Group offers to buy Rainbows building

An anonymous group of local investors has a $1 million contract to buy the Rainbows United building at 340 S. Broadway, allowing the nonprofit child services organization to remain there on a long-term lease.

The deal is Rainbows' latest move toward getting a reorganization plan on U.S. Bankruptcy Court Judge Bob Nugent's desk before the end of the year. The sale contract and any subsequent lease of the building will require Nugent's approval.

"While evaluating potential offers, one important consideration in addition to price was continuity, and this offer stood out because it allows Rainbows United to keep our administrative staff in place while we continue our reorganization," Hale Ritchie, Rainbows' chief reorganization officer, said in a statement.

"The sale also helps our cash flow and debt position, and we appreciate the investor group for its support."

Ritchie said Thursday that the sale sends a message to the nonprofit's clients that it's still in business.

"We're dealing with our issues and getting them solved," he said. "By leasing this building back and being able to lease part of it out, we're creating a positive cash flow going forward.

"We're making progress on getting this situation solved. It's all about the kids."

The investment group will lease the Family Enrichment Center back to Rainbows United for $1 a month for five years.

Rainbows United's administrative staff, including finance, development and technology, will remain on the second floor.

Rainbows United will be responsible for utilities and property taxes. The lease contract allows Rainbows to rent out space not needed, including the first floor and basement area. If the basement is leased, Rainbows staff housed there would be relocated.

The nonprofit filed for Chapter 11 bankruptcy reorganization protection on July 30. Ritchie isn't sure how long Nugent will take to approve the reorganization plan they hope to submit late this year.

In the filing, the organization cited $5.6 million in unpaid debts, including $2.3 million in federal withholding taxes, $2.4 million in unpaid bank loans and about $800,000 in other bills.

Rainbows United officials said at the time that misleading internal financial statements led to the bankruptcy, and no funds were embezzled.

The discrepancies in the organization's finances came to light after the unexpected resignation of chief financial officer Scott Richards on July 6. Richards had been with the agency for 14 years and had handled its finances for the past four, Rainbows officials said.

Lorraine Dold, the nonprofit's president, was fired Aug. 21.