Dispute Sparks Resignations At Wismer Martin Key Executives Quit In Disagreement Over Management Of Spokane Software Company

A top-level management dispute that has been simmering for months at Wismer Martin Corp. boiled over Wednesday in a series of resignations that include company president Stan Hatch.

Hatch’s March 15 departure date was agreed to in January - but not disclosed - when majority shareholder Ron Holden took over Hatch’s duties as chief executive officer.

When Hatch’s departure from the company became official Wednesday, several other key executives followed him out the door. The other resignations include Michael Magliaro, vice president of health care information networks; Jim McHaney, vice president of network implementation; and Peter B. Summerville, who handled marketing and communications duties for the company.

The dispute also has produced widely disparate accounts of the company’s condition.

Two weeks ago, Spokane-based Wismer Martin reported an operating loss of $698,000 on sales of $2.5 million for the second quarter of fiscal 1995, which ended December 31. Its stock price, which was in the $2 range three months ago, is at about $1 now.

The gloomiest assessment is that Wismer Martin, which has about 150 employees, is headed for financial disaster. Some of Holden’s critics say the company has been drained so badly by the acquisition of another Holden company - Integrated Health Systems - that it will not stand up to the fiscal scrutiny of potential customers. In a fast-changing industry, customers won’t buy products from a company that might not be around to support them.

Further, Holden’s critics charge that he has cut off talks with a number of major U.S. corporations that were being carefully cultivated by the Hatch management team as strategic partners. Those partnerships are vital, the critics say, if Wismer Martin is to break into the big leagues with its health care information packages.

Holden responded Wednesday in a telephone interview from his Detroit office by saying, “Wismer Martin remains a completely viable company. We’re stable, we’ve got our new plan in place and we’re moving forth.”

Holden says the talks with potential strategic partners remain on track.

“I am confident in the future of Wismer Martin,” he emphasized.

Agreeing with that assessment is company co-founder Judy Martin. Martin is no longer actively involved with the company, but she remains a significant shareholder and her husband and co-founder Glen Martin is a member of the Wismer Martin board.

“As a shareholder, I have great faith in this company, in its products and in its current management,” Martin said. “I believe Ron Holden will get it going where it needs to go.

“I wish everybody had liked everybody and everything had worked out,” Judy Martin added, “but I think what has happened was necessary.”

Hatch was unavailable for comment Wednesday, as was McHaney. Magliaro and Summerville declined to comment.

Wismer Martin was founded in 1980 by the Martins, who had designed a software package that allowed the management of physicians’ practices to be computerized. The company earned modest profits in its early years, until an acquisition went sour, producing some significant losses.

Hatch came aboard as president and chief executive officer in 1989 and nurtured the company back to profitability in 1990. Profits peaked at $600,000 on sales of $11.5 million in fiscal 1994.

The first quarter of 1995 produced earnings of $41,000, followed by the almost $700,000 loss in the second quarter.

Two years ago, Hatch took the company in a new direction he felt would assure its growth and sustained profitability.

In addition to its increasingly sophisticated physician management software, the company had developed a product that could be applied to the management of hospitals as well.

With health care reform looming, Hatch saw potential in a product that would tie all health care providers - hospitals and physicians and insurers alike - into large money-saving computerized networks. Wismer Martin collaborated with Medical Services Corp. of Eastern Washington to create such a network that proved effective in reducing health care costs and attracted national attention.

Holden, a Detroit-based investor, came on the scene in 1991 when the Martins were ready to sell most of their stock. His holding company, National HealthTech Inc., acquired 52 percent of Wismer Martin. In 1993, National HealthTech was acquired by a Texas company that wasn’t interested in Wismer Martin, or Integrated Health Systems Inc., a San Diego company also under the National HealthTech umbrella.

So Holden maintained his controlling interest in Wismer Martin and IHS.

Holden, too, was captivated by the potential of Wismer Martin’s health care network package. He agreed with Hatch’s shift in direction, but apparently they disagreed in how best to reach the destination.

When Holden replaced Hatch as CEO in January, both men presented the change as a part of Hatch’s longstanding plan to gradually extract himself from the company.

Clearly, though, the parting was more complicated than that. Some company insiders describe the reason as a clash in personality and style that has been building for a long time.

Holden supporters say the problem was that Hatch’s management team expanded too quickly in certain areas in anticipation of health care network contracts that didn’t materialize.

Wednesday, Holden downplayed the issue as a conflict between himself - with 51 percent of the stock the company’s largest single shareholder - and Hatch, whose 1 million shares representing about 10 percent of the company make him the second-largest shareholder.

“The fact is the performance of the company was way below projections and the board of directors moved to make changes,” Holden said. “As a result you’ve got a new team in there, and all these other things are ripples. There’s nothing more than that going on here.”

Holden indicated that John Perez, who is president of IHS and has been active in Wismer Martin’s operations since January, will be moving to Spokane to run the company.

Wednesday’s resignations represent the loss of several key players in Wismer Martin’s health care information network marketing thrust, but Holden said the company will be able to cope with the disruption.