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BURLINGTON — Koffee Kup has filed an emergency motion with the Chittenden Superior Court, asking the court to order Key Bank and the receiver of the assets of Koffee Kup to immediately pay nearly $800,000 in paid time off to “numerous former employees” of the now-shuttered bakery.

Last weekend, the Reformer received information that employees of Vermont Bread Company, a subsidiary of Koffee Kup, had money taken out of their checking accounts after they received their final paychecks from the company that abruptly closed on April 26.

“For the company to deposit the funds and then remove them from employee’s accounts the next day is theft and the Attorney General needs to look into this,” an employee wrote in an email to the Reformer. The employee asked that their name be withheld to protect their ability to find a similar job. “People are now seriously overdrawn in their accounts because they paid bills with the money.”

On April 1, American Industrial Acquisition Corp. purchased a majority share in Koffee Kup, which included the bakery in Burlington, Vermont Bread in Brattleboro, and Superior Bakery in North Grosvenor Dale, Conn. Twenty-five days later, AIAC closed the bakeries with no notice to employees.

The day after the closure, Jeff Sands, of Dorset Partners and the senior adviser in North America for AIAC, told the Reformer: “Four years of losses are the culprit. Everyone wants a villain storyline, but there’s just not one there. This one just wasn’t salvageable.”

In another confidential email to the Reformer, a former Vermont Bread employee noted he and others were facing “a nightmare” due to “the criminals at AIAC and the heinous disregard by Key Bank for employees who are now trying to rectify overdrafts ... none of us could even fathom that once paid, AIAC could go back and take our money from us. ... as they play political football with our lives, many of us are dealing with the shambles they have left us in.”

Sands did not respond to a request for comment.

On Tuesday, a representative of the receiver of Koffee Kup’s assets published a news release stating: “No funds were removed from any employee accounts.”

While the payroll company notified direct deposit employees that their payroll deposits would include both wages and paid time off, and issued paychecks that also included these amounts, wrote Justin Heller, an attorney for the receiver, in the news release, this was a mistake.

Heller wrote that the balances were supposed to have been paid out of a $2.5 million support package from AIAC. Heller wrote that AIAC reneged on the agreement to provide the funds, and acknowledged the result was the first payroll disbursement was rescinded and replaced with an adjusted disbursement.

“AIAC has refused to fund these amounts, and is now attempting to foist that obligation onto the Receiver,” wrote Heller. “However, the Receiver has no obligation to fund the Company’s pre-receivership obligations.”

This resulted in overdrafts in accounts of many of the employees “because the initial payroll notices and paychecks that included PTO were issued in error and had, in fact, not been funded, and employees received less in their accounts or in their paychecks than they were initially and incorrectly told by the Company would be paid,” wrote Heller.

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Heller did not respond to a request for comment.

However, wrote Alexandra Edelman, of Primmer Piper Eggleston & Cramer, in Burlington, on behalf of “Koffee Kup Entities,” that Key Bank and the receiver are obligated by a stipulated order filed on May 3 “to immediately satisfy an urgent final payroll obligation of accrued paid time off in the amount of $797,568.17 ...”

There is no mention of AIAC in the emergency motion filed by Edelman.

“Instead of satisfying this obligation ... the Receiver is improperly holding back the funds, at the Bank’s explicit direction, for the Bank’s exclusive use,” wrote Edelman in the motion.

On May 4, attorneys for Koffee Kup notified Heller of an obligation to pay final payroll in the amount of $1,003,819.45, consisting of final April wages and paid time off.

“Counsel for the Koffee Kup Entities implored the Receiver, as the one in exclusive control of all company funds, to pay the employees what was owed to them ...” wrote Edelman.

On May 5, attorneys for Key Bank stated the receiver was appointed only to protect the bank’s collateral, that the company’s accounts “are now the Bank’s and the Bank will not make the final payroll payment,” wrote Edelman.

During a phone call on May 7, Key Bank attorneys told Koffee Kup attorneys the bank decided “in an empathetic attempt” not to object to the receiver funding payment of the final wages in the amount of $206,251.28.

However, wrote Edelman, absent was an explanation “as to why the Bank’s empathy did not extend to the PTO obligation ... It appears that this empathetic attempt involved deducting money from employee bank accounts.”

Edelman wrote that she learned from local news that about 80 percent of the money that had been placed in employees accounts several days prior was subsequently deducted by Key Bank.

The receiver is in possession of Koffee Kup’s assets, including payments for products supplied to stores prior to Koffee Kup’s closure, wrote Edeleman, so the receiver should have the funds necessary to comply with the May 3 order.

Bob Audette can be contacted at raudette@reformer.com.