CorpLogoWare's Levine Details Financial Woes

http://www.lenticularpromo.com/ received Breaking News Alert from the ASI. Here is the copy of it.

CorpLogoWare's Levine Details Financial Woes; Vows to Leave Company Once Deal Is InkedAs first reported in a Breaking News alert on Wednesday, Top 40 distributor CorpLogoWare (asi/168827) has been dealing with major financial problems over the past few months. As of this morning, the company reportedly was working to close a deal to be acquired by another industry firm, as employees are leaving the distributor organization and suppliers are reporting debts that reach into the millions.
Jack Levine, the president and CEO of CorpLogoWare, who says he would no longer be with the company after the close of the deal being negotiated, now admits to growing the company too fast and taking on too much overhead. "I pressed too far too fast, and I'm to blame for that," he told Counselor in an exclusive interview over the weekend. "We weren't operating efficiently, and I stressed the financial side of the business way too much."
Levine says that a few efforts to grow his company actually ended up hurting. First, he points to the overly aggressive hiring of account executives and being too free with cash advances on commissions in an effort to get reps ramped up quickly. As of last week, before some salespeople began defecting, the company had 130 account executives, and Levine says, "We probably went through double that amount before we found the ones we really wanted. It was a very expensive undertaking."
Other efforts that hurt the financial side of CorpLogoWare, Levine says, included some strategic errors with some acquisitions as well as large investments in corporate programs that took too long to become profitable. "It just became too much financial stress," says Levine, who claims to have invested more than $3 million of his own money into the company.
Meanwhile, Counselor has learned that this isn't the first time that Levine has headed up a company with financial troubles. After filing for personal bankruptcy in 1987, Levine became president of a public company named Ciro. He was president of the fashion jewelry company in the early 1990s, when the SEC accused the company's management of filing false quarterly and annual reports. The SEC charged at the time that Levine used phony franchise fees and fictitious sales reports to turn losses into profits. Court papers charge that Ciro reported a profit of $1.2 million in 1991, when the company actually lost $2.4 million. Ultimately, Levine signed a settlement with the SEC in which he paid a $50,000 fine, agreed to never become a director or officer of a public company, but did not admit or deny guilt of the charges.
"Along with the owner of the company, I did not act honorably," Levine says. "He put money into the company as licensing fees to cover up the fact that the business was not doing well, and I as president helped him do it."
Levine left Ciro in April 1993 and started work on his next venture, in which he was a founder of online lending company Mortgage.com. When the company had an IPO in 1999, Levine's status with the firm was changed to "shadow director," as the SEC had barred him from being an officer of a public company. Mortgage.com ended up going out of business in late 2000, and the company's creditors ultimately won a court settlement from Mortgage.com for $4.68 million. Of that, Levine was ordered to pay a share of $400,000, as creditors charged that he and others received money from an investor as a stock buyout when the money was meant for Mortgage.com operations.
Levine says there was no truth to the accusations in that court case. "We operated Mortgage.com in a totally ethical and honest fashion," he says, "even though it fell victim to the dot-com bust."
And now, he has overseen financial issues at CorpLogoWare that he attributes to his own mismanagement. "I wanted CorpLogoWare to be as successful as it should have been if I had been managing it well," he says. "Now, the impact of what I did to ensure that has resulted in the exact opposite of what I was trying to accomplish. And I hurt the very people I was trying to protect. I take full responsibility for everything that went wrong with CorpLogoWare."
And what went wrong has led to suppliers saying they're left holding bills totaling in the millions of dollars. "We've been going back and forth with CorpLogoWare for at least four months, having been assured that they would pay us," says the principal of one Top 40 supplier, who reports being owed "in the neighborhood of six-figures. At this point, I'd be surprised to get any of it back."
Meanwhile, employees and salespeople of the company are defecting, saying that the company's financial situation has made it impossible to do their jobs and fulfill orders for clients. One regional manager, who is still with the company, says that the financial problems have been going on for about six months, and that the company has been on credit hold with suppliers for a while. "They haven't told us much throughout this whole mess," says the salesperson. "They said that the bank has frozen our funds. I just don't understand where all the money has gone. We bring in a lot of revenue at good margins, but then we don't have any money to pay vendors? I'm devastated by this. Somebody I trusted ended up screwing me."
Other salespeople at the company have already begun to find alternate places of employment. Counselor has learned that at least 25 out of CorpLogoWare's top account executives have signed up with Proforma (asi/300094) within the past couple of weeks.
CorpLogoWare, which Levine founded in 2002, ranks number 32 on Counselor's Top 40, with $42 million in reported ad specialty sales in 2006. Levine was also honored by Counselor magazine last year as its Distributor Entrepreneur of the Year. - Andy Cohen