By Jef With One F
By Rocks Off
By Chris Lane
By Angelica Leicht
By Corey Deiterman
By Angelica Leicht
By Corey Deiterman
One of the things that most vexed Jones, according to sources, was the company's total inability to tighten its belt, a phenomenon that would follow it to the grave. Even as BCI was holding its creditors at bay, employees continued their wayward spending, taking home laptops, charging lunches at fancy restaurants and gentlemen's clubs and running up $8,000 cell-phone bills.
Despite the layoffs, which had trimmed the workforce from its peak of about 500, the payroll remained bloated. Edwards's wife, for example, kept her job as special events coordinator, even though what few special events the company could afford were organized by the administrative staff. And until he was finally let go last September, public-relations director Long whiled away the days maintaining his contacts in the philanthropic community by telephone while grant proposals piled up on his desk. "I wasn't doing anything," Long says. "Frankly, I probably would have laid myself off a year and a half earlier."
Those who had real jobs were getting wages that many considered off the scale, though Edwards calls them "high end of market." Sales managers with little experience, for example, were clearing $80,000 or $90,000. "We were all making way too much money for what we were doing," says Susie Taylor.
As usual, however, the principals held the first-class tickets on the gravy train. Edwards continued to cut himself bonus checks, charter limousines and use the airplanes indiscriminately. In one instance, he flew an attorney from Washington to Sacramento for a hearing before the Public Utilities Commission, then flew her back the same day. In another, he jetted to New Orleans with three others on a Saturday -- for lunch -- and wrote it off as a business expense. "He wouldn't get rid of the jets," says Taylor. "He didn't want to give them up."
Jim Evans may have been loath to give up his salary and favorite perks as well, but Edwards offered him the proverbial deal he couldn't refuse: He'd buy Evans's stock for $500,000, almost $1.70 a share (compared to the original purchase price of three-tenths of a cent). Plus, BCI would give the attorney a fat consulting contract for doing essentially nothing ("We just wanted to make sure he would be available to answer some questions," says Edwards) and pay his personal secretary's salary for several months even though she would do no work for the company.
Not a bad haul, considering that the company was virtually insolvent, and considering that Evans himself was allegedly concerned enough about BCI's fiscal position to angle for bankruptcy. Evans declined to discuss the details, citing attorney-client privilege as well as a confidentiality agreement that was part of the closeout package.
And how did Edwards pull together the half-million? "I was 'bonused' [by] the company," he says, almost sheepishly. "Some of that [paid for the stock]."
Last summer, no-show Mike Driscoll went on full disability and was at last removed from BCI's personnel rolls. But in another iffy stock transaction, the company paid for his full-time, private nursing care -- $18,000 or more monthly for at least two years, according to one knowledgeable source -- in exchange for most of his shares, worthless though they may have been.
Nevertheless, midway through 1998 Edwards was ready to declare a new dawn. Consulting with the remnants of his management team, he decided to ditch the sweepstakes promotion and try a new marketing approach: The sales force would be dispatched to the frontier with ten-minute calling cards, which would be given away as an incentive for enlisting with BCI. In June he gathered the regional sales managers from around the nation and delivered the news with his usual optimistic spin.
At least a few of the crew emerged from the meeting shaking their heads. A completely new direction, with no test marketing and little guidance, made zero sense. "There were too many gray areas in the thing," says Stan Jaffee, who tendered his resignation several weeks later, ending his three-year tenure with BCI. "I saw the handwriting on the wall, and I bailed out."
As the sales reps fanned out with their calling cards, Edwards was sweating. Regulators were hammering him: a $95,000 settlement in Arizona with suffocating restrictions on future dealings, a $70,000 fine and order to reimburse 700 customers in Texas, an investigation in Wisconsin, complaints in Colorado. A year after it closed the lid on new recruits, California ordered BCI to forfeit its existing customers and cough up $702,000 in repayments.
Worse, the IRS was about to shut BCI down for failing to pay $1.5 million in overdue taxes. To forestall the padlock, Edwards struck a deal with RFC Capital Corp., which specializes in loaning money to small telecommunications companies. RFC would float $1.5 million to pay off the feds as well as front additional cash to keep BCI breathing. Edwards added the note to the stack, which included a loan for several million that he had personally guaranteed to LCI, a long-distance carrier.
Early returns from the field looked promising. "Late July and August, the new marketing seemed to be working, and the projected revenue was performing perfectly." Edwards says. "We were right on track." The first ten days of September, he says, proved just as propitious.