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After legal storm, Christensen yachts setting sail

Longtime Vancouver company moving to Tennessee after settling three-year legal dispute in late January

By , Columbian business reporter
Published: March 3, 2019, 6:05am
6 Photos
The exterior of Christensen Shipyards is seen here on Friday afternoon, Feb. 1, 2019. (Nathan Howard/The Columbian)
The exterior of Christensen Shipyards is seen here on Friday afternoon, Feb. 1, 2019. (Nathan Howard/The Columbian) Photo Gallery

For more than 30 years, the Christensen yacht company made its home inside a 180,000-square-foot warehouse in Vancouver’s Columbia Business Park, tucked between Highway 14 and the Columbia River. Workers in the facility’s 12 assembly bays manufactured some of the most luxurious vessels money can buy, and the company made a name for itself as one of Vancouver’s homegrown success stories.

But later this year, Christensen yachts — officially called Christensen Shipyards, LLC — will move to Tellico Lake, Tenn., and the Vancouver facility will become a new home for Vigor Industrial, which plans to manufacture a new type of landing craft for the U.S. Army called the Maneuver Support Vessel (Light).

The deal was announced Feb. 1 and caps a series of tumultuous years for the Vancouver yacht builder, which at its peak employed nearly 500. The move to Tennessee will leave the company well-positioned to adapt to the latest trends in the yacht industry, according to President Jim Gilbert.

The current structure limits the size of the company’s yachts to 50-meter hulls, he said, but the yacht market has shifted in the past three decades, and 50-meter hulls are now considered to be medium-sized.

The Tennessee facility can accommodate hulls up to almost 70 meters, according to the company’s website, and the Vancouver facility’s bays are an ideal size for Vigor to build the 100-foot MSV(L) landers. Vigor said it plans to start with 130 workers and ramp up to 400 after a few years.

“The property is ideally suited for what Vigor is going to be doing, so it’s a win-win for Vancouver,” Gilbert said.

The Tennessee shipyard is about 90 percent complete, according to Christensen yachts owner Henry Luken, and will require about two months of construction to be made operational.

“It’s got complete bays that are essentially finished,” he said.

Christensen yachts currently employs about 70, Gilbert said, and all of them are being offered the chance to stay with the company at their current salary if they will move to Tennessee. Several have already agreed, according to Luken. But before that can happen, the company still has two yachts to finish at the Vancouver site.

One of the yachts is expected to be completed in a matter of weeks, Gilbert said, while the other will need to be brought to a point where it can be outfitted with motors, launched onto the Columbia River and sailed out to the Pacific Ocean, through the Panama Canal and back up to the Tennessee facility to finish the interior.

“The actual handover (of the shipyard) is at the end of June, beginning of July,” Gilbert said. A Vigor spokesperson described the handover date as “late spring.”

The two companies are still discussing the particulars of the transition, Gilbert said. Christensen yachts has begun packing its hardware to be trucked to Tennessee, though some of it is still needed for construction, and Vigor may also want to purchase and retain some of it.

Another detail that’s still being worked out, according to Vancouver economic development director Chad Eiken: a separate business entity called Christensen Group, Inc. has a long-term lease on a nearby city-owned marina to use as a launch point, and the Christensen yacht company has a sublease.

The parties will need to work out a deal to end the sublease and allow Vigor to take over the main lease, Eiken said, and the city will want to make sure the fire department retains access to the marina, which houses the city’s fireboat. The discussions are moving forward smoothly, Eiken said Wednesday.

Legal battle

Vigor’s Feb. 1 announcement came four days after the resolution of a long-running lawsuit brought by Luken against former Christensen yachts co-owner Dave Christensen and members of his family, in which Luken sought to recoup losses that he claimed to have incurred as a partner in the business.

Dave Christensen founded the Christensen yachts company — then known as Christensen Shipyards, Ltd. — in 1985 and Luken was a co-owner from 2003 onward. In 2015, the company went into receivership and Luken bought the remainder of its assets and restarted it as a new business entity.

Christensen and his family separately owned the physical shipyard property through Christensen Group, Inc. and leased the facility to Christensen yachts. That arrangement continued after Luken restarted the yacht company.

Christensen yachts and its president, Gilbert, were not parties to the lawsuit, and he declined to discuss the legal battle.

Markowitz Herbold, a legal firm representing the Christensen family in the lawsuit, also declined to comment on the settlement, as did Dave Christensen’s stepson, Joe Foggia, who served as president of Christensen yachts until 2015.

“I can tell you that the Christensen family is delighted that Vigor is buying the shipyard,” said Kathy Maynard, Dave Christensen’s daughter. “It’s going to provide jobs for the community, which is what my dad would have wanted.”

Reached for comment last week, Luken offered a similar assessment.

“The community comes out a winner with Vigor coming in there,” he said.

Maynard and Dave Christensen’s brother Paul Christensen both referred further questions to the family’s lawyer, Casey Marshall, who also declined to comment, citing a non-disclosure agreement.

“All I can tell you is that it’s been settled,” he said.

The settlement details are not publicly available, but the complaints and responses filed by both parties earlier in the case shed some light on the grievances that drove the lawsuit. Most of the disagreements stemmed from differing claims about which party was calling the shots in the years leading up to the receivership.

Luken’s filings contended that the other Christensen yachts leaders defrauded customers — including Luken himself — out of millions of dollars via a “Ponzi-like scheme” in which they used money from new yacht orders to make up for funding shortfalls on previous orders, and that Luken was kept in the dark about the company’s business practices and its increasingly dire financial predicament.

The Christensen family’s filings described Luken as a “corporate raider,” and argued that he was aware of the company’s financial status and operations and used his leadership position and financial influence to force the company into a series of deals that benefited him personally while pushing Christensen yachts into bankruptcy, setting himself up to eventually buy the rest of the company.

Luken disputed that narrative in comments to The Columbian, noting that he lost his original investment in the company when it went into receivership, and had to pay additional money to buy it back.

“Why would I destroy the value of something I owned half of?” he said. “I didn’t make them do anything. How could I? All the boats in the yard belonged to customers.”

Partnership

The parties’ narratives in their legal filings align on a number of details about Christensen yachts’ history, business transactions and the circumstances that led to Luken joining the company.

Because of the time and cost to build a yacht, and the small pool of buyers, the company usually couldn’t get bank loans to finance projects. Most yachts were sold in advance, with ongoing operations financed by the buyer’s down payment and subsequent installment payments during the construction process, which led to inconsistent revenue over the years.

Luken met Dave Christensen in 1997 when he purchased a yacht from Christensen yachts. In 2003, Luken bought 50 percent of the company’s stock, with the remaining shares split between Christensen and his family. Luken joined Dave Christensen and Joe Foggia on the board of directors.

The filings from the two parties disagree about what happened next.

The Christensens’ filings allege that in exchange for the opportunity to buy into the company, Luken agreed to provide ongoing financing for the construction of “spec boats” — yachts built without a buyer lined up in advance. The family viewed the arrangement as a way for the company to achieve long-term financial stability.

Luken’s description of the agreement is similar, both in his own filings and his comments to The Columbian, but he said he expected his deposits to be held in trust while the boats were built. Instead, he said, they were spent on company operations and expenses, including a series of large bonuses awarded to Foggia, and some of the money later appeared to be simply missing.

The Christensens disputed that assertion and argued that though the agreement did result in the construction of several boats in the following few years, Luken treated them as his personal property and demanded large commissions for each sale, diminishing the company’s revenue.

Recession

Luken began construction of the Tellico Lake shipyard in his home state of Tennessee in 2006, with the goal of eventually opening an eastern division of Christensen yachts with the capacity to build larger vessels. But progress on the new shipyard was halted in 2008.

“For 10 to 12 years, the plan had been to move the large (hull) production to Tennessee,” Gilbert said. “The sheds were built and all the concrete was poured, the roof was on, and then construction stopped with the Great Recession.”

The economic downturn also hit the company’s Vancouver operation, eventually forcing the company to lay off up to 80 percent of its local workforce, according to a 2011 Columbian story. Court filings from both parties indicate that in 2010, Christensen yachts struck a deal in which Luken’s friend, Forrest Preston, would purchase a new yacht, giving the company enough short-term funding to stay in business.

Again, the parties’ filings disagree about the details. The Christensens allege that the agreed-upon price for the new yacht was several million dollars less than what it would cost to build, and that Luken pressured Foggia into taking the deal; Luken says he simply introduced Preston and that Foggia negotiated the transaction and sale price.

The company continued to lose money, and the Christensen filings state that by 2014, Christensen Group Inc. had begun forgiving all of the Christensen yacht company’s rent payments in order to keep the Vancouver facility open.

According to a Feb. 9, 2015, Columbian story, in December 2014 and January 2015 multiple creditors had begun filing notices under the Uniform Commercial Code, which are used to declare claims of an interest in another party’s property as collateral for debts.

Receivership

On Feb. 9, 2015, workers arrived in the morning to find the shipyard closed and the gates locked.

In later court filings, Luken and the Christensens each blamed each other; Luken said the company had become unable to sustain its operations due to financial mismanagement, and the Christensens said Luken had deliberately cut off payroll funding in order to better position himself to buy the company. In comments to The Columbian, Luken said he had been unaware of the extent of the company’s financial trouble until the closure incident.

By 2010, Dave Christensen had been diagnosed with Alzheimer’s disease and was no longer able to participate as a board member, and the board deadlocked when Foggia and Luken disagreed about how to handle the situation. Dave Christensen died last year. Foggia wanted to declare bankruptcy, but Luken wanted to keep the company going.

On March 9, 2015, Luken filed a lawsuit in Clark County Superior Court asking for the company to be placed into receivership, a legal process in which control of the company would be turned over to a court-appointed professional who would develop a plan to repay its debts.

The court appointed Miles Stover to the position of general receiver on March 20, and in an April 29 declaration to the court, Stover stated that he had re-hired more than 70 employees and restored operations at Christensen yachts while he began to examine the situation and develop a plan.

On May 20, Stover filed a declaration stating that the best course of action to repay creditors would be to sell all of the company’s assets to a buyer who would be willing to keep operating it, and he recommended Luken.

Despite objections from the Christensens, the proposal was approved and Luken subsequently bought the Christensen yachts name and assets — including its long-term lease on the shipyard – for $5.5 million. Stover used the money to repay creditors, while in the meantime Luken re-formed Christensen yachts as a new business entity, now officially called Christensen Shipyards, LLC.

The receivership case continued until at least 2017, according to court records, but on Feb. 25, 2016, Stover reached settlement agreements with Luken and the Christensens in which both parties would be released from further claims by the receivership, but any of their own financial claims against the original Christensen yacht company would be subordinate to the claims of outside creditors.

Lawsuit

On March 8, 2016, Luken filed a lawsuit in Clark County Superior Court against Joe Foggia, Dave Christensen, Christensen Group, Inc., and two other former Christensen executives alleging fraud and breach of fiduciary duty.

Luken alleged that the Christensens owed him millions of dollars for a variety of investments and transactions, including a $15 million credit for a yacht that he purchased but the company never delivered, and he noted that the settlement terms meant he likely couldn’t recover any money through the receivership process.

In their counterclaim, the Christensens argued that Luken understood the company’s financial practices and didn’t object until after the fact, and that he used his position on the board and his financial influence to push the company into receivership so that he could cheaply purchase its assets.

At the request of Foggia, the case was moved to the U.S. District Court for Western Washington. Dave Christensen’s wife Mary Christensen and daughter, Cindi Curtin, filed a separate lawsuit against Luken in May 2016, which was later folded into Luken’s case.

The case continued for more than two years, and then in August 2018 the parties filed a notice with the court that they had entered a private mediation and were moving toward a settlement agreement, and the court granted a request to remove all deadlines from the case calendar in order to give the parties time to finalize the details.

No new court records were filed until Jan. 28, 2019, when the parties notified the court that the matter had been settled and asked for the case to be dismissed. The court approved the request on Feb. 6, five days after Vigor Industrial announced that it had purchased the shipyard.

According to a Vigor spokesperson, the company is purchasing the shipyard from Christensen Group Inc. The settlement details are not public, so it’s unclear if the resolution of the Christensen yachts lawsuit was a direct prerequisite before the deal with Vigor could move forward, but Gilbert’s comments suggest that it was.

“We had hoped the settlement would make it possible to continue with the building of smaller boats in Vancouver,” he said, but added that the company will now be giving up the remainder of its lease on the property.

No members of the Christensen family would comment on the details of the settlement, but Luken said it included a lien on the shipyard property, and that he would receive approximately $5 million from the sale to Vigor.

Despite that, Luken said that his involvement with Christensen yachts still resulted in an estimated net loss of about $15 million for him, largely due to the yacht that was purchased but never delivered.

“My money did not get spent on building that boat,” he said.

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