Tales of a Corporate Collapse: Gov't Contractor Edition



  • The company had been in transition (read: downward spiral) for months - having graduated from the 8A program, and getting transitioned from the Prime on their main government contract to a subcontractor role, both the top and bottom line revenue declined. The management, while being loyal to the staff, held on to people for far too long even when it was clear that those people would never find new billable work under that contract or otherwise.

    Fast forward about 6 months and the company is in dire straits (but the C Suite people refuse to tell the ground staff) - they've been taking out, but withholding contributions to staff 401(k), health insurance payments, and taxes (note there is currently a federal investigation into these activities). Instead, we have a holiday party where we announce that the publicly traded company is going to become Employee Owned. In addition, they file Chapter 11 Bankruptcy in order to take the company private.

    This starts a veritable shit storm, culminating with the CEO being forced out, him (probably illegally) surrendering his ownership for $25K, and him sending an email with a salutation of "Love" to which we all thought it meant he was about to off himself.

    At this point, the various board members start fleeing like cockroaches and the round-robin of temporary CEOs starts. The longest stint was 10 days, the shortest was 72 hours. All of them had some previous fiduciary responsibility for one of the things the feds are now investigating, and they showed up to "fix" it before the music stopped and the cash was gone.

    Then, it hits the rank and file - we miss a payroll. The new prime (on that major contract I spoke about previously) terminates our sub contract the next day (a Saturday), and informs all of our staff that they must "re-badge" with the prime in order to show up to work on Monday. It turns out, that they've were actively recruiting many of our staff during the turmoil - which was expressly forbidden in the subcontract agreement between the two organizations (a standard anti-poaching clause)*.

    At this point, the lay of the corporation is this: the publicly trade company itself owns a majority of the shares an voting interest of the company. There are no board members an there are no employees of the holding company. The wholly owned operating company below it has 2 board members who have been told to STFU and GTFA and no employees (they've all been fired or quit**). The companies the operating company owns have no board members and no C Suite executives. It's almost literally a ship with no captain.

    And now it starts to get crazy (yeah, I know that wasn't insane enough?).

    After the missed payroll on Friday (keep in mind we are in bankruptcy at this point, so we have lots of protection from debts), someone willing to buy the ground level operating companies comes along. They're constrained by the court, so they can't just invest money and pay the missed payroll, but they work within the constraints over the weekend and the payroll is made on Monday. and can't make an official offer to purchase the corporate assets (read: the people and contracts) until a court hearing. Before that hearing takes place, it turns out that some paperwork wasn't filed, so we're discharged from bankruptcy.

    This is actually a huge problem; many of the assets the company holds (read: the people and contracts) are collateral for much of the debt, meaning they can no longer be sold without the debtor's approval (there are ~20). One of the operating companies (Company Z), which was recently acquired, isn't encumbered by this debt, but has a lot of its own legal and debt issues.

    Ultimately, 10 days after the missed payroll, the two remaining board members, who showed up to help fix this problem when the bankruptcy attorney called, choose to accept the offer to buy this unencumbered company because it's the only offer on the table, and they have a responsibility to return the best value to the owners on these decisions. Had the sale not gone through, that Company Z would have essentially lost all of its value for various reasons. The structure of the organization is such that there was one back office company (Company B ), and then a number of front facing companies. Following the sale of Company Z, the board planned to fire most of the Company B staff since it represented 50% of the whole organizations remaining employees.

    Needless to say, the shareholders of the publicly traded company did not like the sale of Company Z ... and attempt to remove the two board members (which they have no legal way to do). To do this, the investors decide that they do have some majority voting authority (which doesn't exist because of the aforementioned CEO return of ownership to the company), and "install" the head accountant (an employee of Company B ) as CEO of all of the companies the day after the sale of Company Z. They proceed to remove the two remaining board members and attempt to begin to unwind the sale of Company Z.

    It is important to note at this point that the company pays bi-weekly.

    The "new" CEO proceeds to attempt to issue payroll, for which he has full knowledge cannot be made. Because of the structure of the ground level companies, payroll Company B is paid, but the client-facing employees are not paid. They attempt to claim that "nobody" got paid.

    At this point, the board members who the CEO tried to fire decide that the shareholders had no authority to appoint him. They "remove" him as CEO, and then fire all of the Company B staff. The board members then enter into an agreement with the now sold Company Z for the services Company B previously provided.

    Because of how payroll works, the fake CEO refuses to turn over the 2nd factor key to Company Z - mostly because he's a raging asshole. The people who purchased Company Z pay the front office employees from their own assets, assuming they'll eventually balance the problem when they gain control of the bank accounts.

    At this point, ground level staff learn that our health insurance has been terminated due to non-payment of premiums by the company.

    Fast forward 10 days, and, on a Wednesday, I am sent to the remote office where all of Company B staff were located as a "cleaner" - my mandate was "so we have no idea what is going on, just make decisions and close it down within a week". Keep in mind that we've not paid the rent for this location for about 6 months and they are not happy with us. The staff of the location we were renting from are completely awesome, friendly, and helpful. I wouldn't have been able to accomplish my job without them.

    I land back home on Tuesday at midnight. On Wednesday, we learn that the head accountant and former fake CEO has gotten the bank to suspend access to all of the bank accounts. At this point, it will take 60-90 days of court battles to get hold of that money. Its about a week since the last paycheck, and we are all owed for about 2 weeks of work. The board members inform us we are all fired because they can't pay us and have no idea if or when that might happen.

    Oh, and the icing on the shit cake is that, since the $25K was not paid within 30 days to the originally forced out CEO, he regained his ownership stake.

    And that's how a company dies.

    *I got to play digital forensics person on this, so I saw the emails - it was some of the worst OpSec ever.
    **The Douchebag in Possession is legally prevented from having his resignation accepted, so he, technically, is the CEO on paper though he peace'd out once he "fixed" the 401(k) issue***.
    *** It didn't actually get fixed.

    Edits were to fix Markdown, add a sentence, and I a word.



  • I can't say I understood all of that, but it sounds business people would find plenty of wtf to enjoy here.



  • @cartman82 I tried to distill the last 4 months of crazy while anonimyzing ... given that they are publicly traded, and the federal investigation - so it could be a little to distilled.

    From the first CEO fire to now is about 1.5 months of time.


  • Discourse touched me in a no-no place

    People should've GTFO on the first missed payroll. Holy shit that's bad.



  • @lolwhat Most did - but that's the subject of a lawsuit that the dying company would easily win, to the tune of $5MM-$15MM.

    Edit: including me - though technically I was still employed by them for this timeframe (Note: it's a long and complicated story about why and how that was even legal).



  • Note:

    I know much of the above (and much more that I've not posted) because the two weeks prior to my ship out to the remote office to play "cleaner", I played "fly on the wall" with one of the board members.

    We were traveling together for work, and it's kind of hard not be part of a meeting when the office is a car traveling 60MPH. I was merely IT at this family of companies - though I was employed by the front office, because my original duties were client facing IT support.

    The number of curse words/death threats I heard on that trip were insane.


  • Discourse touched me in a no-no place

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    "fixed"

    Is that like what you get the vet to do to an overly-active tomcat?


  • Impossible Mission Players - A

    This sounds like a great script for one of those fast-talking YouTube videos.

    Someone get to narrating this!,

    I nominate @blakeyrat since he's the only (talking) YouTuber I know from this forum...



  • @Tsaukpaetra Give me moneys.


  • Winner of the 2016 Presidential Election

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    The number of curse words/death threats I heard on that trip were insane.

    Sounds like any meeting that includes my manager + 2.



  • @Tsaukpaetra said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    I nominate @blakeyrat since he's the only (talking) YouTuber I know from this forum...

    There's at least @Remy, too.


  • Impossible Mission Players - A


  • area_pol

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    lawsuit that the dying company would easily win, to the tune of $5MM-$15MM

    Against whom is the lawsuit?

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    former fake CEO has gotten the bank to suspend access to all of the bank accounts

    But if the company is bankrupt, aren't the bank accounts empty anyway?


  • sockdevs

    @Adynathos said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    But if the company is bankrupt, aren't the bank accounts empty anyway?

    bankrupcy for companies works very diferently than it does for people... so no, the bank accounts are not necessarily empty.

    they do almost certainly contain not enough money to service the company's debt though.



  • @Adynathos The company that terminated the subcontract after the first missed payroll.

    Bankrupt doesn't mean no money - there are still outstanding invoices, and the aforementioned lawsuit.



  • @rad131304 Dude, where is this? In New York, whoever is responsible for signing paychecks would have been in jail halfway through your story.

    You don't mess with payroll. Most companies that miss a payroll simply shut their doors and hopefully the employees see part of their paycheck after the assets are sold and divided up.


  • Discourse touched me in a no-no place

    @Jaime said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    You don't mess with payroll.

    QFFT.

    In the UK, if you miss payroll then all your staff will just go “fuck you then, constructive dismissal”.



  • @accalia said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @Adynathos said in Tales of a Corporate Collapse: Gov't Contractor Edition:
    bankrupcy for companies works very diferently than it does for people... so no, the bank accounts are not necessarily empty.

    they do almost certainly contain not enough money to service the company's debt though.

    The latter is in fact almost exactly the definition of bankruptcy (individuals) or insolvency (companies), to use UK terminology. In the simplest possible terms: cannot pay debts.

    (Speaking here from the point of view of the creditor in a Creditor's Petition bankruptcy case. A word to the wise: this tends to be a hollow victory, and Pyrrhic, too.)


  • sockdevs

    @Steve_The_Cynic said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    to use UK terminology.

    that's because your financial system is somewhat sane.

    ours would make Cthulu proud.


  • sockdevs

    @accalia Our financial system isn't that sane; after all, bankers can lose all our money but still get a massive bonus


  • sockdevs

    @RaceProUK said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    Our financial system isn't that sane;

    saner than ours

    @RaceProUK said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    bankers can lose all our money but still get a massive bonus

    first thing we'll do: Kill all the lawyersbeancounters.



  • @RaceProUK said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    ... after all, bankers candid lose all our money but still getgot a massive bonus

    Dubbed in American English.


  • Discourse touched me in a no-no place

    @accalia said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    first thing we'll do: Kill all the lawyersbeancounters.



  • @dkf said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @accalia said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    first thing we'll do: Kill all the lawyersbeancounters.

    To the beancounters: The lawyers did it.
    To the lawyers: The beancounters did it.
    :popcorn:



  • UPDATE:

    The new Chairman of the Board of the Holding company asked me if I have any access that will help him (besides my own password which is, maybe, not yet invalid, I don't know). I told him that, since I'm no longer an employee of the company, that I needed legal protection before I attempted to enter a corporate network that I no longer have authority to access. I'm no longer an employee, so any ingress is a violation of a lot of US Federal laws.

    I told him that I would retrieve the passwords file without any payment (they owe me $8K) assuming my password was still valid, but any additional work besides providing the file and its password was at $150/hr. I feel that it's what I would have done at the termination of my employment (if there had been someone to turn it over to). I provided him with my standard consulting contract with the above provisions.

    He replied that the bank accounts are locked so he can't pay me. I told him that this is just about the file that he wants and I just need legal protection to enter the network.

    I've not heard back from him.

    Note: I did, independently, confirm that he's actually taken over the above shit show.


  • Winner of the 2016 Presidential Election

    I love all this "missing payroll means the company is DONE!"

    Over here it takes 6 months for anyone but the employees to notice. And they didn't quit because the job market is so shitty that most people are afraid they won't find another job.


  • Winner of the 2016 Presidential Election

    @Onyx said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    Over here it takes 6 months for anyone but the employees to notice. And they didn't quit because the job market is so shitty that most people are afraid they won't find another job.

    They worked for over six months without pay and viewed that as better than the alternative? :wtf::question:


  • :belt_onion:

    A friend of mine worked for a company that had musical paychecks. The payroll account was just a bit short.

    Come payday the office would empty out, as everyone* grabbed their paychecks and made a beeline for the issuing bank. Last person's check bounced.

    *Except the payroll department, which would cash their paychecks before handing them out to everyone else.


  • Impossible Mission Players - A

    @Greybeard said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    musical paychecks

    Wow. No fair cheating by enrolling in Direct Deposit, eh?


  • :belt_onion:

    @Tsaukpaetra said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    enrolling in Direct Deposit

    Thank you for volunteering to be the one whose payment bounces.



  • @Greybeard said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    grabbed their paychecks and made a beeline for the issuing bank

    I still can't comprehend just how much stuck in the past the US banking sector is...


  • Discourse touched me in a no-no place

    @Deadfast said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    I still can't comprehend just how much stuck in the past the US banking sector is...

    Every company in Murica that's employed me for the past twenty years has used direct deposit. In fact, I don't think any of them (except perhaps the first couple) provided the option of live checks for salary. They'd usually issue a live check to me for the very first pay period, or sometimes for bonuses; the rest have been strictly via DD. So, at least some companies 'round these parts aren't stuck in the past - on this front, anyway...


  • Winner of the 2016 Presidential Election

    @Dreikin said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    They worked for over six months without pay and viewed that as better than the alternative?

    Alternative is not losing any chance of severance, no unemployment support and a dubious chance of getting another job. Our (recorded) unemployment rate is about 16% currently, which doesn't count many people not counted towards that statistic due to not reporting to the unemployment services or working abroad seasonally. Also, if you're over 40 your chances of getting another job are very slim unless you're an engineer or something.



  • @lolwhat Even so, the popularity of such archaic and deeply insecure system baffles me.



  • @Onyx said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @Dreikin said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    They worked for over six months without pay and viewed that as better than the alternative?

    Alternative is not losing any chance of severance, no unemployment support and a dubious chance of getting another job. Our (recorded) unemployment rate is about 16% currently, which doesn't count many people not counted towards that statistic due to not reporting to the unemployment services or working abroad seasonally. Also, if you're over 40 your chances of getting another job are very slim unless you're an engineer or something.

    That's not strictly true in the US; it depends on your state. The employer is also, likely, on the hook for a lot nastier problems in the US if they accept work they agreed to compensate you for and they knowingly can't compensate you for. They almost always have every incentive to fire you before they can't pay you, unless the people running things like jail.

    Like I said, it depends on the state you live in, though, as labor laws vary greatly.


  • Grade A Premium Asshole

    @lolwhat said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    Every company in Murica that's employed me for the past twenty years has used direct deposit. In fact, I don't think any of them (except perhaps the first couple) provided the option of live checks for salary. They'd usually issue a live check to me for the very first pay period, or sometimes for bonuses; the rest have been strictly via DD. So, at least some companies 'round these parts aren't stuck in the past - on this front, anyway...

    Almost all states (that I am aware of anyway) require there to be an alternative to direct deposit for payroll. Some people don't want, or can't get, a checking account, etc. In those cases, most payroll companies have an alternative such as a variation on the Visa check card. In California, you can elect for a paper check if you request it, which is a total pain in the ass for some companies to do.

    But also, most companies won't even mention these options. They just give you the direct deposit form and only address the other options if the employee brings it up.


  • Grade A Premium Asshole

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    That's not strictly true in the US; it depends on your state. The employer is also, likely, on the hook for a lot nastier problems in the US if they accept work they agreed to compensate you for and they knowingly can't compensate you for. They almost always have every incentive to fire you before they can't pay you, unless the people running things like jail.
    Like I said, it depends on the state you live in, though, as labor laws vary greatly.

    I would wager that outside of California and New York you are entirely wrong about this.

    I know in our state no such protections exist, nor in any state I have ever supervised or employed people in. I was once shorted ~$12K in wages and bonuses until the bankruptcy was all processed. It took almost a year. There were no legal ramifications for the owners.


  • Discourse touched me in a no-no place

    @Polygeekery said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    most companies won't even mention these options

    I suppose my cynical self should have figured that one.


  • :belt_onion:

    @Deadfast said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    I still can't comprehend just how much stuck in the past the US banking sector is...

    Sure, you could use modern methods in this situation. As I mentioned previously, thank you for volunteering to be the one left without their money. And good luck re-presenting your non-physical instrument next time the payroll account is topped up.



  • @Greybeard said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @Deadfast said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    I still can't comprehend just how much stuck in the past the US banking sector is...

    Sure, you could use modern methods in this situation. As I mentioned previously, thank you for volunteering to be the one left without their money. And good luck re-presenting your non-physical instrument next time the payroll account is topped up.

    It's not as if your damn physical medium is so great, either.



  • @Greybeard said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @Deadfast said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    I still can't comprehend just how much stuck in the past the US banking sector is...

    Sure, you could use modern methods in this situation. As I mentioned previously, thank you for volunteering to be the one left without their money. And good luck re-presenting your non-physical instrument next time the payroll account is topped up.

    If the choice of how your salary gets paid determines whether you get paid at all, maybe instead of switching to cheques you should just go all the way and demand cash. Or here's a novel idea, find a different employer because soon you will get paid fuck all, no matter what payment method you demand.


  • Winner of the 2016 Presidential Election

    @Onyx said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @Dreikin said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    They worked for over six months without pay and viewed that as better than the alternative?

    Alternative is not losing any chance of severance, no unemployment support and a dubious chance of getting another job. Our (recorded) unemployment rate is about 16% currently, which doesn't count many people not counted towards that statistic due to not reporting to the unemployment services or working abroad seasonally. Also, if you're over 40 your chances of getting another job are very slim unless you're an engineer or something.

    Where do you live again?



  • @Polygeekery said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    That's not strictly true in the US; it depends on your state. The employer is also, likely, on the hook for a lot nastier problems in the US if they accept work they agreed to compensate you for and they knowingly can't compensate you for. They almost always have every incentive to fire you before they can't pay you, unless the people running things like jail.
    Like I said, it depends on the state you live in, though, as labor laws vary greatly.

    I would wager that outside of California and New York you are entirely wrong about this.

    I know in our state no such protections exist, nor in any state I have ever supervised or employed people in. I was once shorted ~$12K in wages and bonuses until the bankruptcy was all processed. It took almost a year. There were no legal ramifications for the owners.

    If they promised you compensation for work and never intended to pay you, they've committed, at least, contract fraud; you can then file a compliant with the Department of Labor. This would be an example of what is commonly called "wage theft". The no intention to pay is the part that's almost impossible to prove.

    That said, it's not something that the Government just goes out and investigates in the course of Chapter 7 bankruptcy. Somebody has to alert the DOL - or the local equivalent - for anything to happen to them.


  • Grade A Premium Asshole

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    The no intention to pay is the part that's almost impossible to prove.

    You are correct on that. The only thing the employer has to say is "We expected payment from Acme Corp to come in time to cover payroll" and their ass is covered. I believe that is why such matters are never pursued.



  • @Polygeekery said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @rad131304 said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    The no intention to pay is the part that's almost impossible to prove.

    You are correct on that. The only thing the employer has to say is "We expected payment from Acme Corp to come in time to cover payroll" and their ass is covered. I believe that is why such matters are never pursued.

    Correct; though in this day and age of email archiving, it might actually be easier than ever to prove.

    If my above experience taught me anything, it's that people are remarkably stupid about what they're willing to commit to an email.



  • @Deadfast said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    @Greybeard said in Tales of a Corporate Collapse: Gov't Contractor Edition:

    grabbed their paychecks and made a beeline for the issuing bank

    I still can't comprehend just how much stuck in the past the US banking sector is...

    At this point in our republic's history it would surely be racist and xenophobic to require a bank account for payroll.


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