Discovery Tours operator Melody Miranda covers her face as she exits a federal courtroom in Tacoma with her attorney Sean Walsh, of AMS Law, Tuesday. Miranda shielded her face as she walked past nearly 30 seniors she owes money to following a meeting in which the unsecured creditors in her U.S. Bankruptcy Court Chapter 7 case learned they will likely never receive repayment.
TACOMA — Most creditors in a Centralia tour operator’s Chapter 7 case will likely never see a dime, according to the U.S. Bankruptcy Court trustee.
Terrence Donahue told nearly 30 senior citizens attending a creditors meeting Tuesday that he is 99 percent sure Discovery Tours will never repay those with unsecured investments and canceled trips.
The court forced the company, which specialized in tours for senior citizens, to shut down last month amid the liquidation bankruptcy proceedings.
Still, the company’s management continues to operate a similar business under a slightly different name.
Discovery Tours LLC is facing state charges for illegally selling securities and accusations of ripping off clients, employees and investors — including many elderly Washington residents.
The company’s operator, Melody Miranda, filed for Chapter 7 bankruptcy July 12 after two previous attempts to reorganize under Chapter 11.
On the same day, Miranda opened a new business, again organizing travel for people over age 50, called Discovery Tours NW LLC with the secretary of state.
Miranda filed the new business, which is currently operating as DTours NW, under a previous name, Melody Barnes, using her residential Rochester address.
Donahue said nothing prevents Miranda from opening the business legally as long as it does not use any of the closed company’s assets — despite Discovery owing money to hundreds of creditors in the Chapter 7 case and about 30 others in her Chapter 13 bankruptcy.
Centralia resident Michelle Gellings said she felt disillusioned to learn the law will allow Miranda to continue preying on seniors.
“I almost broke down in tears to see she’s getting away with stealing all this money,” the 61-year-old said, noting she has traveled five times to court for more than $3,000 Discovery owes her on a canceled trip. “I feel just heartbroken, for not just me, but for all these people.”
Complaints like Gellings’ continue to pile up. The state Attorney General’s Consumer Protection Division has received 84 complaints against Discovery, but officials could not comment on if the company is under investigation.
Miranda declined to speak to The Chronicle but told the court Tuesday the new business is not using any of Discovery Tours’ assets, except the client list, which she claims to have compiled in 1984, before the travel company began operations.
“It’s similar to being a hairstylist,” she said.
Under oath, Miranda said Discovery Tours opened in 2001. But she told The Chronicle and other regional news outlets in December the business had been operating for 15 years, serving more than 27,000 seniors annually.
Now, she said, the new company is leasing buses to continue operating.
Miranda said she is not extending travel credit from canceled Discovery Tours trips or transferring funds between the businesses.
Discovery Tours owns no real estate, according to Miranda’s testimony. She said Discovery had paid $3,000 in monthly rent for the business’s headquarters on Harrison Avenue to her husband and company owner, Fidel Armando Miranda.
Discovery had little to no money remaining in its bank accounts when she filed bankruptcy, Miranda testified.
Discovery’s remaining assets include three buses, a truck wash and some office equipment, which Miranda estimated to have a value of about $1,800.
Donahue said the buses and the truck wash will be liquidated to pay secured creditors. The office equipment, he said, may not be worth selling.
Clay Hartzell, Winlock, has obtained first position in the security interest of one of Discovery’s buses, which, according to the court, has an estimated value of $75,000 to $98,000. Court records confirm Discovery secured a $180,000 loan from Hartzell with the bus.
Donahue said he may pursue a $135,000 offer from Kenmore’s James G Murphy Co. to auction the two remaining buses. The truck wash, he said, is still being assessed.
Bellevue resident Barb Follett said Discovery owes her $1,500 plus $500 interest for a loan that Miranda misrepresented as secured by the buses.
“This whole crap about not paying us back because we’re unsecured is not right,” Follett said.
The 66-year-old has a March 2010 letter from Miranda that assured investors Discovery’s assets exceeded $1 million.
“She’s taking advantage of seniors that can’t do a darn thing about it. That’s what irritates me to the very core,” Follett said. “She’s getting to clean her slate when, I imagine, some of those people are in a world of hurt.”
The state Department of Financial Institutions filed charges in June against Discovery Tours and Melody and Fidel Armando Miranda for violations of the Washington Securities Act and for selling investments such as Follett’s without licensing.
The Mirandas misrepresented the company’s financial information, misreported assets to secure investments, made misleading statements and failed to disclose risks, according to the charging statement.
Discovery’s original bankruptcy petition indicated the company owes more than $900,000 to nearly 250 investors.
Miranda cited an embezzlement by a former employee and a problem with the company’s printer as reasons Discovery could not pay investors or provide customer refunds.
Journal Graphics, a Portland-based commercial printing company, left out an entire month of tours in Discovery’s 2012 brochure, which, she said, caused a significant financial loss.
Miranda told the court she had filed a complaint against Journal Graphics in Oregon but could not remember her attorney’s name in that matter.
Adding to the financial distress, Miranda said, a former employee embezzled $300,000 to $400,000 from the company.
Miranda did report a possible theft to the Lewis County Sheriff's Office in November 2012. But according to the police report, she told the officer she was not sure if money was missing, how much it was, if it had been misplaced or if an employee had made an error. Miranda told the officer that she does not check monthly records or know how to use the company’s bookkeeping system.
Miranda testified the embezzlement investigation is ongoing though the sheriff’s office has closed its case.
Jim Dunkle, an 83-year-old Centralia veteran, said he attended the meeting to seek repayment of $2,267 for a canceled 2012 Discovery trip.
“That embezzlement business is a bunch of bull,” Dunkle said, noting in his Navy days he might have had a few other choice words for Miranda. “The woman is a great con artist.”
If an investigation did reveal an employee embezzlement or if Miranda successfully sues her printer, Donahue said, some creditors could potentially receive compensation through errors and omissions insurance.
“That is the only way I see the unsecured creditors getting paid,” Donahue said.
Still, Donahue said, individuals who have not entered a claim should file with the court.
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Amy Nile: (360) 807-8235
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