Jason's landlord tries to block Chapter 11 filing

February 18, 1993|By Michael Dresser | Michael Dresser,Staff Writer

The landlord of Jason Pharmaceuticals, an Owings Mills-based diet plan marketer that filed for Chapter 11 protection from creditors last week, asked the federal bankruptcy court yesterday to deny legal shelter to the company and charged that Jason's owners diverted corporate assets before the filing.

Benjamin Rosenberg, an attorney representing Eight Crondall Associates Limited Partnership, said his client has a claim pending against Jason -- maker of Medifast diet products -- for hundreds of thousands of dollars in unpaid rent on space in the Owings Mills Business Park.

He said that Friday, one day after the company filed its bankruptcy petition, his client filed a civil suit in Baltimore County Circuit Court against four members of Jason's founding Vitale family under Maryland's Fraudulent Conveyance Act.

"The court papers detail substantial distributions to the shareholders and substantial salaries paid to the shareholders prior to the bankruptcy," Mr. Rosenberg said.

Jason was founded in 1980 by Towson physician William Vitale and his son, James Vitale, to make liquid diet programs and market them through physician affiliates. The two men, together with Dr. Vitale's daughters, Susan V. Boone and Barbara V. Forrester, were named in the suit.

The filing brought a vigorous reaction from Mrs. Boone, Jason's vice chairman.

"The Vitale family denies each and every allegation of the lawsuit," she said. "We've done nothing improper and illegal and believe this suit has been filed in bad faith and for harassment purposes only."

Jason grew during the 1980s into a business with about 350 employees and $51 million in sales through a network of thousands of doctors. Business boomed after TV talk show host Oprah Winfrey lost 68 pounds on another liquid diet, Optifast, in 1988, said former director of advertising Rich Kuchner, who left in January 1992.

But business later slowed.

"The entire market category declined and the whole industry got bad publicity as Oprah regained her weight," said Mr. Kuchner, who added that the product worked well for people who make the necessarylife-style changes.

By 1991, the privately held company's annual revenues were down to $22.8 million and work force was 150, according to Ziff Communications Co.

Ms. Boone said "there's no doubt whatsoever" that the company will successfully reorganize. A company statement said Jason could emerge from bankruptcy in a matter of months and pay 100 percent of all claims allowed by the court.

In its filing, Jason listed assets of $4.5 million and liabilities of $4.1 million.

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