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Clarification

To clarify a June 15 story about Converged Solutions LLC's default on loans to the Grand Traverse County Economic Development, EDC attorney Bethany Warner said whether the EDC can pursue business owners Dale and Gail Zuelch personally for the amount of money that Converged Solutions LLC owes Grand Traverse County will depend on whether they receive a discharge in their personal bankruptcy case.

Warner disputed a comment by EDC member Ross Richardson that a list or listing of collateral items was not provided to the EDC. She said a list of prospective items to be purchased was provided, but it did not include final purchases or other identifying information such as serial numbers.

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  • Former Converged Solutions LLC worker Dan Monette disputes claims made in an EDC attorney's memo. Record-Eagle/Keith King

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June 29, 2010

Ex-employees shocked by county's accusation

Memo 'pointed the finger'

BY BRIAN McGILLIVARY bmcgillivary@record-eagle.com

TRAVERSE CITY — Grand Traverse County likely lost $172,000 on a bad business loan, but instead of pursuing debtors, officials circulated a memo that pointed fingers at the defunct company's employees.

An accusation that ex-employees of Converged Solutions LLC removed some of up to $60,000 worth of equipment listed as collateral for county loans shocked the company's former workers and their new boss.

They said no one from Grand Traverse County or elsewhere contacted them with questions about alleged missing equipment, most of which they contend Converged Solutions never purchased.

"For them to make an accusation like that, where does that come from," said former Converged Solutions employee Dan Monette, who now works for another local company with some of his former Converged Solutions co-workers.

"By not singling anybody out ... they pointed the finger at everybody," Monette added. "Our reputation and business is based on trust. To be accused of being a thief is not good."

Officials with the county's Economic Development Corp. are trying to distance themselves from the memo, which was written by their attorney and cited in a story in the Record-Eagle's June 15 edition.

County officials now say they don't believe Converged Solutions employees stole anything after the business closed in March.

EDC director Jean Derenzy acknowledged the county never confirmed whether Converged Solutions' owner Dale Zuelch purchased equipment he cited in EDC loan documents.

Zuelch could not be reached for comment.

"We were supposed to be tracking that, but we weren't," Derenzy said. "There's not a good answer on why that didn't occur."

Derenzy said the county contracts with the Traverse Bay EDC, a branch of the Traverse City Chamber of Commerce, to track loan use.

A June 4 memo from county EDC attorney Bethany Warner included speculation from a Huntington Bank attorney and another source that former Converged employees took equipment to start their own business.

But Monette said Converged Solutions never obtained about $40,000 worth of equipment that its owners said would be purchased with the county loan.

He and several other former employees said the equipment manufacturer, Mitel Networks Corp., maintains an online database that lists the retailer and final purchaser for every piece of equipment it sells. The $40,000 in equipment Converged Solutions said it would buy with EDC funds isn't listed in Mitel records, according to documents reviewed by the Record-Eagle.

"If he bought it, the EDC can track it," Monette said.

He does not know what happened to the rest of Converged Solutions' equipment, but said an auction company that represented lender Huntington Bank left little behind.

"There wasn't a nail left in the wall when they left, just papers on the floor that they couldn't sell," Monette said.

The county awaits a list of items sold at auction. A spokeswoman for Huntington Bank said neither the bank nor its attorney would comment.

Employees also didn't start their own business, as mentioned in the EDC memo. Most went to work for Ron Houghtaling at Great Lakes Telecom Inc.

"(Zuelch) owed the bank a very large sum of money and he owed the EDC a large amount of money," Houghtaling said. "Rather than (Huntington and the EDC) looking bad, they'd rather point the finger elsewhere.

"To make accusations against innocent people because of their sloppiness, that's pretty sad," he said.

Warner, the EDC attorney, said she wasn't accusing anyone in her memo.

"I don't know if the employees took it; I was just relaying information to the EDC that I had received," she said.

Warner added that Zuelch's bankruptcy attorney told her all items were purchased by Converged Solutions and on site when the business closed. No written proof of the purchases was provided.

"As I tried to explain in my June 4 ... memorandum, different people are relaying different information as to what actually occurred," she said.

The EDC didn't discuss the memo's accusations because there was "no proof it ever happened," Derenzy said.

"I thought our attorney repeating what was told to her third-hand and blaming it on employees was not highly professional, to say the least," said EDC member and county Commissioner Ross Richardson.

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