St. Petersburg was all smiles when American Collegiate Financial Services chose to relocate to the city over New York and other suitors in 2004.
The company, which markets loan-consolidation plans to students with multiple federal loans, bought a former Peoples Gas property on Ninth Ave. N for $1.8-million, pledged to boost its payroll by 300 jobs, and offered scholarship money and jobs to area high-school students. Mayor Rick Baker came to the ribbon-cutting armed with a taxpayer-funded incentive package worth up to $2.85-million.
Things haven't quite gone as planned since. ACFS and its half-empty headquarters are for sale. Its recent bid to be acquired by an Arizona company has devolved into litigation. It never claimed the tax incentives, which hinged on job creation. And a recent lawsuit filed by co-founder Bruce Record and a dozen other shareholders accuses three top officials of mishandling and misusing company funds.
What exactly went wrong? Neither party is saying much. An attorney for the shareholder group said he was bound by confidentiality demands; ACFS human resources director Karen Goldberg said she was "very busy" and would need several days to respond to a list of questions faxed at her request Tuesday.
But the shareholder lawsuit against ACFS and directors Richard Guillot, James M. Smith and John Vis offer a somewhat spectacular, if highly contested, view. Among the allegations:
- The defendants signed a letter of intent to be acquired by Scottsdale, Ariz.-based Cology Inc. without consulting or even telling the shareholders.
- ACFS employed at least 28 of Vis' friends and family from 2003 to 2005. His son allegedly continued to receive full pay even after being arrested and was in rehab when he received a large bonus.
- One shareholder loaned the company $250,000 at an annual interest rate of 25 percent in 2003 but never got the stock, interest or even principal he was due.
- The three defendants formed a separate company to buy the St. Petersburg headquarters but used ACFS dollars to pay for it.
- The shareholders, who never received a single annual report or a dime of company profit, were kept in the dark about ACFS' finances and strategic plans.
- Though ACFS was suffering from "drastically reduced" revenues in late 2005, operating just a few days per week and owing creditors hundreds of thousands of dollars, two directors paid themselves a bonus of $70,000 apiece.
- Vis, the company's 48-year-old president, allegedly pulled out of a deal to take the company public "presumably so that he could continue operating ACFS as his own private piggy bank."
The shareholders' lawsuit seeks to liquidate ACFS and divvy up the company's assets. ACFS wants to resolve the dispute by repurchasing the plaintiffs' stock.
Precisely why the buyout broke down is not clear. In its lawsuit, ACFS said acquirer Cology violated their agreement by billing it for nearly $800,000 in consulting fees. Brian Duling, Cology's chief administrative officer, said in an interview that the company had a "strong desire" to get the deal done under the original terms.
Duling said St. Petersburg would have benefited. The company planned not only to keep ACFS there but hire more staff.
Times staff researchers Angie Drobnic Holan and Connie Humburg contributed to this report. Scott Barancik can be reached at firstname.lastname@example.org or (727) 893-8751.