Archway Cookies began in 1936 in a garage in Battle Creek, Michigan. Harold and Ruth Swanson founded it as Swanson Home Style Cookies, selling oatmeal cookies and donuts. In the 1940s, as World War II caused shortages of ingredients, the couple decided to discontinue donuts and focus instead on just cookies, expanding the cookie line to 15 varieties. Franchises popped up in the late 1940s, and in 1954, the company changed its name to Archway Cookies (to avoid confusion with the Swanson Company of frozen dinner fame). The decades that followed saw great cookie success, even as times and tastes evolved and company ownership changed.
In April of 2008, Archway's director of finance discovered discrepancies in the accounting, according to The New York Times. For the previous six months, Keith Roberts had been reviewing documents and collecting information to assist with the company's first formal audit since 2004. What he was seeing didn't line up with reality — the financial statements were recording more sales than had actually happened. Roberts brought his concerns to leadership but was allegedly dismissed, which eventually led to his decision to resign. However, this discovery of fraudulent accounting would spark a series of investigations and lawsuits and, in October of that year, prompt the bakery's closure and a filing of bankruptcy.
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That's The Way The Cookie Crumbles
The fraud finding was the ignition for Archway's downfall, in many ways, but several employees and sellers said that the fuel for the fire had been growing long before that. Archway, alongside its sister company Mother's, were no longer family-owned and instead were bought in succession by companies that often made poor business decisions. Private equity firm Catterton Partners bought the company in 2005, and although it had a good business reputation, the troubles didn't stop there. Sellers alleged that Archway was pushing far more cookies on them than they could sell or sending cookies that weren't properly packaged. There were sudden layoffs, and some employees said they believed recipes and ingredients were changed and quality control processes altered. Sales were decreasing, and Archway was in financial crisis. Keith Roberts told The New York Times that the auditors were signaling concern, which could lead to difficulties in restructuring debt and maintaining lines of credit.
Even doctoring financial documents couldn't save the company, though — after the closure and bankruptcy filing, former employees filed a class action lawsuit, stating that Archway had not provided the legally required notice of termination (the lawsuit was settled for $4 million). Then in early 2009, Archway, Catterton, Archway's management firm Insight Group Holdings, and some board members, executives, and managers were sued on 16 counts of fraud. The lawsuit alleged that Archway had been providing inaccurate sales numbers to its creditors for more than a year.