Clean-Rite Maintenance Company, one of the largest black firms in the Washington area, went out of business three months ago.
Before the rags-to-riches empire collapsed, Nathaniel Williams, who started the janitorial firm in 1967 from the trunk of his car, was awarded $9 million in government contracts.
At one point, William's firm was listed by Black Enterprise magazine as one of the nation's top 100 black firms. The failure came quickly -- within 72 hours the business closed and Williams lost almost everything he owned.
His $260,000 Rock Creek Park home was sold at foreclosure two weeks ago. His two Mercedes-Benz sedans were turned over to creditors. His $120,000 townhouse offices are slated for foreclosure Feb. 22, and $50,000 worth of equipment and supplies, Williams said, were stolen just after his business folded.
Williams said his wife has had to sell all of her property and relatives have gone into debt to help him pay off loans.
Even after the sale of his assets and after he declares personal bankruptcy, Williams said he will still owe the federal government more than $100,000 in back taxes. His accountant says Williams owes $300,000 to $400,000 to creditors.
"I never dreamed I could be in as much trouble as I am in and not be locked up.... I don't have anything to lose now, I've lost everything I was trying to protect," said the 43-year-old Williams, who could not hold back his tears. "I had to pull my son out of college and put him to work at a gas station."
The main source of income for Williams and his three children now is his wife's salary as principal of Keene Elementary School.
Williams, a native of Northwest Washington and a graduate of Dunbar High School, once held two jobs, working for the U.S. Patent Office by day and for a janitorial firm by night. After being promoted to manager of the firm and quitting the government job, Williams said, he started his own company with a $2,500 loan from the Black Economic Union, founded by former pro football player Jim Brown.
By 1972, aided by a $25,000 loan from the Small Business Administration, Williams recalled, "I was doing as much as $400,000 in business annually, while everyone else (other black janitorial firms) was doing $40,000 to $50,000."
Williams said his first contracts were for cleaning work at commercial and federal office buildings. The government contracts lasted for a year or less.
In 1972, Williams said, he was contacted by the Small Business Administration, which was looking for minority firms to do additional government work. The next year, with the help of the SBA, he landed a contract to clean federal buildings before the Nixon inauguration. That job, Williams said, led to other contracts at the White House and Blair House, and eventually to the three largest contracts ever awarded to his firm.
The three contracts, at Goddard Space Flight Center, Andrews Air Force Base and Fort Belvoir, totaled $3 million per year for three years. "In just a few months I jumped from $300,000 in sales to more than $3 million," said Williams.
But the federal work, Williams said, meant he no longer had time to pursue commercial contracts. It also meant hiring more employes, facing complex administrative problems, and, as Williams sees it, the beginning of the end.
"All my friends were saying, 'Just put the right people in the right places and don't worry about it,' " he recalled.
He found it wasn't that easy.
Part of the problem began with the bidding for the $1.5 million Goddard contract, the largest the firm had ever attempted. Williams said the people he hired to prepare his firm's proposal underbid the contract. He admits he should have been on top of the bidding process, but said he was "too busy" running the company.
The Goddard contract bid did not take into account the proper amount of vacation time for employes, did not calculate accurately the cost of federal withholding taxes and included only a 6 percent annual inflation allowance for the 3-year contract, according to Williams' attorney Thomas Brown. Brown said he is now negotiating with the government to make a $100,000 adjustment in the Goddard contract.
Williams said he was so far in debt as a result of the Goddard contract that he had to take money from his profitable Andrews contract to cover his losses.
In addition, he said, the low bid resulted in the fact that Clean-Rite did not allocate enough money to pay the proper federal withholding taxes for his employes.
Williams also discovered a problem he had not faced with smaller contracts. According to Williams, federal payments were so haphazard that he eventually had to apply for credit to pay his employes on time.
Thomas Hart, an attorney representing the Service Employees International Union Local 82 Health Trust Fund, said Williams was "an extremely poor manager." Hart said the trust fund, which covers maintenance workers at Goddard Space Center including those who were working for Williams, sent an accountant to audit CleanRite's financial records, and that the books were in such bad shape it cost the trust fund $4,000 to put them in order. (Williams' attorney contends the audit was unnecessary.)
Hart contends that the SBA went overboard in supporting Clean-Rite.
"They kept propping him up again and again and again. They were not willing to write him off as a loss. They were about to give him another loan (for $250,000) when his business was just about to collapse, but the Department of Labor put its foot down," Hart said.
It is still a matter of dispute whether or not the SBA let William's firm collapse.
Hart's view is, "To say he was jerked around by the government is just not true -- they saved his hide."
Williams' accountant, Francis Teti, said the SBA gave Williams just enough money to "drown himself."
Teti said the SBA should never have let Williams bid on government contracts without supplying him with someone who could advise him on goverment contracting. "They have all those people at SBA and they couldn't get someone to help him." Williams said he got help, but the help came too late.
Teti said Williams' multimillion-dollar business required the businessman to obtain a larger office and staff and to hire more than 300 employes. Unanswered, he said, was the question of how the SBA expected Williams to meet this large overhead after the federal contracts expired.
SBA spokesman, Paul Lodato, said "I don't know if it was the company's fault or ours... We did everything we could but run the man's business."
In four years, Williams obtained $130,000 in SBA-sponsored loans, and Lodato said he had $12 million in federal contracts totalling more than $9 million.
"We provided his company with a range of help from such basic assistance as sending his company business management literature, to technical assistance that included providing a professional consultant to set up a cost accounting system for his company."
Lodato explained that Williams had been running his business himself before the SBA had offered its help. He said the SBA also expected Williams to develop additional commercial business instead of relying solely on the federal contracts.
"If he felt it would have been too much for him too handle, he always could have turned down the federal contracts. It's tough to look a gift horse in the mouth, but you can always say, 'I can't handle it.' You should know your business well enough to know whether you can handle additional business."
Williams said somewhat bitterly that he might have been better off if he had not been sought out by the SBA. "If they had left me alone, I would still be in business -- maybe from the trunk of my car -- but I would not have lost my home and my family would not be out in the streets."
Williams, for his part, admits that he may have spread himself too thin by getting involved in a chemical supply company and a fight promotion business. He said he also helped start a new bank and has been chairman of at least one community organization that required a lot of his time.
In 1976, when Williams needed money to bail his company out of financial trouble he said he went to the SBA and asked for a $150,000 loan.
"Instead of giving me what I needed to get out of trouble, they gave me an $80,000 partnership loan with Madison National Bank. That was only enough money to get me deeper in trouble.
"I was like someone who was tossed in the water and did not know how to swim. The SBA threw me an oxygen tank, but when the air ran out they let me drown."
When Clean-Rite folded, Williams said, he lost his home and property becausethey had been used as collateralfor the loans from the Madison National Bank.
Meanwhile, Teti, Williams' accountant,noted that Williams had heavytravel and expense accounts and thathe had taken $30,000 to $40,000 out ofthe business to support the fightpromotion venture. When asked aboutthese expenditures, Williams said heused "personal funds" for the fightpromotion business. He added that hehad given himself a $30,000-a-yearsalary and that he had gone severalmonths without it when his businesswas in trouble. Teti said the travel andexpense accounts would not have affectedthe outcome of the business.
"It got to the point where the federalgovernment put a lien on the federalchecks and my employes were notpaid," said Williams. "People soon labeledme as a guy who would not payhis employes."
Williams said the Internal RevenueService froze his assets because he hadfailed to pay the proper withholdingtaxes for his employes and that theLabor Department stepped in whenemployes complained they were notgetting paid. He said all the governmentcontracts, which began at approximatelythe same time, endedSept. 1 without being renewed. "Within 72 hours I was out of business," he said.
Frank Washington, a spokesman forthe Greater Washington Business Center,described Williams as a businessmanwho tried to borrow his way outof trouble. "He started having troublewith taxes and (business) needs andwas borrowing to pay bad debts. Hewas paying taxes and other debts andcould not deal with the problem ofcash flow," Washington said.
"You're talking to a bitter guy," Williams told a reporter during an emotional interview at the Washington Coliseum, at 1146 3rd St.NE, where he said he was temporarily working. Williams, who said he is still looking for a full-time job, said several of his friends have let him manage their money to promote fights. His next fight is scheduled for Feb. 12.
In a tiny cluttered office, with pictures of fighters hung on the dirty blue walls, Williams complained of a bleeding ulcer that resulted from his financial troubles.
"During the last few weeks before my businesses ended I sat bent over in a chair. I couldn't do anything about it. I had to have friends come in and do what they could to close the business," he said.
But in the end, even friends couldn't help. "I lost everything," Williams said.
As he spoke, the phone rang. It was a call from a District official representing the Minority Business Opportunity Commission. The official asked Williams what type of business he had and if he was interested in doing business with the District government.
In cold tone, Williams replied: "Thanks a lot, but you are 11 years too late."