Better Place buyer's trail of unpaid employees
Tsahi Merkur's electric car recharging venture Success Charging has not paid salaries to foreign employees, even as he seeks new interests.
Two years later, Success Charging was still mostly a vision, and Merkur moved on to his next target: in August, he acquired Better Place Israel and its subsidiaries for the bargain price of NIS 11 million.
Merkur's ambitious venture, Success Charging, was launched in early 2011. It was based on long-term contracts with European and the North American real estate companies and municipalities that owned shopping centers, residential complexes, university campuses, with large parking lots. Merkur planned to install recharging points for electric cars on these properties at his own expense, in anticipation of future profits from the recharging of electric car batteries. The environmental branding and innovation were also selling points.
The former executive told "Globes" that, subsequently, Merkur's proposed contracts were the basic obstacle to the company's development. Instead of allowing the property owners to feel that they were signing a good and fair deal, they felt that they were being locked in to long-term draconian contracts with no guarantee that their properties would be connected to the venture or that the recharging posts would be installed.
"In these contracts, the property owners were to give Success Charging 28 years exclusivity. Under the agreement, during the contract period, the property owner could not contract with another company. The problem was local laws in each country. In Canada, for example, it is not legal to sign such an agreement for a period exceeding ten years. Merkur himself would not have signed such an agreement, but he insisted," said the former executive.
The draconian and intimidating contracts were not Success Charging's only problem, says the former executive. "In 2011, the company was in the final stage of drawing up the contracts with the property owners, but it was unclear which recharging points would be sold in the various markets and which protocol would be used to connect the recharging points with the electric cars. Shortly afterwards, problems began cropping up, such as late payment of salaries to some foreign employees, who were bitter about it. Merkur attributed the delays to administrative problems in transferring salaries from Israel to other countries, and difficulties in reaching salary arrangement in most of the countries. On the other hand, Merkur was saying that the company had money, and that the problem of salary arrears was temporary."
Success Charging had 45 employees in nine countries in Europe and North America at the time. Some employees were hired by the country managers and others by personnel managers who joined the company. Even as the company's employees were negotiating contracts with property owners and waiting for their salaries, Merkur moved on to his next project. He founded a new company, Drives Ltd. to develop software for managing the recharging points planned for Europe and North America. Drives was supposed to complement Success Charging, and it hired at least seven employees. They were paid on time.
Unpaid employees around the world
It seems that Merkur is pleased by Drives. A few days ago, he announced that Better Place will be renamed "Drives Better Place". "There is no question this is an important company for the venture. The problem is that instead of paying the salaries of Success Charging's employees, Tsahi chose to found another company and invest in it," says a disgruntled employee.
Despite the friction, in March 2012, Success Charging was still claiming business as usual at a major electric car show in Amsterdam. As far as the company's officers were concerned, this was an impressive show: a big fancy pavilion, set up at a cost of €150,000, staffed by marketing representatives, and topped by glittery green logo.
Merkur came to the pavilion, along with many Success Charging employees from across Europe, who were invited at the company's expense. "This was a good opportunity to send a message to the employees that the company was serious and that it had money," says the former executive.
The salary arrears continued after the glittery auto show in Amsterdam: some employees were not paid their February salaries and no one was paid their March salaries, including executives in Israel who had access to Merkur. The former executive says that while Merkur was focused on his new baby, Drives, Success Charging's employees were waiting to be paid and were facing financial distress.
Merkur and the company again promised that they planned to sell an asset and use the proceeds to pay salaries. In April 2012, the company stated in a letter to employees that the salary arrears would continue for another 30-90 days, but "We guarantee that all the money owed you will be paid, and we are working hard to do this by raising the money needed."
In the letter, Success Charging suggested that the employees obtain short-term bank loans and detailed a compensation plan for employees who would not be paid in the coming months, offering €500 compensation for each month of arrears.
The hoped for real estate deal that Merkur spoke about materialized in June 2013, but the employees were still not paid.
Sophia Lucas of Madrid, who briefly managed Success Charging's Spanish and Portuguese operations is still waiting for Merkur to pay her and her three subordinates. She says that she is owed €16,500 in salary and taxes. "I don’t know how he sleeps at night," she told "Globes". "The problem is that this company has no assets or money in Spain, so nothing can be obtained from it. He had a disorganized dream that dissipated at the employees' expense."
Lucas will not give up. "If my team and I do not get what we are owed, we'll sue Merkur and his company in Israel, and I hope we'll get our money," she says.
Calvin Blumbaum of Tucson, Arizona, married with three children, who worked part-time in business development for Success Charging, is also waiting to be paid. He says that Merkur owes him $25,000 in salaries, not including expenses. "I emailed him, and he promised to pay us. His excuse is that he was trying to sell an asset, and then he would pay. I've heard about other people who demanded their salaries from him, and became angry at them. He asked me and others to quit, but we told him that he would have to fire us and compensate us," he told "Globes".
"I almost lost my home and go live in the street. It's simply a shame how he treats his employees. He hit me and I haven’t fully recovered financially from this. I was totally humiliated. What he did to me was immoral and unethical."
A top Success Charging executive, who plans to shortly sue Merkur and the company for unpaid salaries, told "Globes", "At least 20 people in Europe and the US are waiting for their salaries. In many cases, these employees were not properly hired or properly fired, so they cannot claim unemployment insurance or other rights through their local welfare systems. I spoke constantly with these employees, I heard their frustration, their and their families' distress, despair and helpless. As part of its activity in the US, the company looked for people with a background in real estate, and it approached them after the 2008-09 crisis which had hit them hard. These people were discouraged, and they suddenly heard about this green, environmentally friendly venture - the electric car. It gave them great hope, and they were with the company. And then it blew up in their faces," he said.
"Groundless claims by competitors"
Success Charging's lawyers say that these are groundless accusations, and that business parties with competing interests are behind the claims. "The company believes that its relations with its employees should not be discussed in front of third parties in general, and especially not in newspapers. The company believes that it is improper to discuss in depth a person who was engaged and/or had a connection with it, partly because such a full and detailed mention should also mention and detail the company's claims about his conduct, the conduct and activity of that person. Any person who has any claim against the company knows the legal and legitimate way to clarify the claims, and it is not on the pages of a newspaper.
"In addition, some of the claims raised in the article ostensibly relate to the business practices of the company, which raises suspicion of breach of confidentiality to which the employees and/or the service providers are bound."
Published by Globes [online], Israel business news - www.globes-online.com - on October 2, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
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