BrandDirect Scales Back Operations
BrandDirect, Shelton, CT, plans to eliminate 75% of its staff in August, maintaining only a limited crew to service existing clients.
The telemarketer of buying-club memberships had difficulty maintaining its viability following agreements last fall with two states over allegedly deceptive telemarketing practices.
“The liquidity impacts from the implementation from the consent decree was just too great for the company,” Dave Thompson, the company’s CEO said yesterday.
The company has been unsuccessful in its attempts to raise capital with existing as well as new investors. In the absence of new funding, the downsizing was unavoidable, Thompson said.
BrandDirect is not taking on new clients or members until conditions improve, he said.
Ninety employees were given notice on June 5 that their jobs would be terminated effective Aug. 5. The cuts will take place across all areas of the company including senior level management. Thirty employees will remain on board. Thompson is expected to continue in his position as president and CEO.
The company will continue to service its existing 20 clients, mostly large credit card issuers, Thompson said.
The company has liabilities in excess of $30 million and the downsizing is expected to allow the company to liquidate those liabilities over the next year or two, Thompson said.
Last September, BrandDirect settled a lawsuit with the Washington and Connecticut state attorneys general over allegedly deceptive telemarketing practices and misuse of private financial information.
The company was to pay a total of $1.9 million in penalties, fees and consumer education funds and about $11 million in restitution. In the lawsuit, it was accused of charging people for buying-club memberships without permission and other deceptive practices.
At the time, BrandDirect used data provided by financial institutions, including First USA Bank, Citibank and Chase Manhattan Bank, to develop lists of consumers. Its telemarketers then contacted the prospects with an offer to join discount-buying clubs that catered to particular interests. The company obtained members’ charge card information from the banks, allowing it to bill those who agreed to join.
Tom St. Denis, a founder of BrandDirect is also the founder, along with Gary Johnson, of Memberworks Inc. Last Monday, three class-action lawsuits were filed against MemberWorks Inc., Brylane and other companies by two Florida consumers also alleging unfair trade practices.
Those suits claim that that the consumers had ordered items over the telephone but were later billed for unwanted products and services. Denis is no longer involved with BrandDirect, Thompson said.
