+1 @yesitsme can you elaborate a bit more about the operation? Was the retail store itself profitable, or was it just a front for other businesses like Amazon etc?
The store was profitable enough to pay a decent profit to the owners. A few good management decisions had been taken about 3 - 4 years ago to get it there. A small business, friendly service, part of the community, run by great guys.
Now one employee at the store began selling stuff online from the basement. They were very successful. They expanded - to a warehouse in Lakewood -, hired guys - working "virtually" (not in Lakewood) - to manage the Amazon accounts (buyers basically), and took investors - (or people they believed had access to investors) - money to fund purchases.
A lot, if not most of products were giving amazing returns. However, a lot sat in inventory and wouldn't move. Some sold for cost, or even a bit less. Also, no star product would last a decent cycle. A certain anonymous vendor came onto the listings of a great line and basically wiped away the micro-industry. The competition on Amazon is so fierce it's scary. So the profits were being used to run operations, while the warehouse became overloaded and inventory was ignored - especially on the financial statements.
Everyone involved was promised "commissions", basically a waterfall from the "profits". It was my job to calculate what the profits per Amazon account was. However, investors were promised a 10% ROE, plus a percentage of the profits (obviously the owners had no idea how to differentiate between a "loan" and an "investment"). The account manager got decent wages (paid by Sterling), and 10% of the profits. Yet inventory was never accounted for. So a buyer could spend $200K on various goods, and turn over $100K of it for $150K. Now the $50K profit got divvied up, but the $100K that didn't sell (and in my opinion, never will) sat. The right place for this would be a $100K write-off, but the only books it would go on were Sterling's. The buyers and investors were doing great! The buyers got paid quarterly, the investors got great Excel sheets, and Sterling was running out of money.
Eventually, such an operation will run out of cash. Also, towards the end of my tenure, the owners began buying up different businesses they felt they can turn around. They began a affiliate trucking business which was very successful. In order to pay-where-they-needed, they used money from wherever-there-was that day. Investors who understood they were investing in account X, managed by Mr. X, focusing on product X, which was a sound idea, found their money being "inter-company-loaned" to whoever needed money that day. There was no Controller or CFO, the owners just "Churned Water".
Now I have no idea how the CC thing began. It was definitely not something that would of crossed the owners minds during my stint there. I guess the situation got really desperate. Again, they were, and are, great honest Erliche guys. They gave Tzedakah, kept people on payroll because they were scared to take way Parnassah from a Yid, and kept their work-space to the highest Tznius standards. They took Mamesh nothing, even when one made Chasuna. They legitimately believed they knew what they were doing, and wouldn't listen to whoever said otherwise. This was, in my opinion, their only fault.