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Creamery in Curdle 

It looks as though the questions that have been roiling the Humboldt County business community -- particularly in dairy country -- should start to be answered later this week.

First question: What did ex-Humboldt Creamery CEO Rich Ghilarducci mean when he suddenly went MIA, sending a letter through his high-powered San Francisco attorneys to the effect that the Creamery's financial statements were not to be trusted? The speculation, certainly, is that the untrustworthiness in the Creamery's books is somehow down to Ghilarducci's own actions, and nothing in the record -- including his O.J. Simpson-like runner from the scene of the action -- would seem to dispute that.

Creamery interim CEO Len Mayer told the Journal Tuesday morning that an interim report on the matter should be ready for stakeholders and the public by Friday. The out-of-town forensic accounting sharpshooting team brought in to examine the company's books head-to-toe quickly has nearly finished the first part of the investigation, according to Mayer.

The nut? "It looks at this point that there were deliberate misstatements around our financial condition," Mayer said. "We do believe that we were the victim of a fraud. There was at least one person, and probably less than two, involved."

In other words, the company should have a better understand of where it actually stands very soon. The company should be able to correct its books, or something very close to it. They'll have an outline of what was incorrect in recent financial statements. This information they've promised to make public, wherever it is not legally impossible to do so.

What the public might not get right away is a blow-by-blow account of how the suspected fraud was perpetrated, or the names of suspected perpetrators. Mayer said the Creamery's teams want to be 100 percent certain of their ground before they start naming names. "What exactly happened and who did it -- that stuff they want to be a little more careful about," he said.

Mayer added that there has been no evidence as of yet to lead one to indicate that the company had been a victim of embezzlement. "That's not jumping up like these other things are jumping up, but it's also true to say that they haven't ruled that out," he said. No indication that money has gone missing, but a grave situation nevertheless. Mayer and other key staff and consultants seem to have been working more or less around the clock in this last week and a half.

The company announced last week that it would postpone $2 million in payments to local dairy farmers until such time as it can be sure of its footing. But there's a potentially deeper financial crisis afoot -- when the scandal hit, the company was in the middle of a sale of $5 million in preferred stock, which would have funded expansion of the company. Some $400,000 of those shares have been sold. If the fraud that Mayer's consultants have found turns out to be real, then they were sold under false pretenses.

Though the Journal has spoken off-the-record to one buyer of the stock who feels confident that the investment will be sound in the long run, there is no certainty that every buyer will feel the same. Mayer said that it was the Creamery's intention to refund unhappy investors "if we are able."

How able is this company, touted not so long ago as one of Humboldt County's major business success stories, a partial answer to the all-but-complete loss of fishing, timber and other old Humboldt County industries? How much of that $130 million in 2008 revenues is real? That's what we'll find out this week.

Meanwhile, Caroline Titus, editor and publisher of the Ferndale Enterprise, told the Journal Tuesday that her paper will advance the story of the missing Ghilarducci in this week's edition of the paper, which comes out on Thursdays. She didn't wish to give away too much, but she confirmed that her paper tracked down Ghilarducci at his second home in Scottsdale, Ariz. -- at poolside, no less. The Enterprise can be found throughout Ferndale, or at Ray's Food Place in Fortuna.

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Hank Sims

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