11th-Hour Buyer's Cold Feet The Last Straw, Says Wolf

After last-minute efforts to sell Wolf Group's New York office failed, Larry Wolf pulled the plug on a network he said was no longer financially viable. The move uprooted 80 staffers and at least eight clients billing more than $140 million in New York and Toronto. Wolf Group Integrated Communications' financial pressures had been building for some time. The Toronto-based network had a costly 10-year lease on 40,000 square feet in New York for interactive arm Viaduct, which folded in 2001 after only a year, according to sources and the space's real-estate manager. It had also been in negotiations over $2 million owed to Jeff Faircloth, CEO of National Yellow Pages Marketing in Atlanta, which Wolf bought in November 2000 for $5 million. Those commitments continue to be sorted out. But Wolf was also behind on media payments. Its total debt could not be ascertained. On Jan. 30, Wolf Group New York CEO Paul Kelly told his 50 staffers that the office was closing immediately, citing the debt from Viaduct, lost revenue and a lack of recent account wins. Kelly resigned two days later. Wolf, chairman of the network, said he had been close to selling the office. But when ecd Mike Rogers resigned Jan. 30, the unidentified buyer pulled out, Wolf said. Rogers said he is starting a shop called ML Rogers and taking 25 staffers with him. The office's biggest account, The Scotts Co., worth $80 million, will shift its business to ML Rogers, client svp of North American marketing Gordon Hecker said. Flavour Advertising in Toronto, the original Wolf Group agency, which employed 30, closed last Monday. "I think the primary problem was New York," Wolf said last week. "When we got an accurate fix on the numbers [the week of Jan. 26], New York going forward was not a viable business. It would have been operating at a loss. It would have depleted cash that we would have used to pay off our creditors. "I have no plans to continue in the ad business," he added. "My wife has no aspirations or desires at her stage of life to be in this business, nor do my sons want to run this network." Wolf acknowledged the network is behind on media payments and is dealing with other creditors. "Right now we have our accountants going over all the numbers, and our intent is to deal with our media obligations as quickly and expeditiously as possible," he said. "I am reasonably confident that we and the other shareholders will get nothing," said Gregory Garville, president and COO of Union Capitol Corp., a minority shareholder. Wolf started building a network through acquisitions in 1997, when it purchased Meldrum & Fewsmith in Cleveland. It acquired Partners & Shevack in New York in 1998. Executives at Wolf offices in Cleveland (35 staffers) and Rochester, N.Y. (70 staffers, including 20 at a satellite office in Atlanta) are negotiating management buybacks. "The network vision from the start was not clear," Sarah Melamed, president in Cleveland, said last week. Sharon Napier, CEO of Rochester and Atlanta, said her offices will be renamed Partners & Napier. Clients include Kodak, Arbor Mist and Bausch & Lomb.Some Wolf employees said they have contacted lawyers. "We were just told the company was insolvent," said Craig Cooper, former creative director at Flavour. "There is no money to pay the bills. We're all owed a lot of money."

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11th-Hour Buyer's Cold Feet The Last Straw, Says Wolf

Deanna Zammit

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Deanna Zammit