Sunday, July 11, 2010

There but for the grace of God

My old time business acquaintance, Ross Scott, was busted recently for diverting $45,000 in employee pension money back into his faltering Holyoke based direct mail business, failing to provide the 3% match--but still claiming that amount as a tax deduction.

I first met Ross about 25 years ago when he was highly praised by another successful Amherst small business owner for saving him money on direct mail, mainly because he was super efficient about his services. And indeed he, a nice guy as well.

About then Amherst axed $4,500 late in the budget year (mid-April) for the July 4th fireworks. I instantly formed a committee and raised more than enough money to save the display that year, later turned it over the Amherst Chamber of Commerce who then returned it to the town's Leisure Services department, who continues to fund them via private/business donations somewhat competing with the July 4th Parade I'm now "somewhat" involved with.

The original business owner who recommended Ross ran a print shop so he donated 1,000 nice red-white-and-blue fliers (color was expensive back then.) Ross donated his mail services and paid the postage for a mailing to all Amherst businesses, almost instantly returning enough to cover the patriotic extravaganza.

But 20-25 years ago the direct mail business (like newspaper advertising) was booming W-A-Y more than today; now the Post Office itself is dying--all for the same reason: the Internet. Unsurprisingly, his once thriving ARA Strategic Mail Services went into a steady if not steep decline.

After my initial direct mail experience I liked it enough to purchase my own bulk mailing permit for Karate Health Fitness Center (although I took it out in my personal name so I could use it for other causes), thus I no longer required Ross.

But two years ago I sacrificed my long-time permit to save on the $150 annual cost of renewal just as I stopped all newsprint advertising (peak year approaching $15,000). The start--or more like final stage--of a downward spiral.

So this past February when Stan Gawle asked about using my (former) permit once again for a 4,000 piece anti-Override campaign mailer (as we did in squashing the 2007 Override), I looked up Ross and found him as efficient as ever. After all these years.

But knowledge, skill, bravado and endless hours only goes so far. You cut corners--at first you do it with a scalpel, then a butcher knife, then an ax and, finally, a chain saw. If every small business in America followed government regulations 100% to the absolute letter of the law, 90% of them would fail.

And yeah, if a business owner circumvents regulations to fund a fancy car, exotic vacations, gambling or prostitutes--that's one thing. But if they do it in order to keep the lights on--that's another. I suspect Ross, like a lot of recently deceased small businesses, occupies the latter.

Sounds like he informed his employees of his deception years ago (if they were that concerned they could have blown the whistle then) and probably told them it was either that or lay them off.

What's worse, losing a 6% retirement benefit somewhere W-A-Y down the road or losing your job now (which ends that retirement benefit anyway)? At least he always paid them their take home salary.

Who is worse off? Ross faces a possible sixteen month prison term and his business, his baby, his life these past decades gets filed in the dead letter office. Unlike his employees, he can't collect "unemployment insurance"--although he is not accused of reneging on that burdensome overhead.

Small business owners are the backbone of America--but they routinely engage in a high-wire act, working without a net. And even the Flying Wallendas took a tumble.

The Republican Reports

The Republican also reports Post Office problems


Anonymous said...

Scott is a nice man. I met him through a friend in Vermont when we all stayed at the same ski house.

I hope his lawyer can make a deal where Scott makes good on his taxes and obligations and can avoid a harsh prison sentence.

If he must go to jail, they should let him go where his life or health would not be threatened, some federal penitentiary with a golf course.

Funny we have one federal attorney threatening to put Scott in jail for not meeting his obligations under the employee retirement plan and, Fortune 500 corporations raiding retirement funds to underwrite leveraged buyouts, and the debt commission (DC politicians) poised to raid social security benefits.

LarryK4 said...

Yeah, the Big Boys seem to get away with murder.

Anonymous said...

You are on the wrong side of this one. This is about stealing. He's not facing jail time because he is a small business owner. It's because he was stealing. The money quite simply was not his.

LarryK4 said... let me guess: you do not now own--or ever have--a small business?

Anonymous said...

Wrong. I have small business. Last year when the economy collapsed I had to meet payroll with a credit card. Damn near ruined my credit but the temptation to use employee money, sales tax, or any other money was never there. I know the difference between my money and somebody elses. I've seen it to many times. People rationalize using money that's not there so they can get by for another month and always say they'll pay it back. They rarely do. It's tough being a small businessman but no one holds a gun to your head to make you do it. You get the reward when times are good. You go under when they are bad. That's the deal.

LarryK4 said...

And if you've been around long enough surely you remember The Chequers before it became Rafters? He too made that mistake (and he too was a nice guy.)

Anonymous said...

You are making my point. It's not about if you are a nice guy.

LarryK4 said...

It is if they are facing jail time.

If you were on the jury would you put them in federal prison for a year?

Anonymous said...

Absolutely. I don't make decisions on whether they are nice guys. The world is filled with so called nice guys. Bernie Madoff gave lots of money to charity. Big deal. Every week there is someone that has committed a crime that has a slew of friends testifying at the sentencing hearing about what a "nice guy" they are. My answer is "They are not as nice as you thought."

LarryK4 said...

Of course the ironic thing is you would never make it to the jury anyway, because a good prosecutor (who has a bug up his butt for some reason and wants the nice guy to go to jail) would never allow you on the jury because they would assume as a small business owner you would empathize/sympathize.

Anonymous said...

Empathize/sympathize? Of, course, in that I know how tough running a small business is. But it's a "can't stand the heat, get out of the kitchen world." If you can't make it work legitimately then find some other line of work. The way I look at it is you can't put all the other small businesses that are doing things legally at a disadvantage by succeeding through criminal activity. If the 6% he stole (yes, I use the word stole) gives him an advantage over another business then you are increasing the likelihood that someone else will feel the pressure to do the same.

As for the argument that the employees are better having jobs then watching the business go down the tubes, I don't buy it. First of all, if the only way you can get by is to use money that's not legitimately yours then you are going out of business sooner rather than later. Second of all, unless you are making your employees co-owners with you then they are taking part of your risk without part of the potential reward.

Bulk mail is a dying business you say? Then you better come up with new and better services to offer. Innovate, partner with others, and scrap and claw to make yourself relevent in a new century.

LarryK4 said...

Didn't do the whip making industry in Westfield much good, now did it?

And I also fear the newsprint industry is on the same kind of sinking ship.

Anonymous said...

IBM doesn't make a lot of typewriters and mechanical adding machines these days do they? If bulk mail is dying then you can either sit around and cry about it or expand into something new. The only ones not willing to do that these days are dinosaurs like the post office.