Old Ghosts

Well, some Old Ghosts of jobs past are cropping up.  It turns out that the lawsuits against executives at the former Recoton Corporation (a former employer of mine) are heating up again.  It's a shame the plaintiffs don't have the real scoop.

A number of cases were consolidated under a class action by former stockholders against Robert Borchardt -- former President and Chairman, and Arnold Kezsbom -- former CEO.  Basically, Borchardt and Kezsbom are accused of misreprenting and failing to disclose material facts as to the amount and quality of Recoton's inventories and failing to write-off inventory in a timely manner.

The evidence they have isn't all that substantial, but they should win.

It's just a shame what they DON'T know, that could blow their case wide open.  For instance:

1) That the purchase agreement between Recoton and STD Electronics of Hong Kong, executed in 1995, provided the ability for the former partners of STD Electronics (Stephen Chu, Patrick Ho, and Todd Hays among others) to receive percentages of sales not only on products to retailers worlwide, but sales from STD Electronics (the subsidiary) to Recoton (the parent company). Talk about double-dipping.

2) The use of company funds to pay for extensive trips by certain merchandise managers and buyers at major national retailers like Best Buy, Office Max, and others to strip clubs -- including Mitchell Brothers in San Francisco.

3) The payment of a merchandise manager's income taxes by one of Recoton's manufacturer's representatives.  This is, by the way, illegal.

4) InterAct Accessories (another subsidiary of Recoton, and the former US arm of STD Electronics) leased a building for their final headquarters that was one-half owned by the President of InterAct (Todd Hays) -- a material fact not known to Borchardt and Kezsbom at the time the lease was signed.

5) The spending (or should I say burning) of $3 million in R&D dollars on a product called SharkWire that never made it to market (and never would) since the technology it used (14.4k modems) was four years old at the time the product was conceived.  Despite recommendations by several technologists and product speciialists (including me), the product was continued.

6) The hundreds of thousands of dollars paid in bribes to Chinese government officials to guarantee that products manufactured by STD Electronics could actually make it to the port at Hong Kong (STD's manufacturing facilities were in Shezhen, PRC).

7) The calculated and deliberate over-ordering of inventory by the InterAct Vice President of Operations on orders of the President of InterAct, in order to boost the HK-based profits of STD Electronics.  Specific products I know about:  SV-2010, SV-2020, SV-2030, SV-235, SV-237, SV-240, SV-245, SV-247.

8) Continued manufacture and sale of products known to be defective, necessitating tremendous amounts of return dollars.

9) The deliberate hiding (if not outright theft) of profit in HK by STD executives.  The Vice President of Finance for InterAct was quietly let go in 2000 after this was uncovered -- but never reported -- by Recoton's Senior Executives, including Stuart Mont, the former CFO for Recoton.

If the plaintiffs ever really start digging, they might uncover a lot of this type of info.  I have personal knowledge of the information I have laid out here.