THE SCENE THAT MORNING AT BILL Rodgers & Co.'s headquarters in Weymouth, Mass., resembled an outtake from an episode of "The Untouchables." Ten minutes after Cormier's warning call to Yahn, the Bank of Boston asset-recovery team pulled up. Company employees were just drifting into work. The atmosphere quickly went from frosty to confrontational. Yahn asked to see a court order and, assured one was not needed (in fact, it was not), was informed that his house might be seized as well. Christine Scanlon, BRC's customer-service manager, got into a shouting match with one bank representative when she tried to remove some personal effects from her desk. Security guards were posted and padlocks installed. Bank representatives then disappeared into the warehouse to count inventory.
Even then, the principals tried hard not to panic. That they owed the Bank of Boston $1.3 million was indisputable. Still, as best they could calculate, finished-goods inventory totalled $660,000 at cost, and gross receivables came to $920,000. Furthermore, all of the current inventory (roughly 80% of the total) was on open order -- the retailers still wanted it. Yahn and Rodgers talked things over and could see "no way" that liquidation would leave them with a deficit for which they would be personally liable. "I knew things were complicated," says Rodgers, "but I did not think, 'Uh oh, there goes my house."
How complicated things really were soon became painfully apparent. Yahn summarized the chronology of events in a letter to the Bank of Boston dated January 20, 1988.
"First Bill, myself, and [Cormier] wanted to start a successor company, which would buy the current inventory items and arrange for the disposition of [other] items. We felt a successor company would also be very helpful in receivables collection. Jack refused to sell part of the inventory. He said he did not want it 'cherry-picked.' The bank then obtained bids from local merchants, with the high bid being 50%, or $330,000. Jack felt this amount was totally inadequate. Bill and I then offered to sell the inventory to a few selected customers. We informed Jack that if it had to be done quickly (within 2 weeks), $475,000 could be realized. Jack replied that much more could be realized with a plan he had worked out with MVP Sports [a sporting-goods chain] -- the inventory was to be sold to the public at the Northeast Trade Center.
"I told Jack this was not an economically viable plan because the quantities were too large. The amount was more than we had sold in all of New England in a year. It was not reasonable to sell it all in one location over 4 days. . . ."
Reasonable or not, the sale proceeded as Bradley had planned. Four days later, the gross profits came to $235,000, minus advertising costs and other fees totaling $110,000. The net was thus roughly $125,000 -- significantly below the firm outside bid for the inventory, and far off the $475,000 promised by Yahn and Cormier.
"Bill and I then asked if we could at least sell what was left over after the MVP sale," Yahn's letter continued. "When asked what I thought could be realized, [I replied] $120,000 to $200,000, depending on the condition. Only one problem -- I was repeatedly told that I could not see the goods in order to make a specific determination. Besides, [Bradley told me] if my maximum was $200,000, it didn't matter, because the bank expected more. [The remaining inventory] was still [worth] $450,000 at cost, and the bank throught that something close to the original bid (50? on the dollar) could be obtained at auction. I said I thought Jack was dreaming and would be lucky to get $50,000 for goods that had already been through a sale. The result was $47,000, less expenses, but that included fixed assets.
"So the final tally was $155,000 for all finished goods, and Bill and I are expected to make up the $320,000 difference. . . . We expect to pay for our mistakes. It is paying for the bank's mistakes that is brutal."
Yahn's list of complaints did not end there, either. "After the auction," he continued, "I asked Jack if he wanted me to remove the records from the company offices. He replied that he was only obligated to give up the payroll records and intended to put the rest in storage. Despite several calls from the landlord, the records were never picked up and were eventually thrown out. Obviously the bank did not want the records; they just did not want us to have them. [Those records] may have been helpful for future tax filings. . . .
"I don't know the total expenses at the moment, because I have not received a loan statement in over six months. The worst example, however, was being required to pay $2,400 per week for 24-hour-a-day security service -- this went on for about 12 weeks. For nine years we had just locked the door . . . and our insurance premiums were only about $250 a week. What was even worse, the first security company had to be fired because they stole two personal computers and who knows what else. The charges for the service were promptly made to our account, but I have never seen any credit for the computers.
"Obviously," Yahn concluded, "this course of events has left [Rodgers and me] very frustrated. . . . If we were allowed to cooperate with the bank in the liquidation of the assets, there would have been at least $400,000 less for us to pay. The whole matter would have been over by now. Instead, interest and expenses continue to pile on. It appears that the bank or Jack or both wanted more than their money. They wanted as much as possible to come from [us]."
