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Legal cases of LandAmerica and Circuit City wind down [Richmond Times-Dispatch, Va.]

By Carol Hazard, Richmond Times-Dispatch, Va.
McClatchy-Tribune Information Services

Dec. 17--It's been four years since the Richmond area was dealt a triple blow.

Consumer electronics retailer Circuit City Stores Inc. filed for bankruptcy protection Nov. 10, 2008. A couple of weeks later, title and real estate services giant LandAmerica Financial Group Inc. took the same action.

It was enough to have two Henrico County-based companies go into bankruptcy protection within a few weeks of each other, eventually putting tens of thousands of people out of work -- including about 3,400 in the Richmond area.

But then, Qimonda, a Germany-based chipmaker with its U.S. plant in eastern Henrico, said it would close, leaving an additional 2,390 people without jobs. It, too, would file for bankruptcy protection.

Circuit City couldn't survive, making the decision in January 2009 to shut down all of its nearly 600 U.S. stores. The company, then the nation's No. 2 consumer electronics chain, became the largest retailer ever to fail.

LandAmerica sold off its core title insurance business to a Florida-based company and dismantled the rest of the company.

The legal cases involving the liquidations of Circuit City and LandAmerica are winding down. Big buildings vacated by the giants are filling up again.

Although the region has emerged from the painful closings, it has yet to fully recover.

"The latest employment numbers show Richmond is still trying to recover from the recession that took down Circuit City, LandAmerica and Qimonda," said Christine Chmura of Chmura Economic & Analytics.

Employment in Virginia and eight of its 11 metro areas, including the Richmond area, remains below its previous peak level, she said.

"Virginia lost 201,700 jobs due to the recession and, as of September, has regained the equivalent of 68 percent of that lost employment."

Although Blacksburg, Charlottesville and Northern Virginia have surpassed their previous peak levels of employment, Richmond has regained only 52 percent of its job losses from the recession, she said.

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"It's hard to measure the exact impact the losses from Circuit City, LandAmerica and Qimonda had on the Richmond economy," Chmura said.

Some people who lost their jobs left the region to find work, she said. Others found jobs here or started companies.

"There is no way to know how many of those people are earning as much as they did at their former jobs," Chmura said. "If they are making less money, that impacts the Richmond economy, because they can't spend as much."

The bankruptcies of two of the region's largest employers occurred as the financial markets imploded, the stock market tanked and some of the nation's powerhouses were in serious trouble.

Yet, on another level, their unwindings were coincidental.

The business model at Circuit City wasn't working anymore. The chain had taken a number of missteps and missed opportunities over the years, continuing to lose market share and profit to rival Best Buy and Walmart as consumers changed their buying habits.

LandAmerica fell victim to the financial calamity, not a failing business model.

The company got stung first by the freezing in February 2008 of auction-rate securities, a money market investment once regarded as highly liquid and safe.

LandAmerica used the investment for its 1031 exchange subsidiary, parking people's money who had sold nonresidential investment properties into the accounts.

Auction-rate securities to this day have not recovered.

But depositors of LandAmerica's 1031 exchange company, at long last through the courts, soon will be compensated in full for their investments.

The second fatal hit was to LandAmerica's core business.

The title and real estate services company within four months in the latter part of 2008 lost 70 percent of its revenue, as the real estate bubble burst and banks unilaterally stopped lending.

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(c)2012 the Richmond Times-Dispatch (Richmond, Va.)

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Distributed by MCT Information Services



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