Composite Resources client rescued
from the perils of bankruptcy!
Two years ago, Victoria Lowe was on top of the world at the helm of one of the nation’s
largest Woman Minority Owned (WMBE) full service staffing firms. The meteoric rise
of her company, Alert Staffing, made Lowe the “darling” of Los Angeles’ business scene.
Black Enterprise Magazine ranked the company # 13 on their Annual “BE 100” list, the
Los Angeles Business Journal dubbed the firm as the # 1 Woman Owned Business in LA;
and Minority Business News listed Alert Staffing at # 13 of the “ 100 Fastest Growing
Companies in the Nation”.
With reported revenues of $ 207 million, a staff of 150 employees and an impressive
client list including Fortune 100, 500, and 1000 ranked companies, Victoria was well on
her way to the goal she’d set of growing her Culver City- based firm into a one billiondollar staffing company by 2004. All that changed however, when her minority business
partner attempted to put her out of business, initiating a lengthy and costly legal battle,
and thrusting the multi-million-dollar firm into Chapter 11.
The unraveling of Alert Staffing’s success story began in the summer of 2001. “We
were on track doing over $ 225 million with Fortune 500 contracts being signed every
month,” Lowe said. “Then in August, our partner called us and wanted to meet to discuss
the business and the relationship.” Her partner-turned-“Goliath” was the Switzerlandhead-quartered, Adecco group, the largest staffing company in the world. A Forbes
global 500 company, Adecco is ranked number one-or two- in 12 of the world’s top 13
staffing markets, has 5,800 offices in 63 countries, and nearly four million “temporary
associates”.
“We were going to be their diversity arm here in the United States,” Lowe said, but it
never worked. They ended up purchasing some other companies and their focus just
wasn’t there, so the relationship never took off and went anywhere positive. “But they’d
installed a new president and I thought she and I would put it together. The meeting went
well and we agreed our CFOs would get together on September 11, but we all know what
happened on September 11.
With the World Trade Center tragedy, Alert Staffing-like so many other companiestook a direct hit. “All of our payroll goes out across the country via overnight mail and
everything had come to a halt, so we found ourselves putting out fires. Two days later my
CFO called their CFO and that afternoon I got a call from their president, saying, “You
didn’t keep your word. We didn’t hear from your CFO on the 11th and this relationship is
over, click. She’d hung up on me.”
A month later came confirmation in the form of a letter from Adecco charging that
Alert had defaulted on their loan enabling Adecco to foreclose on the loan and
demanding the company pay in full within ten days or have demand letters sent to their
expanding A-list of corporate clients. “They didn’t even wait for the 10 days. I started
getting calls from our clients saying we got demand letters alleging that we had defaulted
and that all monies should be paid directly to them. Fortunately we had really good
relationships and so most of our customers just continued paying us and we moved
forward.
Adecco executives snubbed repeated attempts to sit down with Lowe personally to
work things out. Instead lawyers began the first round of negotiations to sever ties, but
Lowe insists that Adecco officials-angered that the payments to Alert Staffing hadn’t
stopped-upped the ante, filing for receivership of Alert Staffing in a Northern, California
court claiming that Lowe had mismanaged the company, defaulted on their loan and
requesting that a trustee be installed to run the company.
“I believe part of their strategy was to cost us a lot of money and run us out of
business,” said the 41-year old, wife and mother. “We had to fly our attorneys up for
every court session and we were in court at least every other week. That’s two or three
attorneys, airfare, overnight stays and lawyer’s fees at $ 400-500 per hour. You’re
running up easily 15,000, 20,000 a week.” Not only did the judge find that Alert had not
defaulted, but agreed to Lowe’s compromise of a trustee, but not to run the company,
instead to collect the monies and hold the company to a budget. In no time at all, Lowe
was back in business. But in June of 2002, Adecco returned to court, this time asking that
the trustee be cancelled.
The company then sent out another round of direct collection letters, only this time
admonishing the customers that if they directed monies to Alert Staffing and not them,
that legal action would be taken against them as well. At once, business at Alert Staffing
came to a screeching halt, the company’s cash flow plummeting from $ 700,000 to $
20,000 in a week’s time. “We were forced to file for bankruptcy protection under Chapter
11,” Lowe said, “and we fought back and forth in bankruptcy from July 11th until
February 6th of 2003, spending millions in legal fees. Now, she paused for a moment to
reflect, “I understand why most companies never come out of bankruptcy.
“One of the biggest problems we ran into was that with all the fighting and legal fees,
we weren’t profitable, and you cannot be unprofitable in a bankruptcy,”she said. “The
judge has a responsibility to not let you be unprofitable, so on January 30, 2003, the
judge decided to liquidate the company the following Thursday.” Lowe-out of town in
Austin, Texas on a business presentation to a major computer company-was informed of
the decision by phone. “My heart stopped beating for a minute,” Lowe recounted.” I
remember standing in the airport on my cell phone. Part of my team was there so I went
in to the bathroom, got on my knees and started praying. “I said okay, Lord, I need to be
able to square my shoulder and go back out there and deal with the four or five people
that were with me.”
“I really felt the Holy Spirit say to me, this is not over, don’t give up…this is a faith
walk,-you’re going to settle this case”. Friends and associates alike marvel at her calm
under pressure. “Throughout the entire process, I was amazed at her strength and
demeanor,” lead attorney Angela Sousa said. “There was just one point I saw her
emotional and I remember telling one of the other attorneys that I would have cracked a
long time ago. And while I felt that we were right, in a bankruptcy action, there are so
many things at play and we had two giant companies-Adecco and SBC-opposing us for
different reasons. One was a joint venture partner, the other, a customer-both very large
companies with extensive resources to litigate.”
“They came after me big and it got ugly,” Lowe recalls. “They thought if they could
tarnish my reputation they would tear us down. They said I had stolen a million dollars
from my own company and done things that were questionable. It became evident that
they had a problem with who I was and how I carried myself.” Skip Cooper, president of
Los Angeles’ Black Business Association has seen it all before. “Through the years, I’ve
seen a number of viable African-American firms partnered with non-African American
firms and once they establish a level of success, the non-minority investor tries to take
over the firm.” Cooper said. “The sad thing is that as successful as Victoria was, she still
wasn’t able to secure the financial resources necessary to avoid bankruptcy. That’s a
problem that plagues the African-American business community at large.”
It was, for a time, one of Lowe’s biggest frustrations. “The problem”, Lowe explains,
“is how many people do we know that we can call up and say I need a $ 5 million check.
At one point, it was $ 12 million. Maybe I could call five or six people and get a million
or two million. But what we needed was always such a large number, that it had to be an
institution or major investor, God never allowed them to come. Once I gave that up I
said, “okay, Lord I’ve done all I can do. Now, I’m just going to stand. I’m not going to
call another person.” By the beginning of February all parties were at the table
negotiating, continuing right up to the morning of February 6th at the courthouse when a
final settlement was put together. United States Bankruptcy Court Judge Vincent
P.Zurzolo began his ruling by saying that, as it had been a very unusual case, he was
going to make a very unusual ruling. He went on to grant everything that had been
presented in the settlement-without question.
With that, Beyond Staffing, LLC, a new business entity Lowe had filed paperwork on
just one week before officially purchased the assets of Alert Staffing-from the contracts
and offices to the logos and branding. “So today, we’re Beyond Staffing DBA Alert
Staffing because I wanted to keep the name,”Lowe adds. “We gave the receivables of
Alert to the bankruptcy, and it was decided that we were the best party to collect the
receivables. So, since February 6th we’ve been collecting the receivables to pay off the
bankruptcy debt. But she was still not out of the woods.
“As of February 10th we had no money-all we had was a name and the customers-no
way to make payroll, nothing. So we went from being in this bear fight to now fighting
for our lives to keep the company that we had just brought out of bankruptcy open. We
had a brand new entity with no insurance, benefits or bank accounts. We went into panic
mode trying to put everything in place overnight in order to meet a payroll that Friday
with hundreds of people in about 30 states. It was an all-night process but we got it done
and now, for the most part, we’re out of the trenches.”
Since the experience Lowe is finding that people are coming to view her a lot
differently. “In a lot of people’s minds, Adecco had put us on top. We literally had other
staffing companies that wouldn’t work with us because we were an Adecco company,
and they thought anything said to us went to Adecco. Then there were the naysayers,
who’ll always find the negative. Those that said,’we knew she’d fall at some point,
couldn’t last…too good to be true’, all of that.”
Admittedly, there are far too few stories where companies grow the way Alert Staffing
had grown. So much so that she became the equivalent of a poster child for the L.A.
offices of the SBA who referenced her story in a press release they issued in 2001. Lowe
believes a great deal of her success was owed to timing. “We came back to the market at
the right time with the right strategy back in 1997 to go after large corporate accounts
with diversity initiatives. Adecco did help us with start up capitol and we took our
strategy out to the marketplace and felt that companies really understood, not because it
was the right thing to do but because of the browning of America. Companies that wanted
to be profitable were going after new markets.”
“And staffing contracts are usually very large. With Fortune 500 companies the
average temporary staffing contract is anywhere from $ 10-150 million. One big deal and
you’re huge. Ten big deals and you’re massive.” Lowe, who had worked in staffing eight
years, started the company in her living room three months after giving birth to now
eight-year old daughter, Briana. “I started with one contract filling jobs. The next thing I
knew we had 60 people. Then I went out with a strategy to all the large staffing
companies around the country-companies like Kelly Service and Manpower Inc.-and
that’s how I ended up in a relationship with Adecco.
“We said,’Allow us to be your partner, here’s an incredible opportunity to tap into
corporate diversity programs, and we cut the deal. Unfortunately six months into the
relationship, they sent the president I cut the deal with over to Europe and I ended up
with a new partner and that didn’t work out so well.” The Adecceo Group, it seems, had
underestimated Lowe from the start. “I remember early on them saying that they felt I
could grow to a $ 50 million corporation, and I said I’m sorry I felt I could be a billion
dollar corporation.”
Growing up in St. Louis watching and assisting her Dad and Mom in the ownership
and operation of their own construction firm, Davidson Hauling & Excavating, had
instilled in Lowe-whose two sisters work with her at Alert Staffing-a keen sense of
entrepreneurship and an exceptional work ethic. “I’m the kind of leader that if there’s a
job to be done, we’re going to do it together,’ Lowe reports. “If that’s mopping the floor,
give me a mop and you grab yours. And I’m not afraid to hire people that are smarter
than I am, so we’ve developed a culture within Alert that number one, we’re a dynamic
team (and we still are). Number two, that we’re in this together, and number three, that
we walk by faith, not by sight.”
It’s a philosophy that not only made her popular with clients, but on L.A.’s black
business scene where she was often feted and enjoyed an active involvement on a host of
corporate boards, and local organizations like NAWBO (National Association of Woman
Business Owners). Said one observer,” She was a positive role model for black
businesses and entrepreneurs and almost had an open door policy in terms of helping
people and mentoring companies.”
Lowe, however, is quick to add that she’s learned a great deal through the ordeal. So,
too, has partner Roy Gardner, who was recently elevated to the position of president at
Alert Staffing and given an equity interest in the firm. “We have made some tactical
changes,” Gardner said. “It is the same strategy we determined prior to the dispute with
SBC and Adecco as we understood that the company needed to improve its operating
margins. We also needed to shed some costly business, reduce our operating expense and
to diversify our portfolio. That was a focus before the bankruptcy and we have
continued.” To that end, the Alert Staffing family of companies has grown to include five
new upstarts-H.R. Essentials, All About Marketing, Risk Works, Executive Coaching &
Mentoring, and Christian Principals in Business Seminars (Victoria Lowe Ministries)-all
of which provide services Lowe and her team have mastered in their experiences with
Alert. And Gardner has found the response to the recently re-tooled company-and its
offshoot companies-to be extremely positive.
“People are very interested in working with a minority supplier with the ability to
handle high volume accounts, that has our geographical presence, our infrastructure,
leadership and our business motto.” “ The obstacle is the stuttering economy, but we
believe that we are poised to take advantage of the staffing programs of the larger
companies and the larger companies are more likely to grow as the economy picks up
steam.” Those like the BBA’s Skip Cooper believe that Lowe and Alert are destined to
return to the forefront of L.A.’s business scene.
“The biggest testament to her management skills and entrepreneurship is that she’s
been able to come out of it (bankruptcy),” Cooper points out. “I believe, however, that
the real test lies ahead, Victoria is extremely sharp and it would be very foolish to count
her out.”