Sno Mountain investors attempt to force company into bankruptcy

A group of Sno Mountain's investors and creditors are attempting to force the Scranton resort into bankruptcy reorganization.

Members of the group filed an involuntary Chapter 11 petition Monday in U.S. Bankruptcy Court for the Eastern District of Pennsylvania and allege they have claims of more than $9.6 million against the skiing and water park complex.

The filers include members of the ownership group who want to oust Sno Mountain president Denis Carlson, said Scott Tattar, a spokesman for the group. Efforts to reach Mr. Carlson were unsuccessful.

If approved, the ski complex would shed some debt and get a new start, Mr. Tattar said.

"This is a good thing," he said. "This allows for the mountain to get back to their core competency, which is amusement."

Operations are continuing at the complex, and they are currently advertising discount ski season passes.

The filing comes after financial trouble piled up in recent years for the recreation complex.

Sno Mountain defaulted on a $5 million state loan last year before renegotiating terms on the $4.5 million balance earlier this year. The complex faces state litigation over unpaid sales tax and has a history of local property tax delinquency.

The 388-acre property was listed for a Lackawanna County sheriff's sale in August after a Berks County bank filed foreclosure action, claiming it was owed $6.6 million on a $7.5 million mortgage. The sale was postponed in July when Sno Mountain principals reported they were close to a refinancing package.

Mr. Tattar said attempts to refinance are continuing.

The bankruptcy filing created alarm about the future of one of the region's prime entertainment attractions.

"The timing is terrible for something like that, with the ski season coming up," said Austin Burke, president of the Greater Scranton Chamber of Commerce. "I'm saddened that the recent problems have put them into this particular situation."

Sno Mountain traces its origins to Montage, a company established with public and private financing and incorporated in 1975 to build a ski complex in South Scranton. The facility opened in 1983 with half its mortgage debt assured by the county.

After running into financial difficulty and a foreclosure threat, the county acquired the property for $14.7 million in 1991. Former Commissioners Robert Cordaro and A.J. Munchak, both now serving time for federal fraud convictions, sold the property to Mr. Carlson's investment group.

Montage's creation kicked off a development boom in an otherwise barren and wooded area of Scranton and Moosic, including the Glenmaura residential and golf complex, two office parks, the county baseball stadium and retail, hotel and restaurant development.

"Montage Mountain has changed the perception of our area," Mr. Burke said. "I believe 6,000 people work on Montage Mountain now."

Investors in the resort figure prominently in the drive to force the bankruptcy. Sno Mountain LP was established as a Philadelphia-based investment group that bought the complex from Lackawanna County for $5.1 million in November 2006. After the new owners took over, they invested $3 million in snow-making equipment, added new ski trails and developed a terrain park. The group also invested $12 million to develop SnoCove water park, which opened in 2008.

WCP Sno Mountain, which has a Montgomery County address, has a $6.5 million investment stake in Sno Mountain and a $2.5 million loan to the complex outstanding, court papers show. Charles and Kathleen Hertzog, a Montgomery County couple, have $2.6 million invested, and Mr. Hertzog loaned the facility $200,000, according to the petition.

Mr. Hertzog and Edward Reitmeyer, identified in court papers as managing partner of WCP Sno Mountain, are part of the ownership group driving the bankruptcy filing, Mr. Tattar said.

Other parties to the filing, according to court papers, include:

- Funeral director Al Hughes invested $200,000. During an unrelated public corruption trial held in June 2011, it was revealed Mr. Hughes delivered thousands of dollars in payments from businesses with county contracts to Mr. Cordaro when he was serving as county commissioner.

- Nicholas Scandale and his company, Scandale Associated Builders, Clarks Summit, which has an $846,206 lien judgment against Sno Mountain and a $250,000 investment in the property, court papers show. Scandale Associated Builders was a contractor on the Sno Cove water park development.

- Eugene and Michael Ruane invested $2 million;

- Sterling Trust invested $250,000 each for benefit of Donna Ford and Richard Ford. Also, Mr. Ford had a $100,000 loan to the company;

- John Pardue invested $125,000;

- Mark Paradise invested $125,000;

In a separate filing Wednesday, several other creditors sought to join the bankruptcy petition:

- Game LLC invested $300,000 and loaned $100,000. The company listed an address associated with Glenn Gress;

- SMFPIC invested $125,000. The company listed an address associated with Kevin McFadden;

- ProSlide Technology Inc., $56,000 for unpaid invoices;

- D&S Realty Laurel Oak loaned $53,245.04;

- Robert Sablich loaned $160,000;

- Michael Sullivan loaned $100,000;

- Scott Orr loaned $611,000; and

- Fred Shipman loaned $190,000.

Chapter 11 allows debtors to continue operations, restructure financially and eventually pay creditors.

A procedural hearing on the bankruptcy is scheduled Nov. 7 in Philadelphia.

Contact the writer: jhaggerty@timesshamrock.com

Sno Mountain timeline

❄ December 1984: Montage Mountain opens for skiing.

❄ October 1991: Lackawanna County approves a measure to spend $14.7 million to buy out Montage Inc., the operator of the ski resort.

❄ May 3, 2001:- Montage reports its first profit in seven years.

❄ August 2005: Lackawanna County looks for an outside group to manage Montage Mountain Ski Area. The county requests that the management group keep on all the employees and if they decide to purchase the resort they must agree to run it for 10 years.

❄ June 23, 2006: An investment group from Philadelphia offers to purchase the ski resort from the county for $4.1 million. The group know as Sno Mountain LLC also proposed putting additional $14 million in improvements into the property. The group wants to add a water park.

❄ June 30: Sno Time Inc. of York offers $5.1 million for the resort plus $10 million in improvements. Sno Mountain increases bid to $5.1 million.

❄ July 10: Lackawanna County agrees to sell Montage Mountain Ski Resort to Sno Mountain LLC for $5.1 million.

❄ Sept. 26: Lackawanna County judge denies an injunction to stop the sale of Montage Mountain by the county. The injunction was requested by minority Commissioner Mike Washo in August.

❄ Jan 12, 2007: Sno Mountain opens.

❄ May 23: Sno Mountain breaks ground on a $9.5 million water park at the resort. The water park will be called Sno Cove.

❄ July 30: Officials with Sno Mountain announced that the water park known as Sno Cove is will be opened sometime in the summer of 2008.

❄ June 25, 2008: lawsuits have been filed against the operators of Sno Mountain for unpaid bills. Also the Scranton Sewer Authority has placed a lien on them for unpaid sewer bills.

❄ Aug. 13: Some of the attractions at Sno Cove, the water park at Sno Mountain, opened after a delay of 13 months.

❄ Oct. 26, 2011: Sno Mountain defaults on a $5 million loan from the state. Also according to court records, the ski/water resort area owes about $15 million in unpaid bills.

❄ July 16, 2012: Sno Mountain is saved from a county sheriff's sale.