MIDDLEBURY — Deborah Schwarz, founder and president of eCorp English, announced Monday that she has formally closed the Middlebury business she launched early last year with considerable state aid and private investment amid promises of creating more than 100 well-paying jobs by 2013.
“I am crushed by it. It is the dashing of my personal dream,” Schwarz said of the demise of eCorp, a company she established in 2006 and then successfully marketed to state and local officials as a good fit for Middlebury.
eCorp offered English language training to corporate executives throughout the world. It accomplished this, in part, by offering both Web-based programs and expert trainers to network directly with worldwide clients, coaching them on their specific English vocabulary needs. Originally, e-Corp was headquartered in Malta with sales offices in France, Switzerland and Shanghai, China. Those offices are now being shuttered along with its Middlebury headquarters.
“We lost the core in order to have a bigger opportunity,” Schwarz said during an interview with the Addison Independent.
Schwarz said eCorp’s closure is being triggered by an inability to marshal financial backing for the launch of its new WordFortune language software. Schwarz was banking on that software as the ticket to eCorp’s future prosperity. But she explained she could not attract the necessary $750,000 to $1.25 million she said it would take to properly market the software.
In the meantime, she said an under-capitalized eCorp was unable to meet its employment targets and ramp up operations. As a result, the company had trouble making payroll and still owes about $150,000 to various local vendors for services ranging from furniture to electricity. That figure does not include more substantial sums owed to larger investors, creditors, lawyers and the state of Vermont, according to Schwarz.
“It is no longer possible for me to finance (eCorp),” said Schwarz, who noted she and other eCorp board members had infused some of their own resources in an attempt to prop up the company while waiting for new investors.
On Friday, Sept. 14, eCorp’s nine remaining employees learned that they had been laid off. The company will soon be vacating its 6,700-square-foot space at 1197 Exchange St.
“I am crushed, embarrassed and feel terrible about this,” said Schwarz.
STATE INVOLVEMENT
Schwarz stressed she is “closing” eCorp rather than declaring bankruptcy. Such an action, she said, will allow her to resurrect the company if she is able to raise the capital to launch WordFortune. In the meantime, she hopes to negotiate repayment plans with the parties to whom the company owes money, including the state of Vermont.
In December 2010 Vermont gave eCorp an assistance package that included $175,000 in low-interest loans through the Vermont Economic Development Authority (VEDA), a $200,000 equity investment through the Vermont Seed Capital Fund, and an offer of more than $200,000 in tax incentives through the Vermont Economic Growth Incentive (VEGI) program. Those tax credits were contingent on eCorp English reaching certain employment milestones over a five-year period.
Lawrence Miller, secretary of the Vermont Agency of Commerce and Community Development, said the state will not lose anything through the VEGI program because eCorp did not meet the performance targets that would have triggered the tax incentives. But he said the state has the right to recoup money loaned to eCorp through the VEDA program, which will now have to stand in line with the other eCorp creditors.
Miller described eCorp’s closure as “unfortunate,” with serious ramifications for the affected families and community. At the same time, he said eCorp’s failure should not dissuade the state from taking a gamble on companies proposing new ventures to create new jobs.
“Certainly, the state knows when it goes into a venture like this … that (success) is not assured,” he said during a Tuesday telephone interview.
“But if we don’t work with prospects like eCorp, we are not doing our job,” he added.
TROUBLE EARLY ON
Miller said that in retrospect, the transformation of eCorp in Middlebury proved perhaps a bigger task than supporters and company managers had anticipated. And that writing was on the wall soon after the company opened its doors, according to various vendors, contractors and employees who provided services to eCorp.
The Independent received several anonymous e-mails during the past 18 months from vendors stating that eCorp had not paid its bills — something that Schwarz has conceded and chalked up to insufficient cash flow.
The Independent received additional e-mails from past workers who said the company was often late in meeting payroll. The Vermont Department of Labor in March filed a complaint on behalf of five former eCorp workers who claimed they were owed back wages. Schwarz said on Monday that all eCorp employees have now been paid in full.
Among those former employees is Joanna Smith of New Zealand, who was hired to serve as eCorp’s eLearning Content Manager. She moved her whole family — including three young girls — to Middlebury to work for the company at the start of this year. Smith said eCorp promised to defray a large portion of her moving expenses, but never came up with the money.
“I worked for four weeks, and never saw a single dime, so I told them I was through until they could pay up,” she said through an e-mail. “It was about eight weeks later that I got my pay for that time period, but I never did get my moving costs.”
She and her family had to move back to New Zealand, as neither she nor her husband could find alternative jobs before their money ran out. They have fortunately found new jobs in New Zealand.
“Our stay in total was just four months, and our kids were in and out of Mary Hogan (Elementary School) in that time,” she said. “Very disruptive. And needless to say, very expensive.”
On Aug. 28, Addison Superior Court Judge Helen Toor ruled in favor of California-based company Medialocate USA Inc.’s complaint against eCorp. Medialocate claimed it was owed more than $30,000 for linguistic services provided to eCorp in 2011 and 2012. Those services, according to the court complaint, included translation of material into various languages for dissemination to eCorp customers through a variety of media.
eCorp English, according to Toor’s judgment order, “failed to appear, plead or otherwise defend themselves against the plaintiff’s complaint.”
HIGH HOPES DASHED
Former Middlebury selectboard Chairman John Tenny was among the many state, local, Middlebury College and business officials who attended the ribbon-cutting ceremony at eCorp’s Middlebury headquarters back in March of 2011. He, too, had high hopes for the firm’s prosperity.
“Deborah and her group put together a sincere effort to launch an ambitious plan,” Tenny said. “In these difficult times, you can’t be surprised by the setbacks of the large and small efforts that people make.”
Tenny said the eCorp’s case underscores Middlebury’s need to aggressively recruit new businesses to Addison County shire town. To that end, Middlebury taxpayers, Middlebury College and local businesses are contributing toward a fund to support the hire of a “Middlebury Business Director” to recruit new enterprises and help current ones grow. Tenny is a member of the committee that is helping to define the director’s charge, with the expectation of filling the post early next year.
Middlebury College — internationally renowned for its language programs — was also bullish on eCorp. College officials saw eCorp as, among other things, a potential employer of spouses of college faculty and staff.
“We were disappointed to hear that eCorp English recently closed,” said Middlebury College Public Affairs Director Sarah Ray. “The nature of entrepreneurial ventures is that some fail and some succeed. Middlebury College remains supportive of efforts to attract businesses and develop economic opportunities in Addison County, which offers many advantages to entrepreneurs and other potential employers.”
Robin Scheu, executive director of the Addison County Economic Development Corp. (ACEDC), said she, too, is dismayed by eCorp’s closing.
“It is always sad to see a business fail,” she said. “It affects the whole community.”
But like Miller, Scheu said the state should anticipate that some failures will come along with entrepreneurial success stories.
“If we believe in entrepreneurship, we have to accept that not every business succeeds, and that we have to tolerate failure,” Scheu said.
Scheu is scheduled to meet with Schwarz this Friday to talk, among other things, about repayment of the $100,000 loan that the ACEDC extended to eCorp earlier this year. That loan came from a pot of United States Department of Agriculture Rural Development money the ACEDC taps as part of a revolving loan fund for new businesses. Default on that $100,000 loan would mean the ACEDC would have less money to loan to future emerging businesses, Scheu said.
Schwarz said she is currently looking for a job to help in her efforts to pay back eCorp’s debts and possibly launch WordFortune sometime in the future.
“We will continue to try to raise money,” she said.
Reporter John Flowers is at [email protected].