Pittsburgh Food & Beverage Company

Pittsburgh Food & Beverage Company

Company type	Private
Industry	Food, beverage and glass
Founded	1991 (1991) in Pittsburgh, Pennsylvania
Founder	Michael P. Carlow
Defunct	1995 (1995)
Fate	Bankruptcy and Embezzlement
Brands	Clark Bar, Iron City Beer, Bun Bars
Revenue	$76 million (1994)
Subsidiaries	City Pride Bakery D. L. Clark Company L. E. Smith Glass Company Pittsburgh Brewing Company Wayne Candies, Inc.

The Pittsburgh Food & Beverage Company was established in 1991 by businessman Michael P. Carlow as a holding entity aimed at overseeing several struggling yet historically significant Pittsburgh-based enterprises. Initially, it brought together the confectionery firm D. L. Clark Co., recognized for the Clark Bar, with the Pittsburgh Brewing Company, known for Iron City Beer. Over time, the company broadened its portfolio to incorporate L. E. Smith Glass Company, Wayne Candies, Inc.—the producer of Bun Bars—and City Pride Bakery. By 1994, the company achieved $76 million in sales but ultimately filed for bankruptcy in 1995 following Carlow’s conviction on charges of a $31 million check kiting scheme that garnered widespread media scrutiny.

Formation and expansion

In 1991, entrepreneur Michael P. Carlow, then aged 39 and noted for turning around distressed businesses, purchased the D. L. Clark Company for about $22 million. Founded in 1886 in Pittsburgh, Clark had discontinued its signature Clark Bar under former owner Leaf Candy Company due to its limited distribution outside the local market. The acquisition also included other regional confections and legacy Leaf brands such as Black Cow and Slo Poke.

Later that same year, Carlow secured ownership of the Pittsburgh Brewing Company, maker of Iron City beer and contract brewer for Samuel Adams Boston Lager. This brewery had previously been owned by Australian investor Alan Bond and integrated into G. Heileman Brewing Company before being divested during Bond’s brewing asset liquidation. In early 1992, Carlow acquired Pittsburgh Brewing for $15 million and managed it alongside Clark under his newly created holding firm, Pittsburgh Food & Beverage.

In April 1992, the holding company expanded further by acquiring Wayne Candies of Fort Wayne, Indiana—manufacturer of Bun Bars—from August Storck KG. Additionally, it controlled L. E. Smith Glass Company based in Mount Pleasant, Pennsylvania, which Carlow had purchased earlier in 1986. Ownership of Pittsburgh Food & Beverage was divided between Carlow and his father Frank (each holding 47.5%), with Larry Ousky owning the remaining 5%.

During 1993, Carlow sought to grow the business by bidding on Whitman's Chocolates and G. Heileman Brewing; however, he only succeeded in acquiring City Pride Bakery—the last remaining bakery in Pittsburgh—adding it to the company's assets that year. By this time, Clark had returned to profitability partly through contract production for Sam's American Choice and Ultra SlimFast brands, while Pittsburgh Brewing increased its regional market share to become the ninth largest brewer in the United States.

Although City Pride Bakery closed after incurring $4 million in losses during early 1994, Carlow was widely regarded as a savior of local industry and was celebrated by regional media as a "messianic hero" for his contributions to revitalizing businesses in the area.

Plans announced in late 1994 to purchase Wise Foods from Borden for $87.5 million indicated ambitions for further growth but ultimately led to revelations of financial misconduct that caused Pittsburgh Food & Beverage’s collapse.

Fraud Discovery

Carlow had committed a $6 million non-refundable deposit to acquire brands owned by Borden and secured financing that depended on Clark’s profitability over a six-month period. Nevertheless, Clark encountered operational halts caused by missed supplier payments, prompting financiers to retract their support. Subsequent forensic accounting uncovered that from late 1993 onward, Carlow and Ousky orchestrated a chain of bad check transactions among their enterprises to postpone debt settlements, artificially boost revenues, and conceal asset diversion. Carlow provided Borden with an extra $2 million for a two-month extension and ramped up production at the Clark facility, channeling the surplus output through Karlov International for export to Russia. This escalated the check kiting activity, with $560 million in checks issued against an annual income of $76 million, half of which occurred during efforts to finance the Wise acquisition. The majority of these checks circulated within the same banking institution, generating approximately $500,000 in overdraft fees that were covered by additional bad checks. Co-owners also issued and cashed checks payable to themselves amounting to millions.

Pittsburgh Food & Beverage and its subsidiary Pittsburgh Brewing significantly underreported payroll figures to lower insurance expenses and engaged in tax evasion, resulting in a 30-month prison sentence for one employee. Payments intended for Social Security and credit unions on behalf of Clark employees vanished, while executives allegedly distributed company credit cards to fictitious managers for personal expenditures. The misappropriated funds were used to satisfy Small Business Administration debts from previous ventures and creditors tied to earlier kiting operations.

With the Borden deadline approaching and no available funds, PNC Bank’s routine audit uncovered the fraudulent activities. Carlow was charged with defrauding PNC of $31.3 million. After Carlow’s proposal to repay using another check was refused, PNC notified the FBI and U.S. Attorneys. Borden withdrew from the transaction, retaining Carlow’s $8 million deposit. On February 7, PNC appointed turnaround expert William A. Brandt to manage Pittsburgh Food & Beverage. Brandt encountered immediate difficulties including payroll processing complications as the company’s bookkeeper withheld corporate documentation.

Consequences

Brandt described Clark as a "black hole," cautioning that without a buyer it would cease operations within days. Additionally, Clark owed Leaf North America $3 million from Carlow’s purchase four years prior. On February 17, the plant shut down, terminating most of its 180 employees and maintaining only a minimal staff to dispatch remaining inventory. Leaf promptly initiated foreclosure proceedings, reclaiming trademarks, accounts receivable, inventory, and equipment. After unionized workers obstructed Leaf’s removal efforts, an agreement was reached permitting Leaf to remove inventory but leave equipment in place while pursuing a new buyer. Concurrently, PNC along with smaller creditors filed for Chapter 11 bankruptcy protection for Pittsburgh Food & Beverage.

Bankruptcy Judge Joseph L. Cosetti addressed an objection from Michael and Frank Carlow regarding Brandt’s role as turnaround specialist. Upon reviewing an accounting analysis, Cosetti determined liquidation was unavoidable and replaced Brandt with a trustee charged with overseeing the company’s dissolution.

Subsequent bids resulted in the sale of Clark and Wayne Candies to Pittsburgh entrepreneur James Clister for $3.2 million and $1 million respectively; most proceeds were allocated toward outstanding loans. Wayne Candies’ Fort Wayne facility was closed with operations consolidated at Clark’s O'Hara Township plant. In 1998, Clark Bar America sold Bun Bars rights to Pearson's and former Leaf brands Slo Poke and Brown Cow to Gilliam Candy Company before declaring bankruptcy in 1999; Necco acquired remaining assets at auction. Other subsidiaries of Pittsburgh Food & Beverage were divested: L.E. Smith Glass Co., employing 110 workers, was purchased by American Glass Company for $5.9 million; Keystone Brewing Company buyers assumed $16.8 million in debt along with 325 employees.

In May 1995, PNC initiated a $94 million racketeering suit against Michael and Frank Carlow but dropped it the next year after concluding that bankruptcy forfeitures and federal investigations left limited assets recoverable. Michael Carlow pleaded guilty to charges including embezzlement, conspiracy, and fraud; in August 1996 he received an eight-year prison sentence plus an order to pay $1.4 million in restitution and back taxes. After serving six years, he was convicted again in 2013 for continuing asset diversion schemes during incarceration and sentenced to an additional 35 months.

Frank Carlow faced a 91-count indictment covering pension fraud, mail fraud, tax evasion, and obstruction of justice; he was sentenced in 1998 to 87 months imprisonment but died two years later. Several other employees involved in the fraud scheme also received jail sentences. Fortune Magazine featured this case in its 2009 collection Scandal! Amazing Tales of Scandals that Shocked the World and Shaped Modern Business, emphasizing its significance on corporate governance reforms and legal accountability measures.