesn’t happen again.”

A new president is final proof that the worst is behind Christensen, Gilbert said, and he wants everything to be above-deck from now on.

Well, almost everything. Henry Luken, the billionaire yacht lover from Tennessee who bought a stake in Christensen in the 1990s, won’t name the business partner who owns another big share of the company.

For Castro, his young family and many others like him, as long as the owners continue paying a living wage, it shouldn’t matter who they are.

“I enjoy being part of a great group of guys, great management,” Castro said. Luken, who runs a vast media empire out of Chattanooga, Tenn., “is a cool guy to work for,” he added.

But for a company that since 2010 “was insolvent, the insolvency was deepening, and unpaid obligations were increasing,” according to court records, others might be looking for a little accountability.

World-renowned craftsmanship

Dave Christensen started his shipyard in 1983 and built a name in the super yacht industry that has attracted buyers like golfer Tiger Woods and dozens of lesser-known multimillionaires. Christensen hulls are recognizable once you’ve spent enough time looking at expensive boats, and the craftsmanship is world-renowned — all the founder’s doing, Gilbert said.

“Dave’s an old Pacific Northwest kind of guy,” said Gilbert, a 67-year-old former journalist who founded ShowBoats International magazine. “He built great boats.”

Christensen stepped away from his shipyard in 2009 due to deteriorating health, leaving Foggia, his stepson, in charge of running the company. Christensen still owned half the business, and Luken owned the other half.

It was around then, as the world economy was in shambles, that “poor management,” as Gilbert put it in a press release, started leading to rough seas.

The shipyard floated on until last year, when Christensen folded amid a barrage of lawsuits from unpaid subcontractors and other debtors. A Clark County Superior Court judge appointed a receiver, or financial administrator, to manage claims against the defunct company.

Subsequent court filings allege that around 2010, Luken arranged for several boats to be built for a total of $20 million less than what it would cost to build them. Foggia executed those contracts. Of four boats Luken initially contracted while he was the company’s half-owner, none were profitable for the company, wrote Vancouver forensic accountant Tiffany Couch, who was hired by Christensen and later retained by the court-appointed receiver, Miles Stover of the Gig Harbor firm Turnaround Inc.

“In fact, it appears that these transaction have harmed the company in numerous ways,” Couch wrote.

Because of the below-cost pricing, the company “engaged in a Ponzi-like scheme of overbilling customers under other construction contracts,” wrote Al Kennedy of Portland law firm Tonkon Torp LLP, attorneys for the receiver. “Such overbilling was intentional and necessary to fund the construction of (four hulls).”

Of those underfunded boats, two were purchased by Luken or a company he controlled; one was bought by Harlan Ltd.; and another was bought by Donald A. Burns, a Florida multimillionaire who made his money in the telecom industry.

During these alleged “insider deals,” more than $1 million in bonuses were paid to Foggia, Kennedy wrote. Foggia had no comment on the bonuses.

Couch wrote in court filings that the shipyard had liabilities that exceed its assets by $40 million when the finances for Christensen Shipyards Ltd. were handed over to the receiver last spring.

The receiver’s job is to attempt to get creditors and suppliers paid. To that end, the receiver filed suit last October to recover more than $16 million from Luken, Foggia, Dave Christensen, a company owned by Luken and another owned by Burns.

All the while, the new incarnation of the company — Christensen Shipyards LLC — can operate unimpeded after Luken bought the old company’s assets for $5.5 million a year ago.

“The entity that bought the company, the company’s assets, is not involved in this (receivership),” Kennedy told The Columbian. “We want (the new company) to succeed.”

Foggia now works in sales at a prestigious yacht brokerage in Fort Lauderdale, Fla. Should he sell his former home in Camas, a judge has ordered proceeds up to $1.3 million to be held for the receiver to possibly recoup what the receiver called in court filings “exorbitant” bonuses.

However, the parties are all moving toward a settlement, Kennedy said.

“If the matter is settled, we’ll be able to wrap this up and make disbursements within the next three to four months,” Kennedy said. “If it’s not settled, then I think we’ll be facing some extensive litigation.”

Meanwhile, people have jobs to do — boats to build.

Back to work

In the summer of his 21st year, Sasa Mitrobic started work as a carpentry trainee at a local shipbuilder.

“I can go build houses and whatnot, and that’s what I started in,” Mitrobic said. “But building boats is a completely different animal.”

Since he started at Christensen, the Vancouver native has worked his way up to carpentry lead man. Mitrobic, now 31, endured a previous layoff before the most recent stop-and-start. But he always made his way back to his labor of love.

“It’s the finished product, being able to see the boat when it’s all done. You take pride in how it turned out,” Mitrobic said. “People spend so much money, and the quality of what you put inside these boats has to be high. It’s the challenge of the work and the end product.”

Unless you tour the inside of a not-quite-finished megayacht, it’s hard to see the layers of craftsmanship that go into it. Wiring, woodwork, machining, stonework, welding and carpentry all mingle, exposing the millions of dollars and years of work that go into a 160-foot boat.

Maximizing the company’s output — a typical Christensen yacht takes about 320,000 man-hours — means finding the best and the right amount of workers, Gilbert said. He expects employment to grow from 115 to 150 this year.

Yet beyond the four yachts currently under construction — two of which should see completion this year — Gilbert won’t say whether any new orders are in the pipeline. And since Christensen builds to customer orders — not speculatively, as larger shipyards are able to do –it will need to rebuild the Christensen brand in the small marketplace of yacht buyers.

Although Gilbert doesn’t have experience running a shipyard, he knows his yachts from his days at ShowBoats International magazine, where he first met Christensen and Luken.

“I’ve visited probably every major shipyard in the world,” Gilbert said. “I have a unique vantage point that otherwise doesn’t exist.”

His friend Luken made him interim president, a role Gilbert expects to hold for a year before finding his own replacement.

“What Henry would like to do is become very owner-friendly,” he said, which means more transparency and owner involvement.

Considering the millions of dollars the old company owes, Gilbert admits there are supplier relationships to focus on as well.

“Unfortunately that means some great, local suppliers won’t do business until that is settled,” he said.

Yet the Christensen brand is a powerful one.

“We are working with them as a supplier,” said Tim Daly, vice president of finance for Tacoma-based Stellar Industrial Supply. “It’s a brand new entity. There’s some common ownership, but we are continuing to work with them, and they are a good customer.”

Stellar had liens put on several hulls in 2014 while Christensen’s finances were going awry.

“It’s totally an unfortunate situation all the way around,” Daly said. “It is what it is, and we’re happy to work with Henry and his organization.”

Some speculated Luken was building a shipyard in Tennessee that would be the new home for Christensen, but that project never fully materialized. “There never was a plan to shut down this yard,” Gilbert said. “The rumor about moving was more about expanding into the big-boat market.”

So long as some buyers can make do with slightly smaller superyachts, then, Vancouver stands to benefit in the building of these playthings of the rich.

In that nondescript shipyard on Columbia Way, Jesse Castro is finishing up work on Christensen’s latest beauty. It’s called the Silver Lining, and that’s all Castro can see in the clouds of his bosses’ troubles.

“It’s not one of those 9-to-5 jobs, where you go to work, get work done and come back home,” he said. “If you love what you’re doing, I don’t see why I would leave.”

Columbian Business Reporter