Mediator Can Ease Hassle Of Debt Burden

Many small-business owners besieged by bills could be rescued with the help of a skilled business mediator. For a fee based on a percentage of the reduced amount of the debt, the mediator negotiates a settlement aimed at keeping your doors open, all while appeasing your unhappy creditors.

“Mediation is a much better alternative than bankruptcy,” said John Karpac, a CPA and mediator in Langhorne, Penn. “Creditors are usually able to get more than they would in a bankruptcy.”

A Southern California pharmacist who credits a mediator with saving his business agreed to share his dramatic story but asked not to be identified. About two years ago, he bought a small pharmacy in a downtown suburban medical building. According to the owner’s books and tax returns, it was making money and appeared to be a thriving business.

He and his wife put $100,000 down - basically their life savings - and financed more than $200,000. They agreed to pay about $5,600 a month to the seller and the wholesaler, who provides the bulk of their prescription and non-prescription drugs.

About six months after buying the store, they realized that the monthly sales were far below what the seller promised.

“Sales were $20,000 less a month than we were told,” said the pharmacist. “The seller had cooked the books.”

Realizing they had been defrauded, they began to panic. They couldn’t repay the debt and were stuck with an ailing pharmacy. “My wife was hysterical, and I was going nuts,” said the pharmacist. “We were going to lose everything.”

After many sleepless nights, they consulted a bankruptcy attorney, thinking they had no alternative but to give up. But, before filing the papers, they called Harold Sussman, an acquaintance who is chief executive officer of Valcor Arbitration Services Ltd., a Las Vegas-based firm with offices in Southern California, Orange County and London. “His lawyers wanted him to go Chapter 11,” recalled Sussman, a chartered accountant who is originally from England. “Our negotiations saved his business from going under.”

Sussman worked for weeks to sort things out. After reviewing the past six month’s sales, he told the seller and his attorney that he had enough documentation to sue for fraud - if the purchase price was not renegotiated. “Harold kept us out of court and negotiated the deal down by $130,000,” said the pharmacist. “Our payments went from $5,600 a month to about $900 a month. We aren’t out of the woods yet, but we’re OK.”

Sussman also negotiated new terms with the drug wholesaler who had lent the pharmacist some of the cash to buy the pharmacy. The wholesaler agreed to take 20 percent of the pharmacy’s stock and forgave part of the debt. “Without the wholesaler’s help, we would have been under the water,” said the pharmacist. He said he spent about $50,000 on Sussman’s fee and his attorney’s fee, but it was worth it to save his business.

To promote mediation, Sussman’s firm sponsors an intense two-day training course for people who want to become mediators. Valcor also provides graduates with proprietary software and helps to set them up to handle clients. He said on any given day, about 5 million U.S. small-business owners are behind on their bills.

“They just can’t handle it,” he said. “We sort things out and put them on a good footing for the future.”

Other mediators around the country are bailing out business owners every day.

Peter Connors, of Ryan Mayes & Connors in Dallas, helped a mortgage banker negotiate a deal with eight radio stations he owed $140,000.

“We negotiated that debt down to 38 cents on the dollar with six months to pay,” said Connors, adding that he believes his negotiations saved the man’s business. Connors and other mediators interviewed said too many clients wait until they face a string of lawsuits before calling in a mediator.

Business owners interested in finding a mediator can contact the International Association of Business Mediation Consultants at 800-549-2128. Sussman’s two-day professional mediator course costs $11,900 and includes propriety software and support. For information on becoming a mediator call: (800) 998-9843. xxxx