In search of employment, Michael E. O'Donovan went in October 1977 to Emploi Internationale, a Virginia corporation that accepted people's money with the promise of a new job in a year or 75 per cent of their money back.
Yesterday Michael O'Donovan was in Nevada, at a job he obtained without the firm's help, while his wife Carol was representing him in federal court in Alexandria. Donovan is one of 2,000 creditors allegedly owed $1.75 million by Emploi Internationale, which filed for bankruptcy Feb. 2, leaving a trail of lawsuits filed by former clients from Virginia, to Pennsylvania, New Jersey and New York.
"We wouldn't have gone to the company if we were in good financial straits," Carol O'Donovan said. "Many of us here, being proud Americans, wanted jobs, not welfare, not unemployment."
Most of the defunct firm's creditors are individuals who each paid up to $3,000 or more for help in preparing and sending out resumes and letters to prospective employers. Seventy such creditors jammed the small bankruptcy courtroom yesterday to voice their complaints.
"This court's not here to determine if a crime occurred," U.S. bankruptcy Judge Martin V.B. Bostetter Jr. told them. "I'm not ruling on ethics today. I'm here to see how much money I can get you back."
At first blush, the prospects did not appear too promising. In papers filed with the court, the firm reported total assets amounting to $9,287, most of it in office equipment and supplies.
According to records, the key figures in the firm founded in 1972 are Maurice F. Allen, Emploi's president, and Daniel L. Retter, by his own description the firm's largest stockholder, chairman of the board, vice president and secretary-treasurer.
Allen filed for personal bankruptcy in 1976 when his nearly $52,000 in debts exceeded his $47,000 in assets. Among the items he was allowed to keep, under bankruptcy laws, were the "family Bible" and the family pet cat of "no cash value."
Yesterday, Allen, a man described by one creditor as "like a hotshot out of Harvard Business School," was in California attending a training seminar with his new employer, a computer sales firm. Retter, a man in his early 30s, sat in the bankruptcy court witness chair almost impassively answering questions from the bankruptcy trustee, the creditors and their lawyers.
Retter said the firm had paid out $175,000 in refunds during its last two years, most recently in January.
The judge asked him the "principal reason" for the firm's financial troubles. "An inability to pay rent and other bills," Retter replied.
What happened to the money? "We spent it," he said. "The largest expense was advertising," in such newspapers as the New York Times, Wall Street Journal, Philadelphia Inquirer and The Washington Post.
His annual income from the firm, Retter said, never exceeded about $12,000 in salary, plus $100 to $200 a week in expenses. He said Allen's salary was about the same with fewer expenses.
At its peak, he said, the firm had about a dozen employes, plus an untold number of "salesmen" who received commissions of 10 to 15 percent as "independent contractors." In the last two years the firm "sold" some 600 contracts with job seekers at its three locations, Retter said.
The firm decided to declare bankruptcy Jan. 29,, Retter said, after the landlord of its springfield headquarters, a whole floor in an office building near the Capital Beltway, "told us . . . we were two months behind in our rent."
Some of the furniture moved from the office two or three days later and excluded from the firm's attachable assets, Retter said, belongs to a company owned by one of Emploi's stockholders. Retter said he once had a "small, partial interest" in the firm, which had received payment from Emploi.
One by one, creditors rose to question Retter. One man said Retter had called him on Jan. 27 to cancel a meeting about his refund. "You told me to call you after Tuesday (Jan. 31), that you would make all the necessary arrangements to expedite matters," the man said.
"I don't recall making that statement," Retter said.
Channing Smith, of Alexandria, another creditor, said he was told by an Emploi worker on Jan. 27 to write to Retter for his refund. The letter was returned days later marked "moved, not forwardable."
All such stories for now were beside the point, the judge said. But he appointed an eight-member creditors committee, promised that any criminal information would be turned over to prosecutors and indicated further hearings could be held to look for any possible hidden assets.
"We're not done with them," promised Gloria Kornasitwicz, Fairfax County consumer specialist. Since the firm moved from Alexandria to Fairfax in 1973, she said, her office had received 66 complaints about Emploi. "In the early years, many were favorably if not fully resolved," she said. "We are requesting an investigation by the commonwealth attorney's office."
Not all the firm's creditors are individuals seeking their 75 percent refunds. Among those listed in bankruptcy court files are Dun & Bradstreet, Inc., owed $156 for a copy of the "Million Dollar Directory."