Day: August 10, 2009

Ohio shut down business of data center promoter

Paul Allen arrived in Floyd a few months ago with all the subtlety of a Tasmanian Devil, whirling about with grand promises of bringing a mutli-million dollar data center to the county’s commerce park.

He had plenty of time of his hands because the State of Ohio had shut down his data center business there by revoking his company’s registration and Certificate of Authority.

Allen’s bold stories and grand plans sparked interest with the revenue-starved county government, which jumped to embrace the wheeler-dealer from Ohio. He rented one of the most expensive apartments in the new Station on South Locust complex across the street from the Floyd Country Store and then asked locals to help him find free or cheap used furniture. He drove around in a fancy white Mercedes G-Class SUV and talked about buying land, making Floyd his home and even buying Citizens Telephone Cooperative because, he said, they are in trouble, and need his help.

In Floyd County, being showy attracts attention and also creates doubt. People started talking about the flashy promoter and asking questions. No land purchases are on file with the Circuit Clerk’s office. As a public-owned cooperative, Citizens would be difficult, if not impossible, for an indivual to buy.

He bragged about big contracts with the federal government, the Radford Army Ammunition Plant and pending deals with Virginia Tech.  None of these deals, however, can be confirmed.

He said his company was a multi-million dollar operation wth locations around the world. Manta, which tracks small businesses, reports:

B Telecom, Inc is a private company categorized under Data entry service and located in Parma, OH. Our records show it was established in 2002 and incorporated in Ohio. Current estimates show this company has an annual revenue of $630,000 and employs a staff of approximately 11.

Manta’s information came from Dun & Bradstreet, the business and commercial rating company.

Some said Paul Allen was too good to be true. They might be right. Although he shares the same name as the billionaire Paul Allen who co-founded Microsoft with Bill Gates, this Paul Allen is not the same force in the technology industry. Questions are arising about this Paul Allen, his past, and his promises.

Not long after Allen hit town, the Ohio Secretary of State canceled the Articles of Incorporation certificate for his company, B-Telecom Inc. (also known as Bti) for failure to file necessary corporate franchise tax reports or pay taxes. 

In a March 6 letter signed by Secretary of State Jennifer Brunner, Allen was notified of the revocation and told to stop practicing business under the B-Telecom name. The registration for that company remains “on hold” by the state of Ohio.

A month after Ohio revoked Bti’s business credentials, Amish businessman Bill Byler, an Allen partner, filed corporation papers creating Data Knight 365 LLC and Allen continued promoting his latest venture.

It’s not Allen’s first run-in with government or those with questions. An investigation is open in Ohio regarding questions about the validity of letters of credit used by Bti.  Questions about the authenticity of letters of credit provided by Bti were cited in the company’s failure to win a bid for the controversial Networx project in Memphis, TN.

Memphis Light, Gas & Water hired The McLean Group, a prominent investment banking firm headquartered in Northern Virginia, to vet the bidders. McLean found problems with B Telecom, saying their letters of credit were “unconvincing” and the company failed to show for a due deligence meeting.

Others who have dealt with B Telecom and Allen report similar problems. Some said Allen would not show for scheduled meetings but would send Byler or Don Sabin, who served as spokesman when DK3 announced plans for the data center in Floyd. Sometimes, nobody would show.

“I would advise Floyd County to stay as far away from these guys as possible,” says a Virginia-based procurement officer who has dealt with Bti and who asked not to be identified. That procurement officer contacted us this week after reading our earlier reports about Data Knight 365.

When the Networx deal fell through, Allen told Memphis media that the “fix was in” and that the McLean Group was not a competent organization to judge his credentials. The McLean Group’s managing director is Dennis Roberts, a former bank President, certified valuation analyst and a teacher and writer on mergers & acquisitions, business valuation and corporate finance. The McLean Group’s board of advisors includes former Congressman Vic Fazio, former White House National Security Director Robert McFarlane, who also served as US Ambassador to the Middle East and retired Navy Vice Admiral Al Burkhalter Jr.

The county and Data Knight 365 announced a deal last week for plans to spend more than $20 million for a “world class data center” in Floyd’s industrial park. Allen has said the deal is done and the land is his but no contract has been signed and no money has changed hands. There is a performance agreement in place and it outlines things that Data Knight 365 must deliver before the deal can move forward. Two supervisors told us they need more information and some questions answered about Paul Allen and the DK3 deal but the board will not have a role in this transaction unless the Economic Development Authority wants the county to spend money. From what we have been told, the county is not granting any concessions or spending any taxpayer funds.

(Updated to include new information)

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Power Direct: A company of aliases and problems

Power Direct, the telemarketing company behind Data Knight 365, the shadowy firm that announced last week it would spend more than $20 million to build a "world class data center" in Floyd’s industrial park, is an operation of aliases, multiple listings of "dbas" (doing business as) and run-ins with consumers and the law.

It’s a privately-held company sometimes known as Power Direct, but also known as D.R.D. Inc., R D D Inc. and several other names we have discovered in a search of business databases, public records and corporation filings.

D.R.D. stems from the initials of Daniel R. Delfino, the owner of record of the many different identities of Power Direct. In his biography on the Power Direct web site, Delfino sounds like a man of many great accomplishments:

Dan Delfino brings over 20 years experience in the call center and data/marketing arenas. Multiple Fortune 1000 companies can credit their wealth and prestige to his unique revenue generating strategies. He sampled the telemarketing industry at Dun & Bradstreet where he marketed its list management services and quickly acquired more responsibilities. His progressive success and leadership in developing marketing strategies led him to consulting in the publishing and telecommunications fields. And in 1994 his own company, Power Direct was born. Dan’s ambition and entrepreneurial spirit has never wavered as Power Direct holds its own as a call center powerhouse. He upholds his initial vision of providing clients with turnkey marketing solutions, inbound/outbound telemarketing and database mining solutions. Dan earned his Bachelor of Arts in Business Administration at Baldwin Wallace College. The school also honored him as a 1998 Football Hall of Fame inductee, remembering his contribution to its 1978 Division III National Championship.

Baldwin Wallace College is a private, Methodist-oriented liberal arts school in Berea, Ohio, about 20 minutes outside of Cleveland. Delfino graduated from the school in 1981 and was inducted into the school’s "Hall of Fame" in 1998.  It is an athletic hall of fame specific to the school and includes alumni who contribued "in other ways" to the school along with past school officials.  It is not part of the College Football Hall of Fame located in South Bend, Indiana.

Delfino and DRD Inc. were also "honored" on December 14, 2006, by the Federal Trade Commission with fines and injunctions because Delfino and his company violated the "Do Not Call" rules of the commission.  The FTC press release:

The Federal Trade Commission today announced it has entered into court settlements with the final defendants charged with violating the Do Not Call (DNC) provisions of the Telemarketing Sales Rule (TSR) by calling consumers whose numbers were on the DNC Registry in an attempt to sell them DIRECTV satellite television subscriptions. The orders require the defendants to pay a total of $100,000 in penalties and bar them from future TSR violations.

In December 2005, the Commission charged DIRECTV and other defendants that telemarketed on DIRECTV’s behalf – including those settling today – with violating the DNC Rule and the TSR by calling consumers, despite the fact that their numbers were on the National DNC Registry. In settling the charges, DIRECTV paid $5.3 million, representing the largest-ever DNC penalty obtained by the Commission.

The final court orders announced today settle the Commission’s charges against the following defendants: D.R.D., Inc., also d/b/a Power Direct; Daniel R. Delfino, individually and as an officer of D.R.D.; Global Satellite, LLC., also d/b/a Mavcomm; William King, individually and as an officer of Global Satellite; and Michael Gleason, individually and as an officer of Global Satellite.

The FTC placed Delfino, D.R.D. and Power Direct under a special monitoring program to keep an eye on future telemarketing abuses, noting:

The stipulated final judgments and orders against the D.R.D. and Global Satellite defendants contain both monetary penalties and conduct provisions…Finally, both orders bar the defendants from violating the TSR in the future and contains monitoring and record keeping provisions to ensure their compliance.

Detailed information on a privately-held company is not always easy to get because public disclosure filings are not required. Manta, which tracks small businesses says this about Power Direct:

Power Direct is a private company categorized under Nonclassified Establishments and located in Cleveland, OH. Our records show it was established in 1994* and incorporated in Ohio*. Current estimates show this company has an annual revenue of unknown and employs a staff of approximately 1 to 4.

Dun & Bradstreet, however, lists Power Direct’s "estimated" annual revenue at $17 million and says the company has 577 employees.

While Delfino’s background does involve the collection of data and information, it does not match Data Knight 365’s claim that:

For the past 15 years, DK3 senior management staff has operated and managed Data Center storage and management facilities, collocation facilities, and private fiber networks providing connectivity services that ensure clients are able to run their businesses with maximum efficientcy and reliabiliy.

Fifteen years is the length of time Delfino’s operations have been in business but DK3’s connection to the data center business appears to be Don Sabin, a former salesman for Fiber Media in Hollywood, Florida. Fiber Media was founded in 2000.

Complaints about D.R.D., R.D.D. and Power Direct continued to flow into the Better Business Bureau and web sites that monitor telemarketing abuses long after the FTC fined the company and ordered it to stop violating telemarketing laws. The web site 800 Notes cataloged complaints about telemarketing abuses from phone number (216) 453-1979 through June of last year. The number backtraces to Delfino’s companies.   Delfino’s three call centers in Cleveland use several different numbers and recently changed some because of consumer complaints.

Power Direct’s web site uses photos not of the company and its personnel but "stock" photos from an agency that sells the images for generic use. The "news" section of Power Direct’s web site lists seven stories about the company from August 2005 to May 2008 but does not link to a single outside source for the "news."  Two of the stories announce the company was on Crain’s Ohio Business list of "Leading Edge" for two years but Crain’s dropped the company from the list this year with no explanation. Three stories tout the company’s listing on the "Weatherhead" list of fastest growing companies in Northeast Ohio.

We checked the Weatherhead list. Power Direct is 92nd. In Northeast Ohio, just about every company that didn’t lose money the previous five years makes the list. Companies can apply to make the list. They are not nominated. The key is to be in the top 25.

Click here to read the PDF file of the FTC order against Delfino and D.R.D. Inc.

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