Even though moves are under way to pay back creditors, the sudden closure of list broker Alan Drey Co. in August has left a bitter taste in the mouths of many in the list industry, with some executives calling for stricter standards of conducting business.
At press time, Howard Samuels, president of Rally Capital Services LLC — hired by the directors and shareholders of Alan Drey Co. to oversee the firm's liquidation — had set Oct. 7 as the target date to begin paying back the former list brokerage firm's creditors.
He said he would first attempt to compensate creditors owed money after Aug. 22, the date Rally was assigned the Drey account. Only after this first group was paid back would Rally seek to recover money owed creditors before that date.
Overall, Samuels says he would seek to recover all the money creditors were owed, something he felt was possible since Drey's other choices — Chapter 7 liquidation or Chapter 11 protection under the U.S. Bankruptcy Code — would have eaten up a sizable portion of the money owed to Drey creditors and would result in their being paid back less than under this plan.
Still, several list industry professionals see events like Drey's closure as helping to foster an atmosphere of mistrust.
Issues questioned include how much mailers can trust list brokers without written guarantees; under what circumstances is it acceptable to use list owners' money; whether a written code for standard business conduct should be developed; and how to formulate an equitable way to pay off the now-defunct Chicago-based list broker's creditors, which reportedly were owed sums ranging from less than $1,000 to several hundred thousand dollars.
One of Drey's creditors — Direct Media, Greenwich CT — was talking with its lawyers at press time about whether to file any legal action, says Ed Bocknik, executive vice president of list management. He noted that Direct Media was assured by Rally officials it would receive more than the 5 to 10 cents on the dollar that often accompany bankruptcies.
Bocknik notes that Direct Media — which is owed around $400,000 — was planning to call a meeting of 15 to 20 list companies to try and establish some sort of standard list brokerage business practices. (He was unsure if assembling such a meeting might have any anti-trust-type implications).
Like many in the industry, Bocknik says he was surprised by Drey's action. “They always paid their bills on time. These things always happen during bad economic times.”
What also galled list companies polled by DIRECT was that many Drey creditors were owed less than $100,000, making any lawsuits cost-prohibitive.
“Winning a suit against them would be a Pyrrhic victory,” says the head of one list firm owed less than $70,000. “It would cost you twice as much to hire a lawyer to collect that amount.”
“Basically, nobody saw this coming,” says Lee Kroll, president of Kroll Direct Marketing, Plainsboro, NJ and vice chair of the Direct Marketing Association's List Leaders Council. “Drey always had good reputation for quick payment but the company must have been upside- down [mismanaged].”
Even though he feels closures such as Drey's — and those of Kleid Co. and Greenfield Direct Marketing several years ago — “create an environment of mistrust” among other list companies and direct marketers, he's not sure if stricter business standards are the answer to the problem. List brokers often work without making written statements of what they hope to perform.
“Are we going to have written guarantees for everything?” asks Kroll, whose firm is owed about $7,000. “That would be an accounting nightmare.”
“It's nearly impossible to investigate the financial viability of every list broker you deal with because it would take to much time,” notes David Juhl, circulation director at American Nurseryman Pub. Co. The Chicago firm rented one small list from Drey earlier this year and was out less than $1,000.
Juhl, who often asks for prepayment from firms with which he hasn't previously done business, didn't do so in this case because Drey had been around so long and had a decent reputation.
Kroll was hoping all the issues surrounding Drey's closure would be brought up at the meeting of the List Leaders Council at the Direct Marketing Association's annual fall conference in San Francisco last month.
Another complaint: Some individual brokers who worked for Drey before its shuttering were able to land jobs at other firms almost immediately.
Just a few examples include Pat Patten, former Drey president, who was appointed president of Statlistics' Ventura, CA office; his former co-worker Locki deUrrtia, named vice president of Statlistics in Chicago; and Don Hoika jumped over to Rubin Response as vice president.
“They can go out and get jobs with other [list] companies while list owners end up getting stuck,” complains Kroll.
Since Drey had been around so long, there was a good degree of trust surrounding the company, says Rich Baumer, president of VentureDirect, who's owed less than $50,000 from Drey. But, he notes, “It's a hard time now but it's irresponsible when brokers and managers from companies like [Drey] go and get hired at other companies and those companies don't check out the finances of the older company.”
For his part, Patten rejects any insinuations about former Drey employees. “They were just good brokers those companies felt they could trust,” he says.
Fran Green, president of American List Counsel, couldn't say exactly how much Drey owed ALC. But she “cautions against overreacting” to situations like this, noting that there are already rules in place to deal with companies that don't pay their bills on time and that it's very difficult to police everybody.
She also notes that times are tough and that the last two cases of list company bankruptcy — Greenfield and Kleid — happened many years apart. “What other industry can claim a track record like that?”
