San Antonio Express-News (Sunday)
Heirs to Jim’s chain in feud over fortune
Germano “Jim” and Veva Hasslocher wrote a stern letter to their five adult children in 2002, laying out a complex succession plan for the San Antonio restaurant empire they had spent more than a half-century building.
The couple said they had imposed “severe protections” to preserve the assets — which included the Jim’s Restaurants chain and Magic Time Machine restaurants — after “threats and ugly behavior” by some of their offspring.
The plan remained largely in place at the time of their deaths. Veva, who suffered from Alzheimer’s disease, died at 84 in 2009, and Jim died at 93 in 2015.
Despite the couple’s best-laid plans, they couldn’t head off a years-long feud in Jim’s probate case, which pits daughters Caryn and Susan Hasslocher against their brother Jimmy Hasslocher, a former five-term San Antonio city councilman who keeps a tight rein on the family business.
Caryn and Susan, who say they haven’t received any distributions from their parents’ estates, have leveled a slew of allegations in a lawsuit against their brother. Among them: improperly using company assets to enrich himself; misusing millions of dollars in pandemic relief aid received from the federal government; and failing to repay hundreds of thousands of dollars in loans from the company.
Jimmy moved for the suit’s dismissal, calling it in court papers a “hodgepodge of alleged activities” devoid of any details. He’s accused his sisters of pursuing litigation “for the express purpose of wresting control” of the family business from him and in defiance of their parents’ wishes.
“And this is what this case is
about: ownership and control of the assets left by Mr. and Mrs. Hasslocher to their children,” Marvin Pipkin, an attorney representing various Hasslocher businesses, said during a February 2021 Bexar County Probate Court hearing. “Almost 20 years ago, they could see this train coming down the track.”
Pipkin added, “This is a long, unfortunate relationship — a long, unfortunately bad relationship that has come to pass here. The parents saw it coming, did their best to stop it. But they set up a plan, and we are asking for the plan to be followed.”
Jim and Veva included in their plan a “no-contest provision” that revokes the benefits of anyone who challenges it. Caryn and Susan should forfeit their benefits, including their ownership interests in the family business, for bringing the litigation, Jimmy has said.
The sisters counter that their beef is not about their parents’ wishes but with how their brother has allegedly breached his duties as executor of their father’s estate and as trustee of various Hasslocher entities. In court filings, they argue they shouldn’t have to forfeit the benefits they are entitled to.
They want the case to go to trial, while Jimmy wants it resolved out of court through arbitration. They await a ruling from Judge Veronica Vasquez.
None of the Hasslochers agreed to an interview.
The Hasslocher family holdings include 13 Jim’s Restaurants in San Antonio and three in Austin, the Magic Time Machine restaurants in San Antonio and Dallas, Frontier Burger in San Antonio and La Fonda Alamo Heights. The restaurants generated about $47 million in sales in their fiscal 2019, before the pandemic upended the restaurant business.
At its peak in the mid-1980s, the enterprise operated about 30 restaurants — including atop the 750foot Tower of the Americas and on a Corpus Christi riverboat.
Just how much the entire privately held enterprise is worth today hasn’t been publicly disclosed. But a 2016 inventory of assets in Jim’s probate case valued his 21.1 percent interest in a family partnership, which owns parent company Hasslocher Enterprise Inc., at almost $6.5 million. That would mean the entire partnership was worth more than $30 million.
Humble beginnings
Jim built the family fortune from next to nothing.
Born in 1922 in Shreveport, La., Germano Hasslocher eventually adopted the nickname Jim.
Hasslocher attended Allen Military Academy in Bryan and served four years during World War II in an army engineering unit. He then followed his mother to San Antonio by hitchhiking here with 37 cents in his pocket.
In 1946, Hasslocher manned his uncle’s bicycle rental stand near Brackenridge Park. He started selling watermelon slices to park visitors and later offered hamburgers.
He opened his first Frontier Drive-In at 3175 Broadway, near the present-day Witte Museum, in 1947. The restaurant sold burgers cooked over a charcoal fire and served on toasted buns, along with fries, onion rings, chicken, steaks, malts and shakes.
That same year, he wed Veva. He’d met her a year earlier when she and a friend rented bicycles from him. After a three-day honeymoon, Veva took over the company payroll.
During the 1950s and ’60s, the Frontier chain expanded throughout San Antonio and into Austin.
The drive-ins provided the seed money for the Hasslochers to launch another venture. They opened the first Jim’s Coffee Shop, offering drive-in and dine-in service, in 1963. As the chain grew, the name was changed to Jim’s Restaurants, becoming an old standby for generations of San Antonio diners.
In 1973, the Hasslochers unveiled a whimsical dining concept — a restaurant and discotheque known as the Magic Time Machine. They expanded the concept to Dallas and Austin. (The Magic Time Machine in Austin has since closed.)
Their company hit some rough patches over the years. The floating Corpus Christi restaurant, the Wayward Lady, ceased operating within about four years of its 1984 debut because of continuing losses. The eight Frontier Drive-Ins disappeared from San Antonio’s landscape by the early 1990s, the
victim of national fast-food chains’ speedier drive-thrus.
And a Hasslocher company lost the contract to operate the Tower of the Americas restaurant to Houston-based Landry’s Restaurants in 2004, ending a 35-year run.
“He made mistakes,” Jimmy said of his father’s business decisions during an April deposition. “He also made a lot of good choices, which provided for paychecks for all of his children throughout their youth, their middle life, and as they got older in years, including divorces, houses, cars, education, etc.”
Family affair
The challenges of overseeing a fledgling restaurant business didn’t preclude Jim and Veva Hasslocher from starting a family.
Their first child, Susan, 73, was born in 1948 — the year after the Frontier Drive-In opened. Caryn, 72, followed in 1949, while twins Jimmy and Bobby, 70, arrived in 1951. Daughter Julie Stirman, 63, was born in 1958.
Over the years, all of the Hasslocher children worked in the family business.
In a 2015 interview, Jimmy recalled joining the business Easter weekend in 1959, “standing on wooden Coke crates, selling raspas and cotton candy. I was 8 years old, and I needed the crates to see over the counter.”
Jim turned over the reins to daughter Susan in 2002, though without the title of president that she had previously held. She had overseen the restaurants in Austin, where she resided for 40 years.
“My dad was reluctant to give me that same title again,” Susan recalled in a 2019 deposition. “He wasn’t one to give away any type of control.”
Her stint as chief operating officer didn’t last much more than a year or so. Questioned about the corporation sustaining large losses during her time in charge, Susan recounted how the business was “saddled” with eight Shoney’s restaurants that it bought in 1998 and converted to Jim’s Restaurants. She said she advised her father against making the deal.
Susan said she believed Malcolm Hartman, the family partnership’s longtime general counsel, and Patrick Richardson, a vice president of operations at the time, convinced her father to replace her with Richardson.
In 2006, Jimmy took over as CEO and president of Hasslocher Enterprises, which does business as Frontier Enterprises.
The 2002 letters
Less than four months after Susan had taken the helm, Jim and Veva outlined for their children in the 2002 letter on company letterhead how they had been working on “establishing a structure and mechanism for ownership and
control of Hasslocher Enterprises.”
The couple sought to “ensure stability in the leadership and management of the corporation for our lifetimes and after we are gone” and “protect our most important asset from claims by outsiders, and hopefully save taxes.”
Over the previous decade, the pair had created various trusts for themselves individually and each of their children to hold ownership interests in the family partnership. The children’s trusts held equal interests, about 12 percent, though the voting power remained with their parents and the trusts they each controlled.
Jim and Veva also noted that some of their children were “very unhappy and displeased with changes in the management of the corporation and other matters.”
“We truly believe that we have set up a plan that will ultimately benefit each of you and all of you; and it is our desire that each of you honor our wishes and not undertake to challenge or otherwise alter our plans,” they wrote.
The couple detailed the nocontest provision, warning their children it could turn into a costly endeavor if they chose to challenge the plan.
Jim and Veva also sent letters to each of their offspring. In the dispatch to Susan, included in the probate case, the couple sought to put to a stop to problems confronting the company. The couple cited “the random withdrawal of funds by family members that have been shown as a receivable on the books of the corporation that never is paid” and the company assuming “certain liabilities and obligations of family members.”
Sibling rivals
During a 2019 deposition, Caryn said Julie received a longterm payout in exchange for her ownership in the family partnership. Julie’s interest was supposed to have been divided equally among her siblings, Caryn said, adding “that evidently didn’t happen.” Julie isn’t involved in the ongoing dispute.
Later in 2011, Jim married Lilia Flynn. She is 87 and lives in the Houston home they shared.
Jim died Nov. 19, 2015.
His estate was valued at almost $9 million, which included his ownership interest in the family partnership, real estate and jewelry.
In 2017, more than eight years after Veva’s death, Caryn filed a court motion demanding an accounting of her mother’s estate. She later alleged her father, executor of Veva’s estate, had transferred her assets to himself personally instead of distributing them to the children or their trusts.
Caryn’s motion surprised a lawyer for Jimmy.
“Not only is this unusual, it
rare because most families decline to spread their dirty linen in open court,” attorney Arthur H. Bayern wrote in a letter to Caryn’s lawyers.
The next year, Caryn filed another motion with a host of demands, including requiring the return of all assets that her father allegedly seized from Veva’s estate. Veva’s 18.5 percent interest in the family partnership, for example, was her own property and did not belong to Jim, Caryn said in the filing.
She also asked the court to make her, Susan, Jimmy and Bobby limited partners in the family partnership with voting rights in proportion to their ownership interests. Susan subsequently joined her sister in the dispute.
Jimmy accused his sisters of using court motions to assert various causes of action against him — in addition to their father.
The sisters later filed an actual lawsuit, amended multiple times, asking at one point for the court to distribute their parents’ estates according to their wills.
In the latest version of the complaint, filed in July, Caryn and Susan accused Jimmy, company general counsel Hartman and its nowformer chief financial officer of conspiring to breach their fiduciary duties and of unjust enrichment.
The various allegations drew a rebuke from Barry Snell, an attorney for Hartman, during a 2020 court hearing. The sisters’ counsel “gets a big bowl of spaghetti and mixes it up real well and throws it all on the wall hoping something somehow will stick,” Snell said.
2016 agreement
In 2016, a year after their father’s death, Susan, Caryn, Jimmy and Bobby came to an agreement to divvy up their father’s $530,000 salary among themselves.
As a result, Susan and Caryn’s annual salary increased to $300,000, while Jimmy’s rose to $450,000 and Bobby’s climbed to $350,000, a court filing shows.
In March 2020, around the time Gov. Greg Abbott closed all restaurants in Texas amid the coronavirus pandemic’s onslaught, Caryn and Susan say Jimmy stopped paying them their salaries and discontinued their insurance benefits. They say the action came in retaliation for their lawsuit.
Around the same time, Jimmy sent letters to the restaurants roughly 1,000 employees informing them that they had been furloughed.
Hasslocher Enterprises later received loan of more than $4.8 million from the Paycheck Protection Program, a lifeline for struggling businesses during the outset of the pandemic. Such loans were intended to cover payroll and other costs such as mortgage interest, rent and utilities.
The company got a second PPP loan for $2 million the next February. It also received a $150,000 Economic Injury Disaster Loan.
Jimmy has “failed to account for and has misused” the government loans, the sisters alleged. The loans have been forgiven.
The sisters hired San Antonio private investigator Gary Ploetz, a former IRS agent in the criminal investigations division, to dig into Hasslocher Enterprises’ finances. He reviewed general ledgers from 2008 to 2019.
Hasslocher Enterprises “paid millions of dollars of personal expenses for various Hasslocher family members,” Ploetz wrote in a 2020 report. The company was owed $4.2 million by Jim’s estate and more than $700,000 from Jimmy and $457,000 from Bobby as of June 30, 2017. The payments should have been treated as “constructive dividends” and reported as taxable income, the investigator said.
“By claiming the payments are some type of loan, the family members are allowed to receive the benefits without claiming it as taxable income,” Ploetz said. The “tax-free money” was “siphoned out of the company,” he added.
Starting in 2010, Hasslocher Enterprises made regular mortgage payments on Jimmy’s roughly $1 million Texas coastal property, Ploetz said. Bobby, who had publicly remained on the sidelines in the dispute, on Friday filed court papers expressing his desire that the litigation go to trial rather than arbitration.
“This dispute has been ongoing for years, and the Hasslocher family is unlikely to heal unless and until this matter is resolved,” Bobby said.
Ronald Shaw, an attorney representing Caryn and Susan, asked Jimmy during April’s deposition when he planned to repay the money he allegedly owed the company.
“I don’t agree with everything that’s on here, and you need to ask your clients the same thing — when are they going to pay their receivables?” Jimmy replied, according to a transcript. Ploetz’s report didn’t say whether Caryn or Susan owe the company any money.
Jimmy then referenced how, unlike him, his sisters didn’t actually do anything for the family business.
“I mean, you want to come after me about my receivable?” he said. “I’m the only doing the actual work, Mr. Shaw. Your clients have been getting mailbox money for years, and a lot of it.” Mailbox money is considered passive income generated by little or no effort.
‘Fiefdom’
Jimmy has made the family business “his own fiefdom,” Caryn said in her 2019 deposition.
As for the outcome Caryn hoped to achieve from the litigation, she said, “That the company will be managed by … the four rightful owners, and that would be myself, Bobby, Susan and Jimmy.”
Asked what other outcome she hoped for, she said, “To keep the company from … continuing to decline as we have seen.”
Giving his sisters the right to “share equally” in “controlling the business” would be a “surefire recipe for the very disaster that Germano and Veva so carefully attempted to prevent,” Jimmy said.
The litigation has not only been a distraction but a financial drain, he said.
Legal bills have “eaten up most of the money that was left in the estate,” so Hasslocher Enterprises has had to step in and pay more than $1.1 million in fees, Jimmy said.
Meanwhile, the restaurants have struggled to rebound from the pandemic. The Jim’s at Northwest Loop 410 and Blanco shuttered, while the most of the remaining 16 Jim’s no longer operate around the clock, like they did before the pandemic.
“We can’t find cooks, we can’t find bussers, we can’t find food servers to staff so we can go back to 24 hours a day,” Jimmy said.
In a 2019 counterclaim, Jimmy said he wants a ruling that Caryn and Susan have forfeited any benefits from their parents’ trusts and Veva’s will as a result of bringing their litigation.
He also wants them to pay his legal fees.