TSER article explains the sell off. Anyone still hot on this one?
Published Friday, March 3, 2000, in the Miami Herald
High-profile delivery firm struggles for life
Link Express engulfed by debt, suits
BY JACK REJTMAN
jrejtman@herald.com
The founder of Link Express -- a Fort Lauderdale delivery company under fire for bouncing checks, stiffing vendors and delaying paychecks -- used company accounts to gamble on stocks as a day-trader, to put a down payment on his home and to invest in a now-defunct South Beach night club.
The revelations come six days after Link Express employees from as far north as Jacksonville delivered and abandoned 23 trucks at company founder Paul Johnson's exclusive Deerfield Beach home to protest not getting paid.
Johnson, chief executive of Link Express, characterizes the revelations and recent protest as ``sabotage' orchestrated by a group of high-ranking executives who recently resigned. Johnson said employees participating in the protest were misled and returned to work this week after their paychecks cleared.
Johnson did not dispute using company funds for personal reasons. He said he put money into Link and was entitled to take it out.
But Link Express -- once the toast of Fort Lauderdale's entrepreneurial community -- is struggling to survive, with lawsuits and debt mounting daily. Johnson and his company had been rising stars in South Florida, with billboards at Pro Player Stadium and National Car Rental Center, and accolades for charity work with chambers of commerce.
Today, Link has 100 employees still shipping packages on behalf of companies from South Florida to Jacksonville. But investors, employees and clients increasingly are concerned the company may not be able to deliver its packages, payments or promises.
Fast-talking and ever-confident, Johnson created Link in 1997, promising to offer technology and systems better than United Parcel Service and Federal Express.
The 28-year-old Canadian consultant, who works in South Florida on a business tourist visa, raised more than $14 million from 340 investors, and signed up clients ranging from walk-in pack-and-ship customers to major accounts such as BellSouth Mobility.
Johnson owns about 55 percent of Link; investors own the rest.
As Johnson expanded the company to nearly 200 people, he promoted charity fund-raisers and signed sponsorship deals with the Florida Panthers and Florida Marlins.
But Link's business practices angered UPS, which dropped Link as a customer -- a move that prompted Johnson to sue the global delivery company. Then, beginning last fall, Link began missing payrolls and defaulting on payments.
Despite Johnson's disclaimers, a paper trail indicates Link's cash crunch is not solely the product of his dispute with UPS nor his inability to raise investment funds. Documents reviewed by The Herald show:
In 1998, Johnson opened a brokerage account at W.J. Nolan & Co. in Link's name, using Link's federal employer identification number. In his application, Johnson listed himself as the sole beneficiary of the account, which was used to day-trade penny stocks, and buy stock options on margin.
Trades ranged from a few hundred dollars to a few hundred thousand dollars, such as a July 13, 1998, purchase of 32,000 shares of Globalink Inc. for $200,117.81 including a $3,923.71 commission and an $8.50 fee.
Johnson acknowledged opening the account but said the firm erred by putting Link on the account. Johnson said he traded and ultimately lost less than $100,000 but that he provided the money -- not Link. Johnson also said he later switched the account, which remained open for 18 months, to his name.
Although asked, Johnson did not provide documents showing he switched the account or traded with his own money.
In mid-July 1998, Johnson submitted a notarized wire transfer of $50,000 from the Link brokerage account to his own private account at Barnett Bank. In an attachment signed by Johnson, he explained that he needed the money to be wired ``immediately and today. I need the funds to close on my new house this afternoon.' Johnson put $150,000 down on a $480,000, 3,390-square-foot waterfront home in the Cove in Deerfield Beach.
For the past four months -- while Link was experiencing its worst cash crunch and employee paychecks were bouncing -- Johnson made payments in excess of $100,000 from Link's Citibank corporate account to himself for personal travel and for contractors at the South Beach nightclub Bacchanalia.
Johnson was trying to complete the nightclub, which he owned with family and friends, in time for an anticipated millennium bash.
The bash turned out to be a bust, as most people opted to ring in the new year from home. Bacchanalia closed its doors on Jan. 7.
Johnson said he has loaned Link $1.4 million since the company's money problems began in October.
He said he has taken about half of that back as needed to meet other obligations.
Johnson produced a fax from the Fort Lauderdale law firm, English, McCaughan & O'Bryan, that stated through Jan. 20, ``a total $859,000 has been disbursed by us from your personal funds to, or for the benefit of, Link Express.'
Johnson did not provide documents detailing the source of those funds.
He also declined to provide a breakdown of the source and timing of the $1.4 million in loans.
Johnson said he is trying to reconstruct the records because he used an accountant sparingly during the past four months to save $25,000. The last time Link was audited was in 1998.
Link routinely has issued bad checks to vendors, contractors and employees. The company bounced a $62,137.25 check in January to Illinois company Fleet Fueling. It bounced an $89,900 check dated Dec. 24 to computer consultant Trandata. During a 16-day span in December, Johnson wrote 90 checks that were returned for insufficient funds on a now-closed account with Atlantic Liberty Savings in Brooklyn, according to a bank statement.
Johnson blamed Link's law firm for the 90 bounced checks, saying it botched the money transfers. Johnson said he never knowingly wrote other checks that bounced, which would be a crime.
Johnson said he has raised $850,000 from investors this week to pay past-due bills, outstanding paychecks, federal withholding taxes and to reactivate Link's health insurance and dental plan, which lapsed in January.
SOURCE UNKNOWN
Broward investment banker John Cook, who raised most of Link's $14 million, said he did not know the source of the new money. Johnson would not disclose names of the new investors.
Trandata President Kaz Chary laughed when he heard that Johnson pledged to give Chary partial payment Thursday for an outstanding bill of $100,000. Chary, who contracted to work at Link through a recruiter last May, said he is owed more than twice that amount.
Chary said he paid contractors $150,000 to complete work at Link, believing Johnson's assurances that he would be paid.
For seven months, Chary waited. The back-breaker came just before New Year's, when Chary said Johnson instructed him to cut short a family vacation in Connecticut to pick up his check for the full amount.
Chary borrowed $1,200 from his mother to buy a last-minute ticket to Fort Lauderdale and flew in Dec. 31. After waiting six hours at Johnson's home, Chary said Johnson told him to come back later.
When Chary returned, he said Johnson would only pay him if Chary agreed to serve as chief information officer for Link and for a Miami penny stock that Johnson had acquired through a reverse merger, Revenge Marine. Chary balked and walked out.
FLABBERGASTED
Chary was flabbergasted to learn weeks later that Johnson had acquired a defunct boat maker named Revenge Marine and renamed it eTravelserve.com. In a press release, Johnson listed Chary as chief information officer in a press release.
``I am not an officer in Link or any of his companies,' Chary said. ``He's trying to make false statements and cash in on eTravelserve.com.'
Flanked by former K-Mart Chief Executive Joseph Antonini in a conference call with investors last week, Johnson portrayed the Internet holding company as a combination of auction site eBay, discount retailer Priceline.com and discount air-fare Web site Travelocity. He also promised the first portion of the Web site, eAuctionserve.com, would be completed this week with the full site being operational within two months. As of late Thursday afternoon, eAuctionserve.com wasn't ready. Johnson said Wednesday it should be ready within seven days. TSER shares closed at $1.08 Thursday, down 3 cents on the day.
Antonini could not be reached for comment.
Johnson dispelled rumors that he will merge Link with eTravelserve.com. Rather, Johnson said he plans to merge Link with a Colorado oil products company that has publicly traded stock.
Johnson said he has been planning the deal for two months. But in interviews with the Herald within the past month, Johnson said that he would take Link public on its own through an initial public offering.
By merging Link into an existing public company, Johnson will not be required to make the same disclosures required by the Securities Exchange Commission in an initial public offering.
DIFFERENT SCRUTINY
Johnson said Link should not be held to the same scrutiny as a public company.
`` A lot of people think something peculiar or strange is going on. But when a company is growing the way we are, it's not like a normal corporation,' Johnson said. ``A lot of people are holding us to the standards of a public corporation and we are not.'
Gary Karp, an account executive with Sprint PCS, said Link may not be a public company yet, but that doesn't excuse the company from paying its bills.
``The way they handled this thing was totally unbelievable,' said Karp, who had to return a $10,000 commission check after Link refused to pay a $38,000 bill, alleging nonperformance. ``There was just a lot of deceit in the way it was done. They are going to hang everyone who gets near them.' |
