The small knot of people huddled in the rain outside the Reading Employee Tribunal office in southwest England were all that remained Friday of a $US65 million, 300-person venture that was Efdex, a 6-year-old company that had promised to create an electronic middleman for the food-and-drink industry.
These former employees are among the more than 200 who kept working for Efdex since April, when the company failed to make payroll. Despite having spent six years and $US65 million building the business-to-business exchange, Efdex had yet to turn over a single penny in revenue. Creditors finally pulled the plug on the venture Friday, forcing Efdex into insolvency.
The group of creditors was led by IBM and Dell Computer, who are attempting to recoup $US11.9 million and $US1.4 million, respectively. The bitter pill that they have to swallow is that Efdex's total assets have been valued at $US39,200. Even more annoying for the out-of-pocket creditors and the unpaid employees is that Efdex used a convoluted corporate structure that effectively left its American parent company, Efdex Inc., fully operational and completely separated from the bankruptcy proceedings. A representative from Nomura Bank, which owns 20 percent of the American company, said the American parent company is still operational.
"The parent company has not gone into liquidation; that only applies to U.K. company," says Clare Williams, spokeswoman for Nomura. "We still have the investment in the American company and hold around 20 percent. As a shareholder we are concerned about our investment, and we are concerned about the employees."
Although Efdex maintained a small office of about 15 employees in Hartford, Conn., all of the development and sales work was in Europe. The European subsidiary held all of the debt of the company, while all of the investors had signed their deals with the American parent. Nomura was one of 85 separate individual and institutional investors.
Investors hoping that six years of development might have left Efdex with something even slightly financially valuable might be disappointed. The entire software development project, led by IBM, was reclaimed by that company when Efdex didn't pay the bill. Efdex then attempted to build a transactional system in-house, but the lead programmer left when he didn't receive a paycheck.
"The only people that know anything about how the system works are myself and another guy that left," says the senior programmer who oversaw Efdex's technical efforts. "I don't see how it's possible for them to continue. The whole system was in our heads. There's no way anyone else could make it work."
The company declined to comment. The company's press representative hung up on reporters who asked about the future of the American company.
Other employees say that Efdex didn't own any tangible assets; they say the building, the cars, the very chairs they sat on, were leased. As early as April, collection agencies had started reclaiming leased goods. British tax authorities stormed the premises in April to collect goods in lieu of an unpaid tax bill. The problem was, the tax collectors walked off with some 450 Dell terminals that hadn't been paid for.
"[Efdex] were issuing checks and then countermanding them before we'd walked across the road [to deposit them]," says Keith Merret, an attorney representing Dell.
The man credited with building Efdex's complicated structure is Tim Carron Brown, the chairman of the company who has seen his venture through one previous liquidation and four name changes. He faced an identical scenario in 1997. Employees and creditors had gone unpaid, finally forcing him to leave the Dunoon, Scotland, base where he had accepted some $US630,000 in local development funding. Carron Brown was not in evidence at the creditors meeting, or the Employee Tribunal meeting Friday.
"The creditors are extremely frustrated that Tim Carron Brown was not here," says an attorney representing Dell. Several former employees and a food industry Web site report that Carron Brown is raising funding for another venture under another name, in keeping with what he did after leaving Scotland.
Carron Brown's representative at the liquidation proceedings, Simon Underwood, told creditors that he "had no knowledge" of Carron Brown attempting to raise money for another company. When questioned afterward by The Standard, he refused to comment.
Additional reporting on this story was done by Lisa Naylor and Rick Wray.