Financial troubles sink promising boat company

March 26, 1995|By Shirley Leung | Shirley Leung,Sun Staff Writer

The Anne Arundel Economic Development Corporation's highly touted business loan program may need a new centerpiece for its promotions.

Paul Barielle, who was featured in the corporation's 1994 annual report, has left town. His Better Boat Co., which received a $135,000 loan guaranteed by the corporation, closed its doors within a year, allegedly leaving suppliers, customers and employees in the lurch.

Mr. Barielle sued last August in Anne Arundel Circuit Court to keep two former employees who signed contracts with noncompete clauses from opening their own business. Seven other former employees are trying to force Better Boat into bankruptcy in hopes of recovering lost wages.

The development corporation, which is funded by a county grant and hotel tax receipts, may have to pay NationsBank, the lender, up to $100,000 if the company defaults.

Mr. Barielle, 35, has moved to North Carolina in search of a job, his lawyer, Price O. Gielen, said.

And the case has tarred the reputation of Anne Arundel's close-knit maritime community, marina managers and sales people say.

"The biggest impact is that the marine service [industry] has a bad rap," said one Annapolis marina manager who did not want to be named.

"It's such a black mark on our small industry," Randy Morris, a former employee of Better Boat, said. "The ramification of a company that comes on the scene and blows it off in a year . . . the government doesn't forget that."

When Mr. Barielle applied to the Incentive Fund loan program in September 1993, he was the kind of candidate the development corporation wanted to help.

In three years, the New Orleans native had built a company that provided all the marine services for the Annapolis Yacht Club and had expanded to a second location in Fort Lauderdale, Fla., according to his loan application.

Mr. Barielle said in the application that a loan would help him expand and absorb business left by his major competitor, Coast Navigation, which had folded earlier that year.

The development corporation acknowledged that the firm was a "high risk" because the marine business had been in decline, profit margins in the marine electronic business can be thin, and the company had no collateral, according to a loan document.

But the loan program was designed for just such businesses, said economic development officials.

"Generally, we know the transactions we participate in as a lender or guarantor -- they're not bankable in the traditional sense. They are of high risk," said Michael S. Lofton, executive vice president of the corporation. "We create reserves and manage our assets to be able to tolerate that risk."

The risk quickly became apparent.

Leica Navigation Positioning Division sent Better Boat two global position receivers, worth a total of $4,870.50, in November 1993 and February 1994, but never was paid for them, according to Stuart Tolman, marine sales manager for the Torrance, Calif., company.

Mr. Tolman said he has tried to contact Better Boat, but "we've heard nothing from them."

"I knew them from a previous company," he said. "They seemed to be a fairly good company. You never know."

Four other companies have filed claims in federal court for nearly $10,000.

Last September, Harvey Williams paid for a $10,000 marine electronic system to outfit his new, 36-foot Black Watch sportfishing boat, but never received it.

Mr. Williams, a Richmond businessman, said Better Boat salespeople told him that if he paid up front, he would a get a third off the cost of the equipment and a cheaper installation rate.

"Like a trusting soul, I did. I'm just out the money," said Mr. Williams, 60.

Annapolis' Bristol Yacht Sales, which sold Mr. Williams the boat, tried several times in December to get his equipment from Better Boat, said Frank Gary, Bristol's vice president

When Mr. Gary called Better Boat in the 900 block of Bay Ridge Road, he got an answering machine. When he learned that the business had shut down, he tracked down Mr. Barielle in January at his Annapolis home.

"He indicated that it was out of his control," Mr. Gary recalled. "He said he was sorry, and I asked him if he had any components, he said no."

Mr. Williams has since paid $10,000 for another system.

"The only thing that could make the experience worse for me is to hire a lawyer and throw good money away and lose the case," he said.

The former employees filed the bankruptcy case in October in U.S. District Court in Baltimore, claiming Better Boat owed them about $20,000 in back wages.

They claimed in affidavits that Better Boat often didn't and couldn't pay salaries and that cash flow was a problem. Lily Walther, a former bookkeeper, charged in her affidavit that Mr. Barielle used loan money to pay off an existing loan and that

customers' payments for new orders were used instead to buy equipment promised to other customers.

But Federal Bankruptcy Judge James F. Schneider dismissed the case in December, ruling that the employees had filed the case improperly. The employees have appealed.

Mr. Barielle's lawyer, Mr. Gielen, said Better Boat's troubles didn't start until after employees began spreading rumors about the company's financial troubles.

Business decreased, customers left and suppliers cut off the company's credit, he said.

Mr. Barielle couldn't run the company because he was battling his employees' allegations, Mr. Gielen said.

"This company was destroyed by improper actions. Someone is going to pay for it," he said. "The company was expanding."

"We disagree strongly with his characterization," said Stephen P. Kling, lawyer for the former employees. "The litigation is continuing, and I don't comment on litigation that is ongoing."

Despite the potential loss, economic development corporation officials say they still will take risks on other fledgling businesses.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.