For beloved ice cream chain Gifford's, a rocky road

By Michael S. Rosenwald
Washington Post Staff Writer
Saturday, October 23, 2010; 11:59 PM

One afternoon this summer, Neal Lieberman did what Washingtonians have been doing for generations: He took his kids to Gifford's for ice cream cones.

Lieberman was no typical customer. He owns the Gifford's wholesale business, which had recently sold its retail ice cream outlets to a flashy Baltimore-area investor who promised he would keep alive the tradition of cozy parlors dipping Gifford's super-creamy flavors.

But that afternoon, the scoops Lieberman said his family was served at the Chevy Chase store were impostors. The sign said Gifford's, but the ice cream was not. It was Hood, a mass-market brand anyone can buy in a supermarket, although a staffer said it was a premium variety of the brand.

A formal allegation of the substitution - along with a photo of Hood ice cream tubs in a Gifford's store - is included in a breach of contract lawsuit Lieberman's ownership group filed this summer against Luke Cooper, the 34-year-old Baltimore investor who last winter took control of all four Gifford's shops from Rockville to downtown Washington. In recent days, all of the Gifford's stores have closed, marking what many fear is the end of the storied chain.

Even competitors are stunned. "Gifford's is the name you could never really compete with around here," said Susan Soorenko, owner of Moorenko's Ice Cream Cafe in Silver Spring. "It's what everybody around here grew up with. It's amazing to see what's happening now."

The nasty legal battle has played out in a Baltimore County courtroom through the summer and fall as customers encountered increasingly odd scenes at Gifford's outlets - stores open only a few hours a day, power outages, weekend closures, spoon shortages and empty cases of ice cream. In September, on Yelp.com, one disappointed patron of the Bethesda store wrote, "They had four flavors when we showed up and two by the time we got to the counter."

Wednesday night, the store next to Bethesda's Landmark Theatres was dark, the chairs stacked up in a back corner, the tip bucket empty on the counter. A sign on the door said, "Closed for the weekend. Sorry for the inconvenience." The writing on the sign seemed to be fading.

Exactly who is to blame for the Gifford's collapse may ultimately be worked out in a courtroom by a jury or judge with tubs of patience, but this much is certain: The troubles are the latest in a series of bizarre chapters for a Washington institution whose storied history has been matched by periods of bitter heartache.

Messy history

The chain was founded in Silver Spring in 1938 by John Gifford, who initially ran the business with his family but later quarreled with his brother and cut him out of the operation, according to family members. The split was so severe that generations later, some Giffords didn't even know John had had a brother. When John Gifford died in 1976, his son Bob took over. That did not go well. Business declined, and one evening, Bob Gifford emptied the cash registers and bank accounts and disappeared, reemerging 15 years later.

In the meantime, the stores went into a steep decline and the company went into bankruptcy. As the sheriff closed in to take control of Gifford's Silver Spring property, family members replaced the original recipes with fakes to protect their family jewel. To this day, family members insist that the Gifford's wholesale operation is not using the real recipes, even though company executives say they are.

"I've got the originals sitting in a storage box," said Andrew Gifford, Bob's son, who has steered clear of the ice cream business.

Andrew Gifford now publishes books through a small literary press and works at the American Psychological Association. He has watched with amazement as the Hunt family bought the rights to Gifford's in 1987 and later sold the chain to investors, who in turn sold the chain to a group that included Lieberman, a former marketing executive at Discovery Communications. Asked about the latest troubles, Gifford said: "I don't know what to make of this anymore. How can this happen twice in 20 years? I doubt the ice cream is the problem."

The problem is that ice cream isn't just dessert, but an economic entree, a $10 billion business that in Gifford's case has grown notably messy. High-end ice cream has not weathered the recession well. Sales in the high-end segment grew only 1 percent in 2008, according to Mintel Research, and sales actually declined by more than 10 percent at some notable high-end chains such as Cold Stone Creamery.

Lieberman, in interviews, acknowledged that some Gifford's stores were behind on rent even before he sold the shops. The company closed two unsuccessful stores before the sale. Asked whether the retail side of the business had been profitable, Andrew Quartner, one of Lieberman's partners, said, "Depends what you mean by profitable."

At the same time, Gifford's faced increasing pressure from a trademark battle with an unrelated Maine ice cream chain also named Gifford's, which has asserted in a federal lawsuit that it won rights to the Gifford's name after the Washington-area Gifford's went into bankruptcy. Ice cream can be a rocky road.

New investor

When Lieberman and Quartner decided to focus on the wholesale business, selling ice cream to grocery stores, they searched for an investor to take over the stores. They settled on Luke Cooper.

Who is he? Legally, he's actually Lueke Cooper, according to court and Maryland bar records. Up until about 2004, Cooper was a lawyer practicing mostly in Maryland district courts. But then he had a career transformation, opening Deal Metrics, a private equity firm that according to its Web site and corporate listings seems to have one employee, Cooper.

On his Web site, Cooper says he "completed graduate work in finance" at Yale University and the University of Chicago, but officials at both schools said their records do not back up that claim.

Asked about the discrepancies, Cooper said he completed a continuing education program at Chicago, and he offered a picture of his certificate as evidence. He said he completed a similar program at Yale, but a spokeswoman there said the school does not "have a record of a Luke Cooper attending any executive education program here." She said Cooper signed up for a summer course, but never attended classes.

Asked about Yale's statement, Cooper replied in an e-mail, "Growing up as a kid from a single-parent household in one of the toughest places in Connecticut, I am quite proud of my distinguished academic achievements."

A press release on Cooper's Web site says his firm formed an "affiliation" with MDRE Equities, a prominent real estate firm. "Deal Metrics is hopeful that the affiliation will give it greater bandwidth to complete buyout opportunities that have a real estate component," the press release says.

Reached by e-mail, Ernest Moyer, an MDRE partner, said: "There was no affiliation. Mr. Cooper shared office space with our firm. I have no other comment."

In 2008, Cooper's company purchased a significant chunk of Brigham's, a chain of ice cream stores in the Boston area. Shortly after Cooper took over, business went downhill, according to reports in the Boston Globe. The paper reported that before the outlets Cooper controlled collapsed, he was allegedly paying employees in cash and had stopped paying rent. Cooper, who faces lawsuits there, said his troubles in Boston resulted from a tough business climate and "industry factors."

Lieberman and Quartner were aware of Cooper's Boston problems, but entered into a deal with Cooper in which he took control of the Gifford's stores and agreed to purchase ice cream from the Gifford's wholesale business. No money was exchanged upfront in the deal.

Lieberman and Quartner both said that Cooper started having problems almost immediately, falling behind on rent, not paying suppliers, and letting the stores get run down. They believe Cooper didn't have as much money in the bank as he claimed, an allegation Cooper strongly denies.

On July 4, at 9:58 a.m., according to court filings, Lieberman sent Cooper a blistering e-mail telling him he was in default of the purchase agreement and taking him to task for selling Hood's ice cream in Gifford's shops. Lieberman and his partners filed suit a few weeks later, and they then sought and received an injunction forbidding Cooper from selling non-Gifford's ice cream.

Lieberman and Quartner both said that in retrospect, they made a "mistake" selling to Cooper. "We did a deal with the wrong guy," Quartner said. Asked if he thought they were duped, Lieberman said, "Yes, I do think so."

A countersuit

Cooper tells a different story. Representing himself in court, Cooper has countersued Lieberman's group for breach of contract and fraud, alleging, among other things, that proper paperwork to keep stores open had not been filed for years, that the sellers misrepresented how Cooper would purchase the ice cream, and that Lieberman and Quartner set up obstacles that made it impossible for him to expand the business through partnerships.

In a stream of e-mails to The Post, Cooper offered several defenses of his ownership. In the first e-mail, Cooper blamed the failure of the business on the trademark suit: "The lawsuit and ensuing judgment required us to exit the ice cream business altogether, which is why we have stopped paying expenses and shuttered the stores." However, there has been no judgment in the Maine Gifford's case, according to court documents and interviews with attorneys.

Later, Cooper blamed his retail troubles on the recession, leftover debt from when Lieberman controlled the stores, and the expense of defending lawsuits. "We were always accurate in our financial ability," Cooper wrote. "They were not honest about their business" or the quality of the ice cream. "We were forced to field multiple customer complaints about the vacillating quality of their ice cream."

Lieberman strongly denied all of Cooper's allegations.

Asked why he served Hood ice cream, Cooper replied, "We never sold any ice cream in our shops that wasn't super premium ice cream."

What happens now? Lieberman and Quartner said they are pressing ahead with their wholesale business, defending themselves against the trademark lawsuit, and looking for other partners to reopen the stores, which they acknowledge will be a difficult chore.

"In terms of the brand, look, this is not great," Lieberman said.

Quartner said: "It's horrible what has happened. It's horrible for the people who love Gifford's."

Staff researcher Madonna Lebling contributed to this report.

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