Chronicle of a Death Foretold
By Efi Landau
Last week Jerry Conca and Mikki Miller, president and executive vice-president of US
company Shopss.com, flew back to the US. They stayed in Israel for several days in an
attempt to discover what exactly happened: why Shopss.co.il did exactly what everyone
expected - collapse (the company is currently undergoing receivership proceedings).
Conca and Miller had been owners of a computer company CCM, which merged with
Shopss.com. The architect of the merger, which also involved a group of investors from
Arab countries, was Israel Rosenfeld, an Israeli businessman, whose name has been
linked with the fall of several companies and ventures. The deal was executed by Rami
Adler, general manager of OSCM, the parent company of Shopss.com.
We sat with Rami Adler and his public relations man, Moshe Dayan, at the beginning of
November in a Japanese restaurant in Tel Aviv for a talk mainly concerning the activity of
Shopss.com Israel. The name of the manager of the Israeli activity was not mentioned at
all. Adler called Rosenfeld several times to consult with him on what to say.
At the time, Adler was well acquainted with every detail of the Israeli activity, and spoke
about it with no little enthusiasm. He spoke of the new shop being opened at the time in
Dizengoff Center, about the giant trucks transporting Shopss.com merchandise and about
the planned computer assembly plant.
It appeared at the time that Shopss.com Israel was about to be a success story, in spite of
Israel Rosenfeld, owner and initiator of the idea.
At the end of that month, at the Comdex Israel exhibition, Shopss.com presented a large,
eye-catching exhibit and registered hundreds of subscribers in its campaign. According to
the campaign, each subscriber was to receive an advanced computer with a 17-inch
screen for $299.
Complaints from thousands of customers seduced by the two campaigns flowed
continually into newspapers and various consumer organizations. The company did not
meet the obligation to supply the computers within 25 days, nor in 35, 45, or 55 days. On
the other hand, it acted quickly to charge subscribers' credit cards. In order to evade the
limitation of once a month billing, a deal was actually made with the US parent company
Shopss.com, as if the purchase had been made abroad, thereby enabling the company to
bill the customer on the day after the signing, instead of once a month.
At the beginning of January, the company published a full page apology in newspapers,
explaining that the problem in supplying the computers stemmed from the unexpected
success of the campaign, and promising the computers would be supplied to all. The
announcement did not impress the Visa-ICC credit card company, which announced it
would block Shopss.com from making credit transactions. Visa-ICC announced that any of
its customers, who wanted to cancel transactions with Shopss.com, would receive their
money back, and Visa-ICC would sue Shopss.com for the money.
Publication of Visa-ICC's actions constituted a death blow to the Israeli branch of
Shopss.com. It was deluged by aggressive demands to fulfill its obligations, on the one
hand, and by applications to cancel transactions on the other. In the middle this dilemma, a
strange announcement was published that shopss.com had acquired 50% of ClassNet, an
Internet access company. ClassNet general manager Ben Oz was appointed general
manager of Shopss.com. After a few weeks, when he realized the dimensions of the
company's distress, Oz resigned his position.
Last week, it was published for the first time that the company had closed and a temporary
receiver appointed, at the request of the security company. It was announced that
ClassNet, the acquired company, had been in receivership since January.
The following is a summary of the complicated ownership of shopss.com, as far as
currently known to "Globes". Warning: the story isn't over yet.
Shopss.com Israel, a virtual commerce and shopping company, is a subsidiary of a US
company named Shopss.com, which operates a virtual shopping mall in the US, which is a
subsidiary of OSCM (One Stop.com). This company was originally called OSCAR (One
Stop Car of Florida).
The name OSCAR was linked to the fall of two companies. In the course of my research
for this article, I was told by a man who has known Israel Rosenfeld for a few years that
anyone wanting to write a bestseller should sit with Rosenfeld and write his biography.
Rosenfeld mostly avoids reporters, so this has not yet been done. What is known is that
Rosenfeld was ultra-Orthodox until about age 30. Quite some time has passed since then,
during which Rosenfeld changed his ways and was considered by the ultra-Orthodox as an
apostate.
OSCAR, which disappeared some time ago, reappeared in recent years under
Rosenfeld's management. In November 1998, Rosenfeld announced the launching of
Studio 2000, a new project, with the giant investment of $600 million. The money was to
come from various investors around the world, and Rosenfeld promised that the
guarantees for return of the money would be supplied by a British company named Motion
Picture Bonds (MPB). MPB was to be backed up for the purpose by its parent company,
London Insurance Group.
According to the announcement, the project was to been implemented by a company
named Israfilm 98. The project never got off the ground, due to a dispute between
Rosenfeld and London Insurance Group. Following publication in the "Ha'aretz" daily citing
the reasons for the dispute, Rosenfeld filed a libel suit against the newspaper.
The Studio 2000 adventure is reminiscent of another Rosenfeld project from two and a half
years ago, when he advised investors to manage their stock exchange investment
portfolios through a Wall Street investment company with a unique, loss-proof model.
There was an advertising campaign, but the project ended there.
The case of Studio 2000 was OSCAR's last bow. It was replaced in February by OSCM, a
public company, still managed by Rosenfeld, which grabbed headlines with a campaign
for distributing 25,000 iMac computers, in return for a commitment to spend $100 per
month for 36 months at an Internet virtual shopping mall named Shopss.com. The iMac
campaign reminded many Israelis of the distribution of free computers in AcTVnet's virtual
shopping mall, which in many cases was not fulfilled.
During the same period, OSCM signed a agreement to market products and
communications services of Israeli company CMR, and also developed a virtual shopping
mall in Israel, called Shopss.co.il. The company also opened a store in Herzliya Pituah,
with computer stands and salesmen helping customers to buy the products at the virtual
mall. The marketing idea - also by Rosenfeld - was original and interesting, and constitutes
an exciting combination of e-commerce and real commerce. A fleet of four trucks was
operated to transport the products to the customers' homes. Last week, the bankruptcy of
this company became known.
Who are the owners of OSCM? "Globes" received the official distribution of shares in
November 1999. OSCAR owner and former Kardan Communications general manager
Israel Letzter and IDT as a group hold 23% of the shares; Rami Adler has 13%; Aharon
Rosenfeld, an anonymous relative of Israel Rosenfeld, holds 11%, IDTI has 23%, various
manager 2%, a subsidiary 14%, and 14% is held by the public. As we shall see, this
distribution, or at least the part of ITDI, is not up to date.
And where in all this is Shopss.com today? At the beginning of 1999, OSCM sold the
business activity of Shopss.com to ACMI, a public company. OSCM received 60% of the
shares of ACMI and $5 million in cash. After the agreement was signed, ACMI changed its
name to Shopss.com. It then announced that the remaining 40% of shares were held by
investors from Arab countries. It is currently unclear what happened to those shares.
Before that, in June 1999, Rosenfeld resigned his position as general manager, became a
consultant to the company, and transferred management to accountant Rami Adler.
At the beginning of October 1999, OSCM reported sales of $80 million in the third quarter
and expected sales of $500 million in the near future. "Globes" revealed for the first time
that the source of the income was to be a large deal with a group of Arab businessmen.
It also turned out that that same group of Arab businessmen, called ITDI, was also a
partner in both OSCM and Shopss.com. Adler told "Globes" that ITDI has purchased 30%
of Shopss.com from the original owners and OSCM 60%. A $25 million private placement
took place, which diluted the shareowners, so that OSCAR remained with 57%, the
original owners with 9%, and ITDI with 34%.
This was the first version of the deal. The second version was published in February,
following an announcement by OSCM to the stock exchange in the US, when the share
(under the symbol OSCRE) was still listed. According to this version, the Arab group of
investors acquired 80% of Shopss.com at a company value of $110 million. In Israel,
people thought that Shopss.com Israel was involved, and the newspaper headlines misled
readers.
It now turns out that all OSCM announcements up to this point were virtual. The
communiques were based on assumptions, not on signed contracts. That was also the
case with the October announcement of revenues of $80 million and expected revenues of
$500 million, and with the February announcement. The deal never took place.
Adler out of the picture
In November, Rami Adler spoke as if he were leading Shopss.com Israel activity, while
Rosenfeld actually sat behind the scenes and managed it. Today, the roles have been
reversed. Rosenfeld has no problem saying he's there, while Adler is doing his best to
avoid having his name associated with the Israeli collapse. He even counts OSCM among
the victims.
"Globes": You are general manager of OSCM, which has holdings in Shopss.com, which
is the parent company of shopss.com Israel R.I.P.
Rami Adler: "We hold shares, but we do not have control".
But you founded Shopss.com Israel.
"I didn't manage it, I wasn't in its offices. I wasn't involved in the story of the computers and
the sales".
You sat with me and with Moshe Dayan, your public relations man, and spoke
enthusiastically about the activity of Shopss.com Israel. You were familiar with all the
details. You said you were setting up a computer assembly plant. Those were the same
computers, for which many claim that money was collected, but which were never supplied.
Now you say 'I wasn't involved in the story of the computers and the sales'.
"I wasn't responsible and I did nothing. OSCM initiated the idea of the virtual shopping mall
Shopss.com. All the activity was there, not in OSCM".
And what is OSCM doing now?
"OSCM isn't doing anything right now. It's an inactive company".
You're disassociating yourself from what happened to shopss.com?
"I am absolutely disassociating myself from it. I wasn't involved".
Don't you think the contradiction between what you say now and what you said in the
"Globes" interview is odd?
"Not really".
What about the deal with the Arab group? You spoke about it with great enthusiasm five
months ago.
"A deal with Arabs? I'm not involved in it."
On February 3 of this year, Rami Adler filed suit in the Tel Aviv District Court against Israel
Letzter, one of the owners of OSCM, through IDT. The claim stated that Letzter had
committed himself to transfer to Adler's possession $1.5 million in company shares, and
failed to do so. According to Adler's suit, the distribution of the company's share differs
than that described by Adler to "Globes" in November.
This is perhaps the first official evidence that Israel Rosenfeld holds OSCM shares. A
week ago, Rosenfeld was still stubbornly claiming that he held no shares.
Adler: "I filed a suit. I have an agreement with him, and he didn't give me shares in OSCM,
which he is obliged to give me. It is a personal suit, and I assume we will arrive at a
compromise".
"Globes" has learned that OSCM is preparing a very un-personal suit against Letzter for
fraud.
There is a global network.
Already in November, when Adler and Rosenfeld spoke of $500 million in expected
revenues and a deal with Arab investors, they were not talking just about a virtual shopping
mall, but about worldwide communications services. The great dream of setting up a
global Internet telephony and fax network is much grander than the shopping mall dream,
and much more concrete. Communications involves physical materials, lines, and
specially designed servers.
As of now, Shopss.com Israel has been buried alive, as has ClassNet, the Internet
company it acquired. The shares of shopss and OSCM have also been practically buried
alive. The first (SHPS) stood at $0.16 at the beginning of the week, compared with $12.5
six months ago, while the second has plunged to $0.72.
The virtual shopping mall company Shopss.com is still alive and kicking, and operates the
US Shopss.com site. On February 23, it inaugurated a new Internet telephony service. The
service, called Ominal, allows subscribers calls unlimited in time to all areas of the US,
Canada, and Puerto Rico for $9.95 per month, collected through credit cards.
The calls are made through a 1-800 free call number, which allows direct dialing to the
desired number. Communications takes place through Internet telephony, with reasonable
quality. The price is simply amazing, and can be assumed to involve a loss, considering
that every call costs the operator several cents. Readers who are US residents should
hurry to the site to subscribe to the service, because Shopss.com intends to double the
price.
As of now, two of the ten planned network stations, each with 48 lines, are serving the
existing customers. Shopss.com customers are one type of customer that uses this
network. A second type is customers purchasing pre-paid phone cards, which will be sold
around the world to travelers to the US. Involved in this operation is - surprise - the ITDI
group of Arab investors, which signed an unrealized deal with Shopss.com and
theoretically holds shares in it.
The network for which pre-paid phone cards are being sold is called ITDI International.
Although the group operates from Israel, it has no activity here. This is because this is one
of the only countries in the world which forbids provision of Internet telephony services
outside the framework of the three international franchises, and also because the
company's investors don't want to know or hear that the company has any link whatsoever
to Israel.
The network is actually being set up by a company named BCM. The owner of the license
and the initiator of the network is none other than - you guessed it - Israel Rosenfeld. As
always, however, he is not a manager, but a consultant. It is said that the Arab investors in
the network have blind faith in him.
Adler may be claiming that OSCM is currently doing nothing, but it turns out that the idea is
not dead. Only the misleading announcements trying to exploit a still unborn venture for
stock exchange needs have died.
"The deluge"
ITDI's manager for marketing is Isabel Alaia, who operates from an office in Ramat Gan.
She was very surprised to be called. "Where did you get the number? Why should I say
anything? What do you care if there's no activity in Israel? There's no connection at all to
Shopss.com", were her initial reactions. She found it difficult to answer the claim that the
company's technology and entrepreneurship came from Rosenfeld and were Israeli.
"Globes": Will the network operate only in the US or also in other countries?
Isabel Alaia: "We are trying to close a deal with an Arab country. It's still being negotiated.
We are examining markets with European and Arab countries, with no connection to
Israel".
What is your connection to OSCM?
"It's a nominal connection. We aren't linked at all. The problems in Israel have nothing to do
with us. We tried to do something jointly".
What is happening with you venture with Shopss.com to set up similar virtual malls in Arab
countries?
"We had a project to sell Shopss.com to investors from Saudi Arabia. We are trying to do
something in the future".
Has the deal fallen through?
"Not really.
A source close to Shopss.com's business claims that the deal with the Arab investors fell
through because of the publicity in Israel, and that Israel Rosenfeld has failed again and
again, because he simply doesn't know how to manage.
The web sites of Shopss.com
There are quite a few Internet sites linked to the Shopss.com story. The main one is the
US site www.shopss.com. - a virtual shopping mall, like many others, offering a wide
variety of food, health, media, computer, software, office, perfume and cosmetics
products.
As mentioned above, the site also offers the Ominal service - calls from the US to
anywhere in North America for only$9.95 per month. For some reason, only the computer
company CCM, which was previously acquired by OSCM, and the owners of which
currently manage Shopss.com, is listed in the category of information about the company.
Another interesting site OSCM's site, www.oscm.net. When you enter OSCM Group on the
site, you get very interesting data, mostly widely divorced from reality, according to which
the company has 200 employees and sales reaching $200 million, and the company
operates in the US, Israel, Jordan, Egypt, Hungary, Germany, Britain, Brazil, Japan, the
Philippines, and India. The number of IP servers it operates reaches 80, and it has
250,000 subscribers. The numbers are very impressive, but any connection between them
and reality is purely accidental.
The Shopss.com site contains a link to a fax plus service, which in turn has a link to a
profile of OSCM. There it says that OSCM plans to transfer to a completely different field -
that of high speed access to Internet, interactive television, electronic books, and
electronic B2B. Happy is he who believes.
The Israeli site shopss.co.il opens with an announcement in bold saying that as of (date
not specified) Shopss.com will operate in Israeli solely through the Internet. Customers
who paid for a computer and received neither a computer nor a refund from the credit card
company are asked to send all relevant details by mail, and they will receive their money
after 45 days, after clarification.
The company also announces that, due to the great pressure created, many customers
received computers or refunds illicitly, and it will publish a list of them on the site.
One site of shopss.com victims announces that on April 9, material will be forwarded to an
attorney for the filing of a class action suit against the company. The site calls upon
additional victims to join the class action suit, as well as the complaint against the
company filed with the police.
Another victims' site announced that it has in hand the names of 80 customers, to whom
the company did not fulfill its promise to supply them with computers by April 3. The site
says that an attorney has been contacted in order to file a class action suit, and complaints
have been filed against the company with the police. Personal complaints with the police
against Israel Rosenfeld are also planned.
Published by Israel's Business Arena on April 11, 2000 |
