The Storm Before the Calm
Think about the last time you were watching the weather and the weatherman was talking about a hurricane about to pummel some coastline. Be it Louisiana, Texas, Florida, New Jersey or North Carolina, your reaction was very likely, “Those poor SOBs.”
This is the reaction I’ve been having for nearly everyone involved in what was briefly known as Divine Cycling Group. If there’s been an uglier yard sale of emotions, unpaid invoices and lawyer paper in cycling, I haven’t seen it. I’ve been digging around for all the information I can. And while I don’t typically use the term “digging” to describe the work I do, several people have used that term in asking me about what I’ve been up to, what I’ve learned. Some have used the term with excitement and curiosity. Others have used it cautiously, nervously.
What I’ve learned is that the number of people in financial hardship as a result of the failed merger of Divine Cycling Group can’t easily be totaled. What I’ve learned is that absolutely everyone I’ve talked to have something in common: they all wonder what the future holds. They are all scared that their careers or bank accounts may take a significant hit. For some, that hit has already arrived. They also share a fear of the lawyers involved in these transactions.
I’ve talked to vendors and former contractors for Serotta. Everyone I talked to has an outstanding, unpaid balance. So far as I’ve been able to find out, these amounts range from the low four figures to the high five figures. In aggregate, it appears to be an ugly, crippling sum. And no one owed this money will go on the record to say they haven’t been paid. To a person, they are afraid that any public declaration that they have an unpaid invoice could result in punitive action from the lawyers working on behalf of Bradway Capital and others.
I contacted Brian Case, CEO of Bradway Capital. He wasn’t willing to say much for the record due to “lots of legalities,” but he did say there was likely to be some news forthcoming in 10 days to two weeks. He cautioned me that only one side of the story was circulating, indirectly alluding to Ben Serotta’s open letter to the industry. He admitted he’d been frustrated to be on the sidelines unable to tell his side of the story and was eager to do so once all the paperwork was complete.
I’ve had a couple of people who have been close to these events suggest that the morass of legal wranglings is far deeper and murkier than most would suspect. For them the smoking gun is the fact that what was Serotta is now operating as Saratoga Frameworks. They each independently noted that not only was Serotta’s intellectual property split from the real estate and the labor force, but that in Case lost control of the Serotta intellectual property in his dealings with Bill Overbay, hence the need for the Saratoga Frameworks brand, complete with logo and website. Case even told Bicycle Retailer and Industry news that Divine Cycling Group owned the Serotta brand and that while there was a chance that brand would be commercialized again at some point in the future, for now it needed to “cool off.”
It’s worth noting that Bradway Capital retains the tooling and the labor force while another company Case controls owns the real estate in which the operation is based. When I asked Case about the disposition of the Serotta name and intellectual property he cited confidentiality due to the legal proceedings and was hopeful that he’d be able to say something on the record about it in a couple of weeks, the point at which he is hopeful that the paperwork will be finalized.
Case is clearly bullish on Saratoga Frameworks. He aims to have as many as 40 employees in 2014 and to be producing as many as 2500 frames over the course of the year. However, when I asked about the people who told me had gone unpaid he began saying, “A lot of promises were made by Ben and the previous management.”
I then told him that the people I had spoken with all asserted that they had signed agreements with Bradway, not verbal agreements with Ben Serotta. Worse, each of them told me that Case had used exactly that excuse for not paying them. When pressed, he said, “We have every intention of paying our legal obligations.” Moments later he added, “Once we have a sustainable business in Saratoga we can meet those obligations.”
The questions I didn’t ask were, “What if you don’t have a viable business going forward? Does that mean you won’t pay?”
My final questions to Case regarded Mad Fiber and what would happen with that company. Currently, the web site has a single page asking visitors to check back later and the phone isn’t being answered. He admitted that production had been shut down and operations had been suspended in the short term. Again, he asked me to wait a couple of weeks when he said paperwork should be finalized and he was hopeful Mad Fiber would be up and running once again.
The assets of Blue Competition Cycles are on the block. The entire workforce has been laid off. To give you some idea of how far suspended operations can inflict pain, there’s $1 million in bicycles for which the factory that produced them hasn’t been paid. There’s a team that placed deposits on bikes to race on this year that has been stiffed. No bikes.
I respect that everyone wants a bottom line; this is very much a work in progress. The challenge here is that emotions are running high and I can’t find anyone willing to take Case at his word. It would be easy to go after Case and harp on all those unpaid bills. It would be easy to look at the firing of Ben Serotta and draw parallels to Fat City and the awful turn of events that ultimately saw Chris Chance leave the bike industry. But the bright side of that chapter of the New England bike industry includes the almost necessary rise of Independent Fabrication.
While no one will say it publicly, there are plenty of people who are whispering that Case and Overbay haven’t treated people ethically or honorably. It’s easy to point to the guy at the top and label him the villain. The challenge here is that Case believes in the workforce behind Serotta/Saratoga and under the right circumstances he may have the ability to keep those craftsmen employed. Should Saratoga go under there’s a very high likelihood that not only will the bike industry lose the opportunity to revive a great brand, the industry will lose a number of talented individuals for the simple reason that most of them won’t be able to find jobs elsewhere.
There’s an additional challenge Case and Saratoga face. They need dealers. While some dealers will likely take Saratoga as a placeholder for Serotta, I’ve spoken with several dealers who want nothing more to do with Serotta, let alone Saratoga. It’s one thing to make 2500 frames in a year; it’s another to sell them.
What happens next really rides on Brian Case. If he pulls this out and revives the Serotta brand, he’ll be a hero. If Serotta goes away but he makes a going concern of Saratoga, he’ll still be a kind of hero, just smaller scale. However, if he is unable to secure the Serotta intellectual property and both it and Saratoga Frameworks go Pan Am, then Case will be served up for all and sundry to be remembered as the black-hat-wearing evil-doer; he’ll be such an obvious a target for blame that any other storyline about Serotta’s years of questionable management will be obliterated by his inability to pull the operation out of the dive.