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August 16, 2001
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Stories gleaned from court records and interviews with attorneys and creditors detail how failing Seattle-area start-ups are bungling their layoffs and shutdowns, according to the Times.
The companies are depriving employees of wages and medical benefits, sticking creditors with millions of dollars in unpaid bills, and letting lawyers clean up the messes.
More than 300 dot-coms have gone bust so far this year, compared with 190 in all of 2000. The tally includes at least three dozen Puget Sound-area companies and would be higher if it included those that dissolve themselves quietly.
If the builders of the New Economy knew little about turning seed capital into profit, they knew even less about how to exit gracefully when the money ran out, the newspaper reports. Strapped for cash and embarrassed by failure, many simply turned off the lights and ran, leaving workers empty-handed.
"From afar, we look at founders as sophisticated business people who have taken the time to educate themselves about basic practices," says Deborah Crabbe, a bankruptcy attorney in Seattle. "But a lot of people in the tech sector didn't."
Websuite's demise demonstrates how little recourse employees have in cases where wages and benefits are unpaid. The company bounced $18,900 worth of paychecks after laying off 30 people last September.
It also failed to forward payroll taxes to the government and stopped paying health- and dental-insurance premiums, even though it deducted those costs from employees' wages. While potentially criminal, the offenses are difficult to prosecute and rarely go to court, according to the Times.
Christian Ryser was stuck with $3,500 in medical charges after his third child was born last August. The following month, the company laid Ryser off. State assistance covered only some of the costs. "It was pretty painful," he says. "We're still paying off about two grand."
At first, Websuite grew quickly, going from 15 to 90 employees. Then sales slowed. The company burned through its cash. By June of 2000, it had stopped paying bills.
In September, operations manager Dave Cleveland and his business partner, Dennis Hinton, thought they had a deal to buy Websuite for $3.5 million. But 10 days later, founders Keith and Kirk Klinkhammer signed an agreement selling the business to Summitt Healthcare, a Las Vegas company headed by Mark Anderson.
Anticipating hostile employees, Anderson and the Klinkhammers brought armed security guards in as they announced Summitt's takeover on a day Hinton and Cleveland were out of town.
Darryl Barlett, the company's 53-year-old technology officer and the senior manager at the office that day, said he called police and asked to have the bouncers removed. Instead, guards escorted Barlett and three other senior managers out.
"They showed up with a bunch of greasy thugs and threw my people out," Cleveland told the Times.
In the following days, company officials handled a stream of phone calls from creditors, telling them Anderson had promised to put money into the company. But the money failed to turn up, so payrolls kept bouncing.
Late last year, several former employees tried to force Websuite into liquidating assets to pay creditors. But Websuite quickly filed for bankruptcy protection on its own.
To view the Seattle Times story, click here.