Bankruptcy Court Approves Talk America Refunds

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In the first meeting of creditors of Talk America Inc., Portland, ME, before Judge James A Goodman on June 22, permission was granted to disperse company assets to customers owed $2.4 million, according to a report in The Portland Press Herald. The company filed for bankruptcy May 13.

Talk America, a DRTV company, has already paid $200,000 in refunds. The company listed assets of $9 million and debts of $11.2 million, which is owed to more than 16,000 creditors, according to court papers. About 14,000 of those creditors are customers owed refunds. Several phone calls to the company's attorney, Robert Keach, were not returned.

The bankruptcy filing was spurred by a dispute between Talk America and Creative Paradox, a Colorado licensing agent for Protein Power, one of Talk America's hottest selling items. The dispute is over an undisclosed amount of money Creative Paradox says it is owed. Talk America received a note of default asking for payment, which prompted Talk America to file for bankruptcy because it could not afford to lose Protein Power as one of its clients.

The company was granted permission to hire a financial consultant to assist in managing the company's restructuring and disbursement of debt payments.

Talk America, according to the Press Herald, is also in negotiations to sell its call-center equipment. There are enough computers and phones to outfit a 400-seat call center.

Since filing for bankruptcy, Talk America has sued DanMark Inc., Topsham, ME. DanMark, was founded by Daniel Longfellow and Mark Sawyer -two former Talk America employees. The suit, filed June 9, charges that DanMark enticed Talk America employees to leave and join Dan Mark. The case has not been settled, but an answer to a settlement offer is pending.

In an effort by Talk America to keep its 315 employees, which is less than half the 750 it employed at its peak in 1996, the creditors committee agreed that bonuses could be paid to all employees as Talk America reorganizes. The average employee would receive $250 immediately and would get another $500 at the end of the reorganization process. Executives would receive 5 percent of their annual salary and 10 percent also at the end of the process. The total amount will cost approximately $540,000.

Robert Graham, president/CEO of Talk America, established the company in 1991 as a one-man operation. In 1995, Talk America sales exceeded $35 million. In 1996, Talk America sales exceeded $100 million, and it gained national attention as one of the fastest-growing, privately-held companies in North America.

Talk America's biggest infomercial this year was for Dalton McCrary's Shooting Straight Golf, which was ranked No. 7 in January, according to Jordan Whitney Inc., the infomercial monitoring service in Tustin, CA.

Talk America is most noted for its infomercial Protein Power package, which includes instructional tapes, books by product developers Drs. Michael and Mary Dan Eads, a video and a protein powder supplement. Talk America plans to repackage the product and sell the powder in an effort to increase its customer base.

The company is also releasing an infomercial for Veromax, which is claimed to be an herbal equivalent of impotency drug Viagra, marketed by Pfizer Corp., New York.

In 1997 the attorneys general of Arizona, California, Illinois, New York, Pennsylvania, Texas, Vermont and Wisconsin filed complaints against the company for allegedly making false claims about its products called Natural Hairs, which was supposed to reverse the effects of male pattern baldness, and Colon Cleanser, which was to help prevent colon cancer.

The company admitted no wrongdoing, but paid $150,000 for legal fees and made good to consumers by refunding the cost of products purchased.

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