Cracks Appear in ESI Group

Arkansas Business, Dec 6, 1999 by Jon Parham

Ford Seeks to 'Refocus' Company

FOR NOW, THE LEADER OF WHAT HAS been one of the state's fastest growing companies is not saying much about the divestiture of one of its divisions or indications that all is not right with the company.

The Little Rock-based technology integration company, ESI Group, is in the process of selling off its electrical contracting section, which it acquired with much fanfare in 1996. Meanwhile, ESI has abruptly pulled up stakes and moved out of its Springdale office, and CEO Rod Ford's wife, Caroline, is listed as the registered agent for a new "information technologies" corporation with identical initials, Einstein Systems Inc., that was registered with the Secretary of State's office last month.

There are rumors of a potential bankruptcy filing by ESI Group, which reported more than $20 million in revenue and 180 employees in 1998.

Contacted last week about the condition of the company, ESI founder Ford said he would be willing to talk at length after ESI completed the divestiture of the electrical division and steps to "reposition and refocus" the company.

More than one person, including former employees and other sources knowledgeable about the company, say ESI may be considering a bankruptcy filing. Contacted subsequently, neither Ford nor ESI officials returned a voice-mail message asking specifically about the closure of the Springdale office or the bankruptcy rumors.

As of midweek last Week, there was no filing by the company in U.S. Bankruptcy Court.

Einstein Systems Inc. was registered with the Secretary of State's office on Nov. 8. Caroline Ford, Rod Ford's wife and daughter of Acxiom Corp. CEO Charles Morgan, is listed as the registered agent, and the address given is that of the home in Riverside Farm the Fords purchased a few months ago.

The articles of incorporation contain little additional information about the new company, except that its primary purpose is to provide "information technologies services." Caroline Ford is the only incorporator listed.

Meanwhile, the agreement with the former owners of what was originally Bradshaw-Clark Corp. to buy back the division is still being negotiated.

Mike Hocutt and Hoyt Monroe, who went to work at ESI after the acquisition, are already operating as Clark Power Corp. and finishing out some contracts started while the company was still a division of ESI, such as the electrical work at the new Baptist Memorial Medical Center in North Little Rock. Some 38 ESI employees have gone to work for Clark Power, Hocutt says.

Hocutt and Monroe say they've heard rumors about possible bankruptcy by ESI, but have no evidence to back them up. Asked who initiated the selloff of the electrical contractor, he says it was a "mutual idea" and the split with ESI has been amicable.

For a company that touted its rapid growth, the Bradshaw-Clark purchase may have been the crowning achievement in ESI's string of acquisitions. It was the first major purchase by ESI after a $2.5 million investment in the company by the Dallas-based Heartland Capital Appreciation Fund LP, which was created partly by Wal-Mart heiress Alice Walton.

It also brought the electrical side to a company that was working to help client companies become more efficient by setting up computer networks, databases and other high technology.

One source says the two businesses might not have been as closely related as was first thought.

ESI is also faced with the loss of its chief operating officer after the recent resignation of Collins Andrews. The reason for the resignation is still unclear, and he did not respond to a phone message left at his home last week.

Andrews came to ESI in late 1997 from Alltel Corp., where he had been a longtime operations manager for Alltel Information Services, stretching back to the days before the division's purchase by Alltel, when it was Systematics Information Services. At the time Andrews came on board at ESI, Ford hailed the move as a "major coup" for the company.

Some former employees tell of the layoff of about a dozen ESI employees in April 1998. Those employees were told their positions were being eliminated. At the same time, the company apparently closed its offices in Tulsa and Dallas, leaving only the Springdale office and the company's corporate headquarters in Little Rock's River Market.

Seven months later, in November 1998, ESI announced the addition of 50 "high-paying" jobs thanks to a financial incentive package from the Arkansas Economic Development Commission.

Last week, the company moved out of its Springdale office with little notice to the landlord, Ben Israel. Israel says the building manager notified him "about 10 minutes before the U-Hauls showed up" that he had been told by ESI officials there that the company was moving out of the 8,000-SF office at Country Club Center. "They told me they were downsizing," Israel says.

Israel says ESI signed a five-year lease with him when it moved into the larger offices in July from another location he owned. He would not disclose the price of the lease, but says there were no terms for leaving early.