Problems plague Platinum Protection

Summer sales company reportedly laid off employees and is now facing $2m lawsuit from Monitronics
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Wednesday, February 15, 2012

AMERICAN FORK, Utah—Platinum Protection, a leading summer-sales-model security company based here, reportedly laid off almost all its employees on Feb. 2, including corporate staff, sales representatives and technicians.

And now Platinum is facing a federal lawsuit filed by its primary dealer, Monitronics, demanding more than $2 million that Monitronics says Platinum owes it for bad accounts and loss of revenue guarantees. Monitronics, one of the nation’s largest home security alarm monitoring companies, wants to take possession of 6,255 accounts it says that Platinum still has in house as collateral.

As of early this week, Monitronics was asking a judge to issue an emergency restraining order to help it secure the accounts because it contends those customers can’t be receiving proper service with virtually no staff left at Platinum and no one answering the phones.

Because Platinum and its parent corporation, Platinum Protection-CA, “are in the process of shuttering their business,” the customers are likely to stop paying or terminate their accounts or sign up with another security company, Monitronics asserts in the lawsuit. It wants a judge to order Platinum to refrain from such actions as selling the accounts to another company or modifying its website, which Monitronics said could alarm the customers with those accounts.

The lawsuit was filed Feb. 9 in U.S. District Court in Utah, just one week after Platinum told most of its employees their positions were terminated immediately.

Officials at 6-year-old Platinum did not respond by Security Systems News’ deadline to requests for comment regarding the layoffs and the Monitronics’ lawsuit.

But The Salt Lake Tribune newspaper reported Feb. 2 that Platinum’s in-house attorney confirmed the company had dismissed 65 corporate employees and its sales and technical staff, leaving only a small management team to service existing customers.

And the lawsuit—filed by Dallas-based Monitronics International and two Delaware-based limited partnerships, Monitronics Security and Monitronics Funding—says that Platinum officials told Monitronics that Platinum “had laid off its sales staff and all or almost all of its support staff and [is] unable to pay their obligations to plaintiffs and other creditors.”

Former Platinum employees, who didn’t want their names used, confirmed the abrupt dismissal of staff to SSN.

One former corporate employee told SSN that a company owner told staff, “I’m sorry to tell you this, but Platinum is closing its doors and all employees are terminated effective immediately.”

The employee said: “People were bawling. They had never been through something like this before. … There’s no severance, no nothing.”

Other summer sales companies are reportedly hiring some of Platinum’s laid-off sales reps and other staff.

That employee estimated about 600 staff were let go, including corporate, sales and technical workers, but that the company kept on five or six employees to try to figure out what to do with Platinum’s in-house accounts.

The company brought on about 25,000 accounts last summer, that employee said. According to the lawsuit, Monitronics bought nearly 19,000 accounts from Platinum between March and November 2011. Monitronics asserts nearly 1,300 were bad contracts.

According to The Salt Lake Tribune, Platinum’s attorney wouldn’t give the reason for the layoffs.

But the corporate employee who spoke to SSN said Platinum was in financial distress because Monitronics, which had been buying Platinum accounts since 2007, decided not to do “what they’ve done every single year, which is prefund us for the summer, and give us financing to be able to continue operations.”

Monitronics declined to comment to SSN on that claim.

The employee also told SSN that Platinum was working on an alternate funding plan with CPI Security Systems, a Charlotte, N.C.-based monitoring company. In fact, the employee said that the management team was told Feb. 2 that the reason Platinum was shutting its doors was because CPI decided not to go through with a deal to which it had previously made a commitment to Platinum.

The employee contends that Ken Gill, CEO and founder of CPI, basically pulled funding for the summer just hours before the deal was to be finalized.

But Gill told SSN that was a mischaracterization of the negotiations between CPI and Platinum, which he said ended Jan. 31.

Gill said CPI worked in good faith to try to find a solution that would have benefited both companies, but said negotiations failed due to lack of time, differing goals and other existing Platinum issues.

“If we had not shown up when we did, our opinion is that this would have happened a couple of weeks ago,” Gill told SSN on Feb. 3. “We did not create the situation. We just tried to come in at the last minute to see if we could work with them. They were on life support when we got there.”

Gill said CPI didn’t seriously get involved with Platinum until early January. “It was a very short window. We were working with them for only three or four weeks as we were trying to put something together, and in the end there wasn’t enough time to make it happen,” he said.

He said that CPI, founded in 1976, started a dealer program in the past year and the idea was that Platinum “was going to be one of our entrees into the dealer program.”

He said CPI planned that after Platinum became a dealer “we would entertain another arrangement after we worked together for a year or so.” Gill said what CPI envisioned was something “not much unlike what Devcon and Pinnacle are attempting to do. We were thinking that might have been a way for us to expand our territory and work together on some projects.”

One problem was a disagreement about a time commitment, Gill said. “One of our biggest concerns was that they were looking for a short-term opportunity and we needed a longer-term commitment,” he said. He added that Platinum wanted an arrangement that would end before 2012 was out and CPI wanted a multi-year agreement.

He also said Platinum was “under tremendous financial pressure.” He said it had been selling off its accounts for five years. “They had very little assets and a lot of overhead,” Gill said.

SSN asked Gill if a lawsuit, filed in December by the Securities and Exchange Commission and charging that the two men who provided the startup capital for Platinum six years ago have been running a $220 million Ponzi scheme, factored into CPI’s negotiations with Platinum.

Gill said CPI eventually concluded that with Platinum as an authorized dealer, the SEC’s lawsuit against former Platinum investors Wendell Jacobson and his son, Allen Jacobson, was not something to be worried about. Platinum has said the two no longer are owners of the company.

“We got past that when we realized he [Wendell] was no longer involved.  But it is our understanding his involvement played a role in Platinum being in the condition it got into,” Gill said.

He stressed that the owners of Platinum “wanted to make a go of it. … I think people need to understand they were trying hard to avoid this situation.”
 
“We enjoyed working with them. They’re a great bunch of people, and they’ve got a great staff. It’s unfortunate this happened," Gill said.