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Largo foreclosures business can't keep doors open

Inc. magazine's September edition singled out Foreclosuresdaily.com as the 35th fastest-growing private company in the country, the only one in the bay area to crack the top 100.

Now, the Largo operation has quietly shuttered its headquarters and fired almost its entire staff.

Though the company has been dogged by customer complaints, president and chief executive officer Mike Kane blamed his woes chiefly on the national credit contraction.

"Our bank froze everything, so we're not able to get loans. … Our customers cannot get access to money to buy our services,'' Kane said Wednesday. "What's going on with us is a microcosm of the macroeconomy.''

That's of little consolation to ex-workers like Alice Mulcock, who calculates that the company owes her more than $3,000. As an independent contractor, Mulcock was paid $106 a day to sift through property records at courthouses in Volusia and Seminole counties.

"The last check I got from them, I received notice Saturday had bounced,'' said Mulcock, who quit in September. "They owe me now for six weeks."

Kane said he and his partners plan to soon open a smaller office and eventually make whole all employees who were stiffed on recent payroll checks.

"'We've had to let pretty much all of our staff go, but we're staying in business,'' he said.

Wednesday morning, the company's headquarters in a strip center on Belcher Road was vacant. Through the window, a phone blinked incessantly on a reception desk. On the wall hung a plaque lauding it as one of the largest companies on the Gulf Coast in 2007.

How did a company that specializes in foreclosures fizzle during the hottest foreclosure market in decades? Earlier this year, Florida had 109,433 homes in foreclosure, up 182 percent from the year before.

The reversal of fortunes is stark for a company highlighted by Inc. magazine for its 3,838.5 percent growth rate from 2004 to 2007, closing that year with $14.1-million in revenues.

Foreclosuresdaily built its profits on two businesses. First, customers were charged several thousand dollars for training programs on how to buy foreclosure properties. Later, for a subscription of about $1,200 a year, customers got regular reports listing troubled properties in counties of their choice.

The company grew to about 50 people in Largo and quickly expanded with satellite branches collecting data in markets like Phoenix, Chicago and Las Vegas.

Revenues began a steady dropoff in February, according to Kane. Ex-manager Jay Wilkerson, who worked for the company in Jacksonville, said Kane and co-founder Dave Vanhoose operated with a flawed business model.

When a Foreclosuresdaily.com seminar came to town, it attracted plenty of local real estate investors. But that pool was only so large, and subsequent seminars, including at least one at Planet Hollywood in Las Vegas, drew fewer people.

"Mike Kane and Dave Vanhoose were spending like they owned a mint: limos, boats, dinners, drinks," Wilkerson said. "They were living the high life when the times were good. Then the times went bad."

By March, the company announced it would stop paying salaries and would compensate employees by commission, Wilkerson said. That's when he quit.

In June, the Florida Attorney General's Office investigated the company for failure to provide customer refunds, prompted by six consumer complaints. The case was closed after the company refunded $22,000.

"They weren't refunding people money for the so-called investment system when they returned materials within the prescribed period," Wilkerson said.

As foreclosure cases spiked, so too did the cost of doing business. Foreclosuresdaily workers had to spend more time and money sifting court records. Then came the credit crunch. The company retracted, pulling out of every state but Florida. It put the seminars on hold.

In e-mails to independent contractors over the past month, Debbie Johnson, one of Kane's partners, traced the company's dissolution.

"The economy strain is taking its toll on FD like many other businesses,'' she wrote Sept. 25. "We are doing everything possible to keep the doors of FD open, we were blindsided and not prepared.''

On Oct. 3, Johnson told workers: "No funding will hit our account again next week, forcing us to hold pay companywide. … The job is flexible for the most part. I recommend you look for additional work to supplement your income.''

Last Friday, Johnson wrote that she and her partners were talking to attorneys about the money crunch.

"We were advised that it is against the law to have anyone work for FD knowing that we have to hold paychecks. It is against the law to sell subscriptions to customers when we can't provide listings. Effective immediately, I need you all to stop working.''

Dawn Sinkovits, a 10-month employee who said she's owed about $1,000, feels sorry for those customers who spent $8,000 on a program to learn about making money off foreclosures "and now they call customer care and there's no one there.''

As it battles to stay afloat, Kane said Foreclosuresdaily has struck a partnership agreement with another company to collect data in other states, but he declined to name the partner.

"We're fighting. … We're retooling our business,'' he said. "The economy has taken its toll."

The difference between his company and the big financial companies, he added: "The government has not bailed us out. It's bailing out the banks, but not us.''

James Thorner can be reached at thorner@sptimes.com or (813) 226-3313.

Largo foreclosures business can't keep doors open 10/15/08 [Last modified: Thursday, October 23, 2008 11:25am]

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