Ed Beagan, his face flushed with anger, grinds out one cigarette, then lights another. "What's the difference," he demands to know, "between what the Mafia does and what Ericsson did?"

Ericsson is Telefonaktiebolaget L M Ericsson, the $19.8-billion-a-year Swedish telecommunications behemoth. Beagan is Edward M. Beagan, the 42-year-old former chairman and president of the now-defunct Teltronics Services Inc., a New York City-based distributor of Ericsson-made telephone equipment.

And what Ericsson did, Beagan claims, is use fraud, misrepresentation, and unfair business practices to push Teltronics into bankruptcy. The Swedish company, Beagan claims, wanted to acquire Teltronics's assets at fire-sale prices. Ericsson denies the charge.

Who is right? That is a question the courts ultimately will decide. Beagan has filed a $300-million lawsuit against Ericsson in the United States District Court for the Eastern District of New York. But one thing is clear: No one came out with clean hands.

Regardless of the outcome of Beagan's lawsuit, the Teltronics story is a compelling example of what can happen when a chief executive officer -- and his staff -- concentrate almost exclusively on sales growth, and what can happen when one company's health becomes dependent upon the actions and goodwill of another company.

It is a story of grand ambitions and the clash of forceful personalities. It is a story aboutgrowth.

Back in the 1960s, Ed Beagan didn't know much about the telephone business. A tall, husky Irishman reared in the Flatbush section of Brooklyn, Beagan had earned a bachelor's degree in history. His work experience had been limited to the operations division of Chase Manhattan Bank and to programming computers for RE-Con Systems Corp., a nationwide employee placement firm.

Then, in 1968, came Carterfone. In the so-called Carterfone Decision, the U.S. Supreme Court ruled that telephones and other devices manufactured by companies other than The Western Electric Co. could be hooked up or "interconnected" with Bell System lines. The decision paved the way for dozens of small companies to break into the telephone business as distributors of high-priced switchboards, or private automatic branch exchanges (PABXs).

Among the first of these distributors was San Francisco's Arcata Communications. By 1970, Arcata was a major player in the interconnect business, installing systems built by L M Ericsson, among others.

Ed Beagan found his calling when he signed on with Arcata in 1971, and he soon became one of the stars of the company's sales force. "This was my first marketing position," he recalls with relish, "and here I was going head-to-head with AT&T."

After just a year with Arcata, Beagan, brash 29-year-old, struck out on his own, setting up shop in a Manhattan garage to sell PABXs. The customers he called on were delighted to find alternatives to the higher-priced Bell equipment, and sales exploded -- from $30,000 in 1971 to $1.2 million in 1972. In 1973, the year Teltronics went public, revenues increased to $1.5 million.

But to support such growth, Teltronics needed cash. It paid out hundreds of thousands of dollars for new switchboards, installed them, then waited for customers to make their lease or lump-sum payments. The more orders the company filled, the worse the situation became. It was a catch-22.

Ericsson, meanwhile, was having just the opposite problem: not enough sales. The Swedish corporation's U.S. sales of switchboards had remained constant or increased slightly, but its share of the American PABX market had plunged from 37.9% in 1971 to 8.6% in 1974. In addition, a competing telephone manufacturer, Stromberg-Carlson, had acquired Arcata, which later stopped selling Ericsson-made equipment.

At the time, Ericsson's U.S. subsidiary, L M Ericsson Telecommunications Inc., was headed by Sigge Malmstrom, a trim, gray-headed Swede with a deep voice and impeccable manners. He headed the company's drive to shore up its sagging American operations and, as part of that campaign, signed on a hot new distributor: Ed Beagan.

Beagan stopped doing business with most other manufacturers and hitched his company to Ericsson's coattails -- and with good reason. The Swedish Goliath agreed to provide the cash tiny Teltronics needed to grow. Ericsson would guarantee a series of bank loans to help the small company pay for the telephone equipment it purchased from the Swedish conglomerate. At Beagan's suggestion, Teltronics pledged to buy a specified amount of Swedish-made equipment for every dollar it was lent -- at no less than a one-to-one rate. Teltronics would collateralize the bank loans with equipment leases, plus provide the Swedish corporation with annual budgets and monthly financial reports.

Beagan saw the arrangement as an I-scratch-your-back-you-scratch-mine proposition. But there was more to it. What Beagan had done, in effect, was to give Ericsson the power to destroy Teltronics.

By the end of 1975, Teltronics had become one of the largest American distributors of Ericsson PABXs. But it had borrowed $1.7 million from one of the Swedish manufacturer's bankers, Citibank, N.A., in New York.

Beagan remained unperturbed by his company's swelling debt. The economy was recovering from the recession; Teltronics's 1975 sales totaled over $4 million, nearly double the previous year's revenues; and Beagan planned to chalk up a similar increase in 1976. He beefed up the sales staff, hiring, among others, Jack Dawson, a portly high school dropout.

Beagan found Dawson to be an affable and capable salesman, and Dawson enjoyed working for Teltronics. No wonder. Beagan awarded cars in sales contests, entertained lavishly, and was liberal with his sales staff's expense accounts. "My impression of Ed Beagan, even to this day, is that he's dynamic," says Dawson. "A lot of people would follow him to hell."

A central part of Beagan's approach to sales management, though, was a commitment to energetic training programs, such as seminars in the Silva Mind Control method, which some employees found irksome. One example was the regular Wednesday night meeting. Salespeople would assemble once a week, and Beagan would "pump them up" about Teltronics. Attendance was mandatory.

"You'd want to run away," Dawson remembers. "But he'd get up there. He'd talk and talk. He was a tough man to work for." And he could be impulsive, too. "At one of those Wednesday night meetings," Dawson says, "I saw a person yawn when Beagan had the floor. He fired him on the spot." The salesman may have been on his way out, but the sales staff was startled by Beagan's precipitous public firing of him.

Neither Dawson nor anyone else at Teltronics ever argued with Beagan's methods. And why should they? His tactics worked. In 1976, the company's sales climbed to about $5.2 million, up 25% from the previous year.

But Teltronics was now hooked in an endless cycle of loans and purchase requirements. Even so, when Beagan heard what had happened to Ericsson's Miami distributors -- they had been taken over, allegedly because they had fallen behind on their trade payments to the Swedish manufacturer -- he shrugged off the news. Beagan assumed he had nothing to worry about because he had an influential friend in Sigge Malmstrom, the head of L M Ericsson Telecommunications.

The two men were, according to the people who worked for them, like father and son. "They were so close," Dawson recalls, "that when Sigge had a major operation and they didn't expect him to survive, there were only two people outside of the family who stayed waiting for Sigge to come out of the operating room. That was Ed Lavin [Teltronics's sales manager] and Ed Beagan. I could never imagine Sigge doing anything to Ed Beagan."

Neither could Beagan. Besides, Teltronics was growing quickly. By 1977 it had expanded its market area from New York City to all of Long Island, with Jack Dawson in charge of the new territory.

Ericsson, presumably as a gesture of goodwill, offered Dawson free office space, although that turned out to be a table in the Swedish corporation's cafeteria. "Still, it was a start," Dawson says.

At Ericsson, however, Dawson began to hear unsettling rumors that Teltronics wasn't paying its bills. As Teltronics's man, Dawson had to field questions from Ericsson executives: Why isn't Teltronics selling more PABXs on Long Island? Why aren't sales doubling?

At the time, Teltronics owed Citibank a whopping $3.7 million, and it had asked Ericsson to back a loan for an additional $1.9 million. But Ericsson took its time in responding to this request. The Swedish company had begun to grow concerned about the health of its key U.S. distributor at a time when Ericsson, facing stiff competition from a new generation of electronic PABXs, could ill afford a financially weak sales operation. Ericsson's sales to Teltronics accounted for 63% of its total U.S. PABX orders in the first half of 1977. Jorgen Lind, an Ericsson internal auditor in Stockholm, was dispatched to New York in August to "form a general opinion" of Teltronics and "investigate the appropriateness" of Ericsson's role as a guarantor of additional bank loans.

His report to Ericsson management praised Teltronics's marketing organization, but was sharply critical of Beagan as a businessman. "He seems . . . to be [a man] possessed by the 'American dream' to succeed and to do it quickly," Lind wrote. "There is a risk present in that he, in order to achieve this goal, will throw himself into quite risky affairs and expand much too quickly."

Teltronics, Lind concluded, needed $2.8 million in additional financing in the coming year. Lind quoted Beagan as saying that if this money was not provided through Ericsson-backed loans, Teltronics's alternatives were to undertake a public stock offering or to borrow from Ericsson's competitors (which would then require that Teltronics market their PABXs).

Should Ericsson consider an equity investment in Teltronics? Lind asked. He arrived at no conclusions, but the issue of an equity investment by Ericsson began to haunt the companies' relationship.

Two months after Lind filed his report, Teltronics borrowed $2.8 million from Nordic American Banking Corp., a subsidiary of a Swedish bank that provided banking services to Ericsson, with the amount to be drawn in several installments. But several provisions were added to the agreement between the bank and Teltronics. Among them: Teltronics must buy switching equipment from Ericsson at not less than 175% the amount of guaranteed loans. Beagan denies it, but an Ericsson lawyer says that Beagan himself had suggested a higher percentage. "He hoped to induce us to guarantee the additional loans," says Robinson B. Lacy, a lawyer at Sullivan & Cromwell, the New York City firm representing Ericsson.

In February, Beagan sent off his 1978 budget to Ericsson, as required. In it, he estimated revenues of $19.3 million (nearly double 1977 revenues), and called for a hefty $2.7 million in new loans. It was clear that Teltronics's financial situation had begun to deteriorate.

So had its relationship with Ericsson. One reason for the rift, Beagan and Dawson charge, was Teltronics's move into the Massachusetts market. The action, taken without prior consultation with its Swedish supplier, brought the small company into head-to-head competition with Ericsson's Boston operation (Ericsson New England) and caused Teltronics to run up another $1.7 million in bank loans.

Malmstrom, Beagan claims, was infuriated by Teltronics's expansion into Ericsson New England's territory, and ordered Beagan to close Teltronics's Boston office. Although Ericsson denies it, Beagan says that he and Malmstrom exchanged verbal barbs and that their friendship collapsed shortly thereafter.

Among the first people to feel the impact of the split was Dawson. He began to be treated at Ericsson headquarters like an unwanted guest. "I remember holding a sales meeting on a Tuesday morning at my table," he recalls. "Five or six people were smoking, and there were ashes on the table. I had a secretary come up to me and say, 'You have to clean [the ashes] off the table.' I wound up cleaning the table, just to keep peace in the family."

Ericsson was more concerned about cleaning up Teltronics's balance sheet. Complaining about Teltronics's slowness in paying for the equipment it ordered, Ericsson pressed for tighter controls over the small company's finances. In March, Ericsson got a lock-box agreement that it had been seeking for Teltronics's lease customers. It would give Ericsson control of Teltronics's lease payment cash flow if the smaller company defaulted on its Ericsson-backed loans.

The lock-box arrangement annoyed Beagan, as did Ericsson's rejection of his request for backing of additional loans. The Swedish company, Beagan was told, wanted Teltronics to pay on its Ericsson account. Ericsson also wanted Teltronics to slow down its growth so that the small company could curtail its appetite for cash.

Beagan swallowed his ire and prepared a revised budget, paring down his estimated 1978 sales by $2.9 million to $15.4 million. He then obtained a $1-million line of credit from Bank of America.

That done, Ericsson's board of directors agreed to continue backing Teltronics's loans. But within Ericsson, some executives argued that the company was wagering too much on Beagan's marketing skills.

Malmstrom defended the U.S. distributor: "The race in the marketplace has been costly, but [Teltronics] is today the area's largest interconnect company. . . . Since we are so close to our new generation of PABXs, I would not recommend a shift in our strategy of supporting [Teltronics], even though we have loan-guarantee exposure."

In May, Nordic American, with Ericsson's blessing, lent Teltronics $1 million. The momentum, Beagan figured, was with him, bolstered by the entry of Gerald Tsai Jr., the well-known Wall Street financier. Tsai made a written offer to acquire a minimum of 20% of Teltronics's stock at $8 per share and to help arrange long-term financing independent of Ericsson. That began to put pressure on Ericsson to act.

Summer of 1978, it now appears was the beginning of the end for Teltronics. Informal talks between Teltronics and Ericsson were under way, but already there were difficulties. By fall, Beagan says, Malmstrom wanted all of Teltronics's Massachusetts operations shut down immediately. Beagan refused, and Malmstrom retaliated, ordering his subordinates to cease issuing the customary "support letters," which guarantee equipment service to Teltronics's customers at prevailing rates should the distribution company prove unable to do so. Again, the two sides differ in their versions of the story. "Support letters," Ericsson's attorney says, "were issued until January 1979." And he denies that Malmstrom complained to Beagan about competition between the two companies in New England.

The other hitch in the talks turned out to be Malmstrom's superiors in Stockholm. They were not convinced that the corporation should make an equity investment in Teltronics.

Nonetheless, Ericsson continued to negotiate with Teltronics, remaining firm in its position. The Swedish manufacturer had stood as guarantor of some $7.9 million in loans for the company, and it aimed to acquire Teltronics's stock at a budget price.

Teltronics, Ronald E. Halvorsen told his boss in a memorandum, "is facing a very severe cash squeeze and must seek additional financing, either debt or equity. Ericsson is in a good bargaining position and should be able to negotiate a lower stock price."

But Halvorsen also warned that negotiations had to be handled delicately, since Beagan had other options to obtain funds. If Ericsson failed to secure an equity position at that time, he cautioned, a future equity purchase might be impossible at a reasonable price, and that could jeopardize the company's long-term objectives to capture a larger chunk of the U.S. PABX market.

Halvorsen's remarks turned out to be prophetic. By August, Gerald Tsai had acquired about 8% of Teltronics's stock on the over-the-counter market. Then, out of nowhere, came Loral Corp., a large manufacturer of electronic products, proposing a purchase of at least a majority interest and perhaps full takeover of Teltronics. That spurred Ericsson to enter into negotiations concerning an equity investment in the company.

The plan was for Ericsson to purchase 14.8% of Teltronics's stock at $8.375 a share and sign option agreements with individual stockholders, to bring the total to 39.8%. The option shares would be acquired at $8 each. But Ericsson apparently got cold feet, and on October 9 it called off the deal, leaving Teltronics to scramble for cash. It was forced to ask Citibank for postponement of a principal payment.

Talks between Teltronics and Ericsson resumed. The plan this time -- the so-called Northeast Concept -- called for Ericsson to acquire more than a third of Teltronics's stock for $6 a share and for Malmstrom to be named chairman of Teltronics's board. Beagan would retain the title of president.

Beagan saw red -- the idea of a new board chairman enraged him. On November 14, he saw Malmstrom at a meeting of Ericsson distributors. "I want $8 a share for Teltronics stock," he remembers telling the Swede, "and I intend to remain chairman of my board."

The situation, however, was now out of his hands. The next day, Ericsson's board of directors met in New York, and in principle approved the Northeast Concept. Two weeks later, Beagan, Malmstrom, and other key executives from the two companies met to set a timetable for Ericsson's acquisition of the Teltronics stock.

When the meeting ended, there was still a difference of opinion about how much Ericsson would pay for Teltronics's stock, but everyone's attention was focused on March. That month, the two parties agreed, the deal would be consummated.

How one interprets the events that followed that meeting is a matter of serious disagreement.

Ed Beagan argues that Ericsson never intended to acquire his company at what he considered to be a fair market price. The Swedish corporation's goal, he maintains, was to put Teltronics out of business so that Ericsson could acquire the small company's assets without paying for them.

But evidence filed in court indicates otherwise. Although the documents in the case, particularly the chronology prepared by the bankruptcy court's trustee, hint at the bad blood between the corporations, they show that until as late as February, the management of the Swedish manufacturer appeared to remain sincere in its offer to buy a chunk of Teltronics's stock. They also list a series of false starts.

Beagan, for example, wrote Malmstrom in December, asking that the negotiations be postponed until early in the new year. Malmstrom responded, agreeing to the postponement and noting that "we'll have to start all over again."

Ed Beagan arrived late at his office on January 16, only to find Malmstrom there waiting for him. What happened in the office is a matter of debate. Malmstrom's attorney denies that business was discussed to any great extent.

According to the bankruptcy trustee's chronology, however, Malmstrom chided Beagan. Why, Malmstrom demanded, had Beagan remained silent on Ericsson's proposal to acquire an equity interest in Teltronics? Why did Beagan take out an advertisement in The Wall Street Journal touting Ericsson's new electronic PABXs when the devices weren't yet on the market? And why, Malmstrom asked, was Teltronics still active in Boston?

Beagan agreed to seek Ericsson's consent prior to any advertising campaigns concerning Ericsson's new products, and he promised that Teltronics would submit a detailed financial report to Malmstrom at a meeting on January 25.

He arrived at the January 25 meeting, however, without the financial data Malmstrom had requested. So Malmstrom suggested that Price Waterhouse & Co. conduct an audit of Teltronics's books as the first step in the resumption of the equity discussions.

Events were now beginning to follow one another with alarming rapidity. It was as if the first in a line of dominoes had been pushed over:

January 29: Malmstrom speaks by telephone with Carl-Henrik Strom, an Ericsson director in Stockholm, discussing Teltronics's financial condition. Malmstrom says the company is solvent, estimating Teltronics's year-end cash at $800,000 to $1.3 million. But the idea of involuntary bankruptcy comes up. In order to force bankruptcy proceedings, Malmstrom explains, three creditors "must file a petition," and even then Teltronics could obtain a stay from the court. Malmstrom professes respect for Teltronics. "Despite everything," he comments, "Teltronics still managed to sell a lot of electromechanical systems, even in today's competitive situation."

February 8: The relationship between Beagan and Malmstrom remains tense, so Beagan decides to dispatch Daniel Smith and Michael Cheng, two of Teltronics's vice-presidents, to Stockholm to seek a hearing with Ericsson's president, Bjorn Svedberg.

February 12: Halvorsen, Malmstrom's assistant, begins work on a special report for Ericsson's February 22 board meeting. The report covered four subjects: "Teltronics's current status," "Teltronics's budgets dated January 30, 1979," "Chapter 11, Chapter 10, and straight bankruptcy," and "collateral takeover." The last section outlined a scenario under which Ericsson could take over Teltronics' leases by forcing the small company into bankruptcy, recruiting its employees, and soliciting its customers. Ericsson, Halvorsen wrote, "would then attach the assets of Teltronics and make it virtually impossible for the company to conduct business." The date anticipated by Halvorser for the possible occurrence of this scenario is the end of March, the same month Beagan and Malmstrom had agreed to during their equity negotiations.

February 14: Smith and Cheng meet with Svedberg, Ericsson's chairman. Again, the substance of this meeting is under dispute. According to the chronology, the Teltronics executives voiced their concern about Teltronics's finances, and they explained the difficulty their company was having marketing Ericsson's obsolete PABX equipment. They made a fresh proposal to Ericsson's senior executives: Ericsson should either abandon the PABX market completely, purchase Rolm Corp. (one of the company's competitors), or enter into a joint venture with Teltronics to develop a suitable PABX product for the American market. Then Smith asked Svedberg to explain Ericsson's position. "I look forward," a court document quotes the Swede as saying, "to working with Teltronics for as long as I [can] foresee in the future."

A Strom memorandum says that none of that conversation occurred and that the men merely shook hands and exchanged pleasantries.

February 15: In New York, Beagan prompts a tense confrontation. He leads a group of Teltronics executives into a dinner meeting with Strom and Halvorsen at Manhattan's 21 Club. Part way through the testy dinner discussion of Teltronics's finances, Donald M. Kleban, vice-president and general counsel of Teltronics, pulls out the draft of a press release, threatening to take the battle between the two companies public. The actual document is now lost, its contents in dispute, but it marked one of the final breaks in the companies' relationship. As Beagan remembers it, the release charged that Ericsson's new electronics equipment, which was designed to replace the Swedish manufacturer's obsolete mechanical PABX equipment, had failed. Ericsson, meanwhile, claims the release recounted the relationship between the two companies and accused the Swedish manufacturer of deliberately trying to lower the market price of Teletronics's stock.

Kleban reads the document out loud, then hands it to Strom. The Swede sits quietly for a moment. The press release, he says, is seriously misleading, and he denies the charges levied against his company. He adds that he hopes for a healing of the breach between the two corporations.

The press release is never issued.

February 16: Strom meets with Richard Howe of Sullivan & Cromwell. Ericsson, Howe tells Strom, has a number of alternatives. Among them: It can buy a majority interest in Teltronics, or it can let Teltronics go into bankruptcy, which possibly could entail subsequent lawsuits.

After he leaves the lawyer's office, Strom tries to arrange a meeting with Beagan and Robert M. Chanda, a Teletronics vice-president. They refuse to meet.

February 17: This time, Chanda telephones Strom. Teltronics wants to pursue the joint venture discussions with Ericsson as outlined by Smith and Cheng in Stockholm. This is the first Strom has heard of these talks, so he calls Svedberg in Stockholm. Svedberg tells Strom that he has met with the two Teltronics executives but that no serious business was discussed.

February 19: Ericsson, by this time, seems to have abandoned its plans to make an equity investment in Teltronics. Malmstrom writes himself a note saying such an investment is "prevented by the price of the stock and [Teltronics's] attitude and. position." He also notes that Ericsson might simply purchase some $6 million in leases from Teltronics.

February 22: Chanda and Kleban meet with Ericsson's board of directors. They tell the board that without emergency funding, Teltronics will go bust. The board informs the two men thatit can do nothing.

February 27: Teltronics delivers its retrenchment budget to Ericsson. The budget contains no entry for cash on hand at the commencement of the year, because most of it has already been spent.

February 28: Late in the day, L. Stanton Towne of Sullivan & Cromwell calls Lars Radberg, president of Nordic American. Radberg makes this entry in his phone log: "Towne. Concerned abt. Teltronics. End of the line for them. Need formal technical default under loan agreement. Debit of int. not formal default. Formal default tomorrow. Citib. will follow. Ericsson def. under Sec. agreem. . . ."

March 1: Howe of Sullivan & Cromwell tells Malmstrom and other Ericsson officials to cease communications with Teltronics. His associate, Towne, writes a letter to the attorneys for Nordic American, enclosing a draft of a letter to be used by Nordic to declare Teltronics in default.

Chanda telephones Carl O. Lennmalm, vice-chairman of Ericsson's board of directors. "Are you trying to force us into default?" Chanda asks. "No, no," a court document quotes Lennmalm as responding. "Absolutely not."

March 2: The two-day grace period for Teltronics's payment of interest expires. The company is now in default.

March 5: Ericsson's default plan goes off like clockwork:

At 7:30 a.m., Ericsson's chief legal officer telephones Beagan to see if Teltronics is going to pay the interest due. He poses the same question to Kleban later that morning. If the interest is not paid, the chief legal officer says, "things would happen pretty much automatically."

Early in the morning, Don Costello, vice-president and treasurer of Ericsson, telephones Radberg at Nordic American. "Has Teltronics been in touch with you or paid anything?" "No," Radberg says.

Early in the afternoon, Nordic's messenger delivers a letter to Teltronics's office in Long Island City. The bank says it is accelerating the small company's loans and that Teltronics has been declared in default. Don Kleban tries frantically to reach Carl Lennmalm and make an appointment for that evening. Beagan will try to appease Ericsson by offering the resignations of certain Teltronics officers.

At 4 p.m., Costello and Towne arrive at Nordic with a check for $4.9 million. In exchange for the check, all Teltronics's notes held by Nordic are endorsed over to Ericsson.

At about the same time, Lennmalm returns Kleban's call. Teltronics, Kleban tells Lennmalm, will do whatever is necessary to resolve the situation. Lennmalm replies that he cannot discuss the matter with Kleban. The matter is in the hands of the attorneys. He adds that Howe at Sullivan & Cromwell is expecting Kleban's phone call.

At 4:15 p.m., Kleban telephones Howe, who calls back at 4:35. Howe tells Kleban that Nordic has called Teltronics's loans and that Ericsson has paid Nordic under its guarantees. A lawsuit, Howe says, has been commenced against Teltronics. Kleban is stunned and says that what is happening is a disaster.

Beginning at the end of the day, Ericsson mails letters to the lessees on Teltronics's collateral list. The letters state that Teltronics is in default and that all future rental payments should be made to Ericsson. "We at Ericsson look forward to servicing your present and future telephone system needs."

March 6: By morning, Beagan has decided to propose the sale of 35% of Teltronics's stock to Ericsson for $6 a share and an offer of the resignation of the company's officers. At 9:30 a.m., Kleban telephones Howe. Howe rejects the offer.

That afternoon, Citibank accelerates Teltronics's $3-million debt. Meanwhile, Ericsson issues a press release announcing that Teltronics is in default. Teltronics issues a press release of its own. "Repeated verbal assurances were given by Ericsson officers that Ericsson would not permit a default to occur," the release states. No matter: Teltronics's stock drops from $9 to $1 a share before trading is halted.

That same day, Manufacturers Hanover receives notice from Ericsson to turn over the funds in Teltronics's lock-box account. Teltronics, Ericsson says, has defaulted on the loans the Swedish manufacturer had guaranteed. The bank then notifies Teltronics that the company can draw no more money from the account

March 7: State National Bank of Connecticut accelerates Teltronics's debt and offsets a checking-account balance of $13,802.81. Sterling National Bank accelerates Teltronics's debt and offsets a checking account balance of $281,591.47.

Halvorsen holds an internal meeting of Ericsson's newly formed division. Soon after, Dawson gets the idea that he should obtain copies of Teltronics's customer files. They contain color-coded diagrams of customers' telephone systems. "Without the diagrams," Dawson explains, "Ericsson would not have been able to service accounts economically." The scheme worked. He paid Teltronics's employees $50 in cash each time they hand delivered a box of files.

March 11: The Old Colony Bank accelerates Teltronics's debt and offsets the checking-account balance of $1,710.85.

By the end of March, Ericsson has announced the formation of its New York division. Under the direction of Halvorsen and Costello, the division will sell equipment and provide service to Teltronics's customers. Jack Dawson, the salesman who headed Teltronics's Long Island territory, has already been recruited by Halvorsen. His job, as it is explained to him, is to convince Teltronics's 2,500 customers to jump ship and sign on with Ericsson.

By the end of the summer, Teltronics has laid off 310 of its 350 employees. It is two months behind on its rent and is unable to provide service to its customers. Few, if any, of its creditors have been paid since early in the year. It has no money for payroll and no money for its attorneys. On September 21, Ericsson's new distributor evicts Teltronics from the building in Long Island City, dumping Teltronics's files into a truck. A week later, the company files a bankruptcy petition, listing non-Ericsson creditor claims of $5 million.

More than four years have passed since Teltronics went belly-up. Since that time, Malmstrom has retired and moved to Florida.

Ericsson has set up a joint venture with a subsidiary of Atlantic Richfield Co. to sell its PABX systems, and is now known as Ericsson Inc.

Beagan, as angry today as he was when Teltronics went bust, has hired a new attorney, Carl Person, the man who successfully wrenched the trademark "Monopoly" from Parker Bros. Undaunted by his Teltronics experience, Beagan is pursuing a new venture: He is starting a company to provide long-distance telephone service via a satellite to the customers of interconnect companies. And his dreams are as expansive as ever.

"We'll have," he says, eyes widening, "a mini-AT&T."