Tradesafe.com president
Tradesafe.com, last spring among the darlings of Rhode Island’s blossoming high
tech community, is for sale, its investors having taken control of the company,
and with a legal battle now under way over who is entitled to the more than $4
million that remains in company assets.
"The company is pretty much reduced to three employees," acknowledged
Kenneth J. Pereira, who was president and chief executive officer of the company
before he was ousted in mid-September. "The investors have made a move
to put the operation to a kind of slow burn mode."
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
Leonard Weiss, who identified himself as Tradesafe’s chief operating and financial
officer, said the "company is still up and operating and we hope to actually
sort of sell the business to somebody. That’s basically the status of things."
Asked if there were prospective buyers, he said there were, but wouldn’t disclose
who they were.
Weiss also acknowledged that there is a court action between the shareholders
and the company, but while the offices appear virtually empty "we’re taking
transactions from people who are looking to settle their trading activity on
the Internet." He said the company is not seeking new business. He said
four employees remain. At its peak, he said, the company had close to 30 employees.
Weiss said he was hired in March, and when asked about customers said: "We’ve
got a lot." Then when asked who they are said: "but we’re also not
prepared to disclose names of customers. There are a lot of alliances and partnerships."
He acknowledged that the investors are now operating the company, but when asked
who they are, he said that’s "not for the public record." He confirmed,
when questioned, however, that IQ Capital of Germany was among the investors.
Weiss also declined to say where he worked before Tradesafe. "I guess that’s
unimportant to the article," he said.
The main investor, IQ Capital, is described in press releases as among Europe’s
premier e-commerce venture capitalists. IQ invested $10 million between March
and May, according to Pereira’s lawyer, Robert Corrente of Hinckley Allen &
Snyder. But soon after making that investment, IQ requested the return of $2
million "to invest in a European venture with Tradesafe," Corrente
said, an investment that "as far as we can tell they never reinvested in
Europe."
Corrente said that at the end of May, IQ "asked for another $4 million
of the investment money to be returned, right in the middle of the launch of
this product." Their motivation for doing so is not clear. When Tradesafe
did not return that money to IQ, the German investors made a deal with the second
round investors (Rakow Group), took over the board(of Tradesafe) and fired all
but three of the employees and cut the operation down to a skeleton level, Corrente
said .
Corrente said it "looks extraordinary unlikely that anybody would"
resurrect the company.
Tradesafe’s product was an on-line payment service for e-commerce. When it announced
the IQ funding in March, the company said it would "ensure that Trade-safe.com
will hit the ground running following the launch of our new Tradesafe Payments
service, which is also paving the way for inevitable growth of our footprint
to keep pace with the global expansion of auction and shopping based Web sites."
All that promise dissolved into the IQ and Rakow takeover and the filing of
a receivership petition on behalf of Pereira and the original investors, led
by Bruce Tedesco, Corrente said. Steven Shechtman of the Providence law firm
of Shechtman, Halperin and Savage was appointed temporary receiver. A hearing
is scheduled for tomorrow (Tuesday) to appoint a permanent receiver, Corrente
said.
"When they (Tradesafe) didn’t return the money the money had just been
invested in getting this launch off the ground. Whatever IQ’s motivation might
have been, their coming in and making the investment and days or weeks later
saying never mind, we’ve changed our mind and sort of disinvesting, is bizarre
to say the least," Corrente said.
Last week the Tradesafe offices were virtually empty, with two employees left
to clean up matters, and those employees, according to a guard in the lobby
of the building at 95 Chestnut Street, Providence, are there only mornings.
The guard would answer no questions when asked if the company was still operating,
and escorted a visitor to the offices, unlocking the door and paging the only
employee still remaining. Telephone calls made during the week to every department
within the company landed in voice mail.
Last March, the company, which was founded in 1995, received the $10 million
infusion from IQ. And in May, Glen Ilacqua, the company’s marketing manager,
said the company was looking for expanded space in Providence and was actively
advertising in both Boston and Rhode Island to hire additional high-tech workers.
In an interview in the Providence Business News in June, Pereira said he had
joined the company in February 1999 and found the company un-capitalized. He
said he invested $50,000 to "start the company up" and then raised
an additional $1 million, then $10 million. "To me," he said, "the
key to attracting venture capital was having a good story — one that involved
high growth prospects and a hot industry."
That hot industry, he said, was Tradesafe’s on-line payment service for e-commerce.
"Between parties that don’t necessarily know one another, we arrange payments
and make sure the goods are delivered in a guaranteed fashion. If you were to
buy something on auction, you would use us to make sure you get your goods and
the other person gets their money. It makes the transaction happen quickly because
you can use credit cards, it’s convenient and it’s safe."
Pereira had come to Tradesafe from Healthcare Automation, a company he had founded
in 1988 and for which he served as president and chief executive officer. It
was eventually bought by IPA Network of Nashville, Tenn.
Ironically, in an article in Providence Business News in October of 1996, Pereira,
then at Healthcare Automation, said he was actively seeking to raise capital,
but was cautious about venture capital companies. "They attach a rocket
to your back," he had said. "You have to satisfy them."
