 VarTec case ruling favors Excel repsPublished Date: 2004-11-27 10:22:14 WorkOnInternet.com
Judge may decide next month whether the agents should be paid 08:54 PM CST on Monday, November 22, 2004 By VIKAS BAJAJ / The Dallas Morning News VarTec Telecom Inc. is finding that breaking up is hard to do. The Dallas phone company's effort to sever ties with 130,000 independent sales representatives for its Excel Communications business through its Chapter 11 bankruptcy case is running into growing resistance. Monday morning, U.S. Bankruptcy Judge Steven Felsenthal gave lawyers for a handful of representatives a small victory, barring the company from using Excel's revenue to pay VarTec employees. He also scheduled a hearing for Dec. 2 on VarTec's request to stop paying the representatives, giving the agents more time to obtain legal standing. At least two groups of representatives have retained lawyers to help them. Mike Rose, an Excel agent and lawyer from South Carolina, leads one, and Steve Smith, an early Excel executive, leads the other. Excel representatives earn money by selling phone service and recruiting other agents. Payments range from a few hundred dollars a month to tens of thousands of dollars. Their success is determined by how much money their customers pay the company and, to a lesser extent, payments from customers signed up by agents they recruited. The representatives say VarTec is cutting them off but keeping their customers. "They are using the bankruptcy mechanism to try to get this money for themselves at the reps' expense, and we are going to do our best to stop them," Mr. Rose said. VarTec argues that it can't afford the burdensome agent contracts. An executive said that many independent agents haven't been actively recruiting new customers for years and that the users they did sign up would typically switch to another phone company in a few months. "It's a survival issue for us, absolutely," said David Walsh, VarTec's chief restructuring officer. "We have to find a less expensive way to sell products and have a customer stay." Companies frequently turn to bankruptcy courts to end contracts ranging fro property leases to business alliances that they otherwise couldn't end. But VarTec's agent contracts may prove to be a bigger challenge, especially if the agents are allowed to form a creditors' committee to press their case in court. The U.S. Trustee's Office, a Justice Department division that impanels such groups, indicated Monday that it would look into forming one for Excel representatives. Mr. Walsh said that would be a highly unusual step because a committee of unsecured creditors, which includes other phone companies, already champions lenders' interests. VarTec's secured creditor, the Rural Telephone Finance Cooperative, will remain the most powerful lender in the case, and the first one to be repaid. But the Excel agents are a vocal lot. Judge Felsenthal said his office is getting a deluge of messages from and on behalf of agents, including letters from churches. The company owes the Finance Cooperative $224 million. Unsecured creditors are owed about $336 million, with the bulk of that due to Teleglobe Inc., which VarTec bought Excel from in 2001. It's unclear how much the agents are owed; the company stopped paying commissions on Nov. 1 when it filed for bankruptcy protection. John K. Cunningham, a Miami lawyer who represents seven agents and Mr. Smith, estimates it could be as much as $650 million if the contracts are revoked. Mr. Walsh said that number was "grossly overstated." He promised a detailed presentation at the Dec. 2 hearing. Did you find anything interesting in this newspaper article? I found the comment made by David Walsh, Vartec’s chief restructuring officer, to be very interesting. He stated that they must find a less expensive way to sell products and have customers stay. He obviously is not familiar with the network marketing concept. Those of us involved in network marketing understand the power of relationship marketing. We have long understood the costs to acquire friends and family as customers to be a lot less expensive than other marketing methods. We also are aware that our customers are much loyal to us because they are our family and friends. What I find interesting is that it was VarTec who bought Excel, if the marketing strategy for gathering customers via network marketing was too expensive, who decided to purchase Excel if this was not a good marketing strategy? In this same article we find U.S. Bankruptcy Judge Steven Felsenthal barring the company from using Excel's revenue to pay VarTec employees. Isn’t it funny that Excel’s revenue is being used to pay VarTec’s employees? When Excel was a privately held company things ran a lot smoother. The leadership and management team were directly involved and true believers of network marketing. The day Excel became a publicly traded company things changed for their independent representatives. First lesson learned: When a network marketing company goes public and the management leadership changes, it does not always indicate a good signal for the independent representatives. Check out the company’s direction, the strategy of their business plan, and more especially, their income to debt load ratio. Second lesson learned: There is no guarantee that the residual income you build today will be available tomorrow. Create multiple streams of income because even network marketing companies have massive layoffs. As you build your business, diversify your income into other financial areas (real estate, stock, new businesses) that can continue to bring you in a steady flow of income. Third lesson learned: People in your up-line do not ALWAYS have you in their best interest, especially if they are heavy hitters with a huge organizational down-line. I have been literally amazed at how some of the top leaders have all of a sudden proclaimed that telecom is dead and that we should all jump on the Shaklee bandwagon. Just two months earlier Excel had its annual Excelebration and these same folks were raving about the new things that were to come and how the telecom industry was the greatest industry to be in. In two months, they have changed the beat of their drum and the business to be in is now health and wellness. Don’t get me wrong, I am not against Shaklee or the wellness industry; it’s just not the industry that I choose to be involved with. The telecom business will NEVER die, however, it will change with technology and we must ensure that the company we are involved with is always positioned to be in front of that change. When life hands you lemons, make lemonade. This bankruptcy caused many of us to seriously look at other network marketing companies. For those of us who love the telecom industry, we were blown away by a discovery that came from our research. We found a company whose compensation plan was three times better than Excel. The products and services lines were more diverse than Excel ever imagined. Finally, the services that we are allowed to market are well known industry branded items that everyone knows and trusts. We had been so blinded by the many years of success that we were enjoying with Excel, that we never paid attention to this company who I predict will be taking the network marketing world by storm in 2005. This company will begin airing the first network marketing info-commercial beginning November 29th. Leads generated from this ongoing infomercial will be shared with its independent representative base. This is just one of the many things that we have discovered about this company. Other exciting news is the soon to be available voice of Internet protocol (VOIP) services. This is what I mean by a company that positions itself in front of the new ever changing technology. For those ex-Excel reps who have decided to sit on the side line, my advice is to get back into the game. You must understand that network marketing is the future. More products and services are being sold through network marketing than ever before. The concept is not going away. There are numerous network marketing companies to choose from that all have success stories. Find the industry that you are comfortable with and whose products and or services you believe in. Then carefully research the company and go for it! You can only win if you are IN the game. Otis Collier Independent Representative – 5Linx www.paid2call.com Home Office: 678-797-1322 Cellular: 678-923-7280 |
