Floorgraphics had to invest $5 million to develop its own instant coupon machines, shopping-cart ad program, and other in-store marketing media, among other costs. Meanwhile, word was filtering back to Floorgraphics' employees from News Corp. counterparts that News Corp. had authorized a $50 million "war chest" to put Floorgraphics out of business, according to court papers that would eventually be filed by Floorgraphics.
Richard and George Rebh girded for a long struggle against News Corp. They attribute their resolve to the influence of their father, a West Point grad and Rhodes scholar who compiled an exemplary military record as the commander of a tactical deception unit during World War II. He closed out his career as a major general in the U.S. Army Corps of Engineers.
Having a father like theirs, George says, instilled a credo: "You don't cower from a fight. If someone is going to bring a fight to you, you don't turn and run. That is in the military DNA."
Given that Richard Rebh has come to speak scathingly of News Corp. as the Evil Empire, it's noteworthy that Floorgraphics struck the first direct blow in the two companies' rivalry.
With the help of a headhunter, in March 2000 Floorgraphics hired Steven Marquis, who had been a News America vice president in charge of $45 million worth of contracts with retailers. As a Floorgraphics vice president, Marquis was to oversee contract negotiations with retailers and create in-store marketing programs that matched News America's.
From News America Marquis brought not only his network of contacts but also a box full of store lists and other materials copied from the company's records. Alleging the unlawful "use and disclosure" of confidential business information, News America sued Marquis and Floorgraphics in a Connecticut state court. But in response to a warning from News Corp., Floorgraphics inserted a clause in Marquis's employment contract saying that he was not to pass along any such information to his new employer. And when Marquis heard that News Corp. might sue, he disposed of the copied materials without showing them to Floorgraphics, a judge found. The judge decided the case in favor of Floorgraphics and Marquis, saying that News Corp. had not proved that it had suffered any damage.
There was soon another round of employees jumping ship, but in the opposite direction. In July 2000, Gary Henderson, a Floorgraphics senior vice president in charge of sales to advertisers, defected to News Corp. as a consultant. Then Rebh sued Henderson, claiming he was making "unlawful financial demands" on Floorgraphics and threatening to divulge its confidential information.
For his part, Henderson accused Floorgraphics of not granting him stock options that he said were promised to him. The case settled out of court, says Rebh, with Henderson returning a Floorgraphics employee directory to the company and each side paying the other $1. (Henderson, too, declined to comment.)
Henderson's defection would have had less of an impact if the five sales representatives whom he supervised at Floorgraphics had not followed suit. "Henderson orchestrated a conference call among employees, where he told them that he and News Corp. were going to destroy [Floorgraphics] and they had only one option to preserve their financial well-being, which was to leave [Floorgraphics] and start working for News Corp.," Rebh wrote in the Floorgraphics court filing.
On October 19, 2000, came what one Floorgraphics executive calls the "Thursday massacre." Within 73 minutes that morning, four of the company's leading salespeople sent e-mails tendering their resignations. A fifth sales representative departed for News Corp. a few weeks later. The five employees together accounted for more than half of Floorgraphics' sales.
News Corp. offered four of the five employees jobs paying from $250,000 to $275,000 a year and guaranteed for one year--roughly double what others in comparable positions at News Corp. were earning, according to one of News America's former senior sales executives. The five defectors, along with Henderson, would eventually constitute News Corp.'s entire floor-ad sales staff.
Henderson pursued at least five additional Floorgraphics employees, recruiting them to work at News Corp., according to the court papers. Mike Devlin, a Floorgraphics senior vice president, recalls a voicemail message from Henderson saying, "We've got some great opportunities over here. You're well thought of. You can make a lot of money."
A series of press releases touting News Corp.'s achievements soon began to arrive by mail at Floorgraphics employees' home addresses. One press release, dispatched in July 2001, announced a further blow: Kmart had jumped ship to sign an exclusive floor-ad contract with News Corp.
To head off further defections, the Rebhs and Potok talked individually with each of the company's then 55 employees and demanded their loyalty. "They really wanted to understand where my head was at," recalls Bob Kamen of his post-massacre meeting with the Rebhs. Kamen says that he reassured the brothers that he had a high regard for both of them and the company and was devoted to his job. "It was emotional," he adds. "I said, 'I'm here for the long run. If this business closes, I'm gone. If the business is here for 10 years, I'm there with you."
