Gordon McKenna in Telemarketing Hot Seat Again

Gordon McKenna's effort to raise his fallen star in the teleservices industry had an ugly end, and now the former TeleQuest CEO is again the subject of accusations and court cases.

The man who was chairman of the American Teleservices Association from late 1999 to early 2001 has proven the focus of controversy throughout his teleservices career. The latest chapter occurred last winter in Wilkes-Barre, PA, where a failed venture has left hundreds without employment.

McKenna came to Wilkes-Barre less than a year after leaving the ATA in January 2001 amid a cloud of allegations concerning his management of TeleQuest, the teleservices agency he founded. McKenna got a new start with a new company, Customer Satisfaction First, which eventually took over a call center operation in Wilkes-Barre.

Now a Wilkes-Barre city agency is suing McKenna for hundreds of thousands of dollars in back rent on the call center his company abandoned just days before Christmas 2002. His employees, who all lost their jobs when McKenna closed the center, sued last month for wages they say McKenna never paid as well as money they say he owes under federal law for failing to give them proper notice of the impending shutdown.

In a written statement to DM News, McKenna said that he was aware of the employees' complaint and that he was confident he and the company would be absolved.

“I believe that the former employees who are involved think they are doing what is right, but I know they do not have all of the facts,” he said. “I also understand that harsh allegations are sometimes made in the course of a lawsuit, but I am deeply saddened by the accusation that either Customer Satisfaction First or I would intentionally cause harm to anyone.”

McKenna declined to answer further questions.

According to the employees' lawsuit, McKenna justified the shutdown of the Wilkes-Barre call center by claiming Customer Satisfaction First faced bankruptcy. Yet at the same time the center was failing, McKenna found the time and money to join a business executives' club on a trip to the Far East, and the plaintiffs also say McKenna appears to have formed a new business, Customer Service First.

McKenna accompanied the CEO Clubs, a nonprofit business association, on a tour of Hong Kong and China to start four new chapters of the organization there. Pictures of him during the tour were published in the CEO Clubs newsletter as well as on a Web site for Datacom Information Technology Ltd., a Hong Kong telecom and IT company whose executives McKenna apparently met.

In an e-mail to the Times-Leader, a Wilkes-Barre-area newspaper, McKenna said at the time of the plant closure that he had just returned from China where he was “drumming up business.”

Joseph Mancuso, president of New York-based CEO Clubs, described the trip as “half fun, half work.” Chinese press and television covered the trip extensively, and members of the trip met with government officials including the mayors of Beijing, Guangzhou and Shenzhen.

According to the employees' lawsuit, McKenna told them that Customer Satisfaction First was filing for bankruptcy. However, CSF.com, formerly the Customer Satisfaction First Web site, now refers to the company as “Customer Service First,” of which McKenna is listed as “founder and CEO.”

Carolyn Price, McKenna's attorney, said in an e-mail to DM News that Customer Satisfaction First sold the Web site to Customer Service First. The site is still under construction, but the reference to McKenna as founder and CEO of Customer Service First is correct, she said.

Though the site last week included a copy of the Direct Marketing Association logo and claimed McKenna is “active in” the DMA, Price said the company is not a member of the trade association, and it quickly removed the logo following inquiries by DM News.

In January 2002, McKenna told the Times-Leader that the Wilkes-Barre facility was Customer Satisfaction First's only call center. The CSF.com Web site claims Customer Service First has “working relationships with several internationally-based call centers” and does “business in China, India, Canada, the Caribbean and Puerto Rico.”

Alan Crone, attorney for McKenna's former employees in Wilkes-Barre, said the number of former employees who join the class-action suit against McKenna could reach 200. He said he did not have an estimate of how much money he thinks McKenna owes the employees.

Their second-to-last paycheck bounced, but after the Luzerne County district attorney began an investigation, the employees received money for this check.

However, their last paycheck never arrived. In the suit, the employees have asked a federal judge in Scranton, PA, to award them the money from that check, and they also charged McKenna with a violation of the federal WARN Act.

The Worker Readjustment and Retraining Notification Act requires employers to notify workers 60 days in advance of a facility closure. If the employer fails to give enough notice, the employees are entitled to wages and benefits for the period of violation up to 60 days.

Crone said he was in the process of serving the lawsuit on McKenna in Arlington, TX, last week.

“The workers in Pennsylvania who received notice five days before Christmas that they were immediately unemployed are going to pursue their claims very vigorously,” Crone said. “We're very confident about the outcome.”

McKenna was once an up-and-comer in telemarketing. Arlington, TX-based TeleQuest made $60 million in sales in the Internet heyday of 1999, up $19 million from the previous year, and the company had more than 2,000 employees.

McKenna became ATA chairman in 1999, promising to set the association back on its feet after a scandal surrounding J. Scott Thorton, a paid manager who was dismissed after allegations arose that he misspent $310,000.

Yet all was not well in McKenna's own house. In June 2000, TeleQuest filed for Chapter 11, and a federal bankruptcy judge appointed a trustee to run the company in McKenna's place.

In October 2000, 13 days before he delivered a speech at the ATA annual convention in Orlando, FL, assuring members that the association had recovered, McKenna was urging a judge to give him back control of his company. His request was denied, but at the convention McKenna won another year as ATA chairman.

An India-based holding company bought TeleQuest in November 2000. A published report in the Fort Worth Star-Telegram later that year included allegations that McKenna mismanaged TeleQuest and spent hundreds of thousands of the company's dollars on personal items.

In January 2001, McKenna stepped down from the ATA board of directors. His stated reason was to spend more time on his new company, Customer Satisfaction First.

Bill Miklas, past chairman of the ATA who joined the board at the same time as McKenna, had no specific comment about the allegations. McKenna was going through tough business and personal matters when he resigned, Miklas said.

“He felt, and we felt, he should focus on these things rather than distract himself with the ATA,” he said.

Later that year, the Wilkes-Barre Redevelopment Authority found itself in a bind, and Customer Satisfaction First found an opportunity. The Order People Co., then the tenant of its 80,000-square-foot call center, was leaving town, and the authority needed rent money from a new tenant to keep making payments on the bond it issued in 1998 to build the facility.

Customer Satisfaction First agreed to take over the lease. Jack Dean, attorney for the authority, recalled that at the time McKenna “was the only game in town.”

McKenna had told the Times-Leader that he envisioned 2,500 employees eventually working at the center. Yet signs of trouble emerged a few months after his takeover of the facility when Customer Satisfaction First began failing to make the monthly rent payment of $50,000.

In the interest of keeping the more than 350 jobs at the center, the authority opted to work with McKenna rather than evict him, hoping he would eventually make good on the rent, Dean said. In November 2002, Dean said McKenna assured him the company would be “back full-bore” by January.

The city made the bond payments out of its own pocket to the tune of $700,000. In one instance, Wilkes-Barre had to rely on its insurance company to make a bond payment.

During this time, Customer Satisfaction First began downsizing. By the time it closed in December, only 100 employees remained.

The company owed $400,000 to the authority in back rent and, under its 12-year lease, owes on every month that passes after it closed until a new tenant is found, Dean said. The authority has sued in Luzerne County court and expects to be awarded the overdue rent. Dean said he expected a judgment in the case next month.

“They don't have much of a defense,” Dean said of the company.

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