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Garber on Business: Fishing on the other side of the Pond -- What to do when you are the victim of a faraway nonpaying business associate

Written by: Anne Garber

Article Overview: What resources are available to small, Canadian businesses when dealing with a non-paying associate in the United States? One small business owner had to resort to a bill collector!

Garber on Business: Fishing on the other side of the Pond -- What to do when you are the victim of a faraway nonpaying business associate

A business parable by Anne Garber

Everyone who runs a small business knows how important networking can be: In a small market, a shared piece of the pie is better than one hundred per cent of nothing. And, when one works within one's own region, the other essential touchstones include reputation, its first cousin word-of-mouth, and of course, helpful contacts, forging those must-have strategic alliances.

But in today's wide-reaching internet world, that little pond suddenly opens up into a confluence of streams that stretches to the horizon, as vast and limitless as the open ocean. A single phone call from across the country, an e-mail message from another continent, and all of a sudden none of the normal standards apply.

Still, no alarm bells rang for Vancouver's Deborah Faurot when she took a call in September, 2005 from a man in Tennessee who wanted to throw some business her way. Her business -- Classic Greetings' Unique Gift Baskets -- was beginning to show a modest profit, even though margins in that business are notoriously small.

On the face of it, Mort Walco (formerly Walcowitz) looked like a stand-up guy, with a good reputation. All Ms. Faurot had to do was fulfill some orders in her own backyard -- deliveries of "bon voyage gifts" to cruise ships Alaska-bound from the Port of Vancouver. Again, it all looked simple enough at first blush.

By her own account, Ms. Faurot explained the sequence of events to me: "Our first contact from Well Wishers' International, Mort Walco was primarily to see if we would be interested in acting as Well Wishers' Vancouver, B.C. vendor for the Alaska cruise industry.

"He sounded credible and was extremely proud of his company's 35 years of success. He came across as being an honourable business man and mentioned his daughter Stephanie Clark (Dempler) ran the business which is based in Oak Ridge, Tennessee.

"Well Wishers is fundamentally an 'order taker' for gifts, cruise gifts, hotel etc. (Just like FTD florists who take orders and charge an additional 15 to 40 per cent to their clientele and use vendors to do all the work.) They establish relationships with vendors in various 'port' cities to fill bon voyage gift orders for the cruise industry (that represents 95% of their business ... and AAA Travel represents 98% of the orders our company filled on Well Wishers' behalf in 2006.)

"The six-month Alaska cruise season leaving the Port of Vancouver began in May 2006."

Soon, however, some minor glitches cropped up.

Ms. Faurot explains: "In September 2005, Mr. Walco negotiated prices in U.S. and Canadian dollars [with vendors] and sent us a price sheet that was more confusing than any document that has ever crossed my desk. Concern over the strengthening Canadian dollar from September '05 until the beginning of the cruise season in May '06 worried me. Accordingly, Mr. Walco did agree to slightly increase the packaging and delivery price [he would be paying] to reflect the current rates of exchange."

Mr. Walco found he could not pay via his credit card for liquor purchases in Canada, so he asked Ms. Faurot if she could expedite matters for him.

"Well Wishers agreed to work with a local liquor supplier and pre-pay all the costs for wines, spirits, beer etc. Unfortunately, the Vancouver liquor supplier could not accept Well Wishers' American Express Card.

"Well Wishers did not have any alternative credit card payment available. (The majority of Amex card holders also have a Visa card). However, in good faith -- and with their pledge to pay us immediately upon billing of all liquor purchases -- we prepaid all liquor costs on our company Visa card. (Over a six-month period, the total billing for liquor alone was over $20,000!)."

By this point, Ms. Faurot's company's finances were beginning to show the strain of this outlay, and an undercurrent of dismay had crept into her dealings:

"In May 2006, Well Wishers received their first 25 invoices from Classic Greetings' Unique Gift Baskets. (It is normal business practice that the person who negotiated all the rates/costs etc. would take responsibility for reconciling the first batch of hundreds of invoices to ensure that both parties would be in agreement as to the prices established in 2005 -- and that there would be no discrepancies in any product costs.)"

Here's where the first communications problems seemed to arise: Small bookkeeping matters became "big obstacles," and the rift between the two businesses began to grow, as no payment from Well Wishers was forthcoming.

Says Ms. Faurot: "Well Wishers agreed to match dollar-for-dollar on our costs for all the liquor purchases. They originally agreed to pay these invoices immediately -- but never once did we receive payments on time. All our invoicing to U.S. companies is in U.S. dollars (except liquor purchases were in Canadian dollars), yet Well Wishers decided to reconcile all our invoices in Canadian dollars at the time the purchase was made ...Mr. Walco did this months after the cruise season ended -- and after the Canadian dollar had gone up considerably against the American dollar. By October 2006 -- after the cruise season had ended – Well Wishers account was already over $17,000 U.S. in arrears."

Well Wishers promised to make payments within 30 days of receiving invoices -- this is a common billing practice in this industry, but Ms. Faurot claims "This [on-time payment] never happened once."

Classic Greetings did receive a cheque in late 2006 for over $5,000, but not entirely surprisingly, it was returned for insufficient funds.

Mr. Walco chose to reconcile the entire cruise season's invoices from May through October, 2006, which took a disproportionate amount of time, and which Ms. Faurot views as " ...really [just] one of many stall tactics."

In an odd twist, Ms. Faurot met with Well Wishers' previous go-between vendor, a Mr. Steven Eng, who said that "…he would never deliver any of Well Wishers' products unless he was [first] wired money into his account and received post-dated checks for all the [remaining] shipping costs," according to Ms. Faurot.

By January, 2007, things had progressed from bad to worse. Accusations were flying. Perhaps believing that the best defence is a good offence, Mr. Walco's final reconciliation showed Classic Greetings owing them some $650.

In April 2007, Classic Greeting performed a detailed audit of Mr. Walco's reconciliation and discovered that he omitted over $10,000 worth of liquor purchases that Classic had made on his account. In addition, Mr. Walco seems to have omitted several invoices that he claimed he didn't receive, although Classic has confirmation of their receipt. Says Ms. Faurot: "We felt Mr. Walco did this on purpose with the hope that we wouldn’t catch his mistake."

Adds Faurot: "He arbitrarily deducted taxes on some invoices and adjusted all the pricing from U.S. dollars to Canadian dollars. And to this day, Mr. Walco has conveniently ignored $2,218 of the $9218 still owing Classic. These invoices represent liquor purchases for AAA Travel orders.

"It was not part of our original agreement and yet he claimed that we changed the terms and conditions of our original agreement. He used this tactic to stall paying us ... and had the nerve to suggest charging us for all the time he spent in doing the reconciliation in the first place (which of course does not take into account the time we wasted trying to prove our legitimate charges). Had he taken the initiative to review the initial invoices sent in May 2006, he would have prevented any discrepancies or disputes over pricing. He deducted special order liquor purchases, taxes, omitted invoices ... all to be in his favour. At the end of the day, he claimed we owed Well Wishers just over $600!"

This certainly doesn't jive with the facts, as an independent audit has now revealed. According to that audit -- at this writing – Well Wishers clearly owes Classic Greetings $9,218 U.S. By September, 2007, Well Wishers account was over fifteen months in arrears.

So here's the dilemma facing the small, Canadian firm, dealing with a faraway company. What options does this hapless businesswoman have?

Ms. Faurot was clearly upset about having to "set the dogs" on this deadbeat account, when I interviewed her in early January. She explained: "In early November, we found a collection agency based in Tennessee to take on our account, so we sent the required 30-day written notice to Well Wishers that we intend to put their account in the hands of a collection agency. (By the way, we had threatened to do this, months earlier, but Mr. Walco assured us then that he intended to pay us as soon as he could.)

"In July 2007 we did receive two cheques totalling $2,000. No payment has been received since then … just false promises and stall tactics."

The next salvo was to be Mr. Walco's, and this delaying ploy was so outrageous that it caught Ms. Faurot completely by surprise.

"In late November," she says, "we received a letter from Well Wishers' legal council accusing us of trademark/copyright infringement. This was another 'stall tactic' ... an accusation that has no relevance to the monies owing. And it is ridiculous! Well Wishers is not trademarked and he has no basis for a claim. Our legal counsel researched with the U.S. Trademark and Patents Office, and Well Wishers does not own that name. We were also accused of copyright infringement because Mort Walco feels our website is a 'mirror' or 'twin' of their recently produced website ... there is absolutely no similarity other than a few product choices. Colours, combinations, graphics, photos etc. are all different. There is no basis for a claim here either. We purchased domain names using variations of 'wellwishers' and had one of them pointing to our website (a universal marketing strategy that is completely legal and very common on the internet. There are many companies using the term 'Unique Gift Baskets' and we certainly have no right to sue them!"

I asked Ms. Faurot candidly if she had thought of registering those domain names because she was tussling with Well Wishers over their unpaid accounts, and she gave me a wry look, saying: "At the end of the day, when you're dealing with someone who is not behaving in a professional manner, and who is stooping to really petty, underhanded strategies to get out of paying you what they owe you, what can you do? You have to fight fire with fire."

Several attempts were made to contact Mr. Walco for "his side of the story" for balance, but at press-time, I was unable to get an interview with him, so we will have to put him down as "unavailable for comment."

The old cliché is still true: What goes around comes around. It is true that our business reach is expanding to encircle the globe, but you know what? It's a small world, after all.

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Article Tags: alarm bells, alaska cruise, anne garber, bon voyage gifts, classic greetings, cruise industry, cruise ships, daughter stephanie, faurot, first cousin, ftd florists, little pond, mail message, oak ridge tennessee, order taker, port of vancouver, stephanie clark, strategic alliances, unique gift baskets, well wishers



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