Multistate real estate showing appointment service eShowings Inc. has shut down, just days after the incarceration of its founder and former CEO, Charles Smith.
The move leaves an estimated 14,000 clients in the lurch and the firm’s 85 or so employees out of work.
Smith, who founded the company in 1999, headed to prison on Dec. 4 to serve a 2 1/2-year sentence for pocketing his employees’ payroll taxes instead of handing them over to the government.
According to the U.S. Attorney’s Office for the District of Delaware, Smith had taken money deducted from employees’ paychecks and spent it on personal items for himself and his family, including vacations and gambling. Smith also continued to use company funds even after he had officially resigned in early October.
EShowings also continued to bounce checks, including employee paychecks, and had not paid rent or other liabilities or employee insurance premiums since Smith’s Oct. 4 sentencing, the office said.
Two days after Smith’s incarceration, the company’s employees were informed their weekly Friday paychecks would be delayed until Tuesday due to lack of funds. By Monday evening, Tomy Kot, the company’s general manager, was calling employees to tell them the company had been shut down and they would not be receiving their last two weeks’ worth of pay.
“He said, ‘We’re f___ed.’ (That) the company is no more,” said Kia Cale, formerly an assistant manager at eShowings’ Newark, Del., office. “I asked him, ‘What about our checks?’ and he said, ‘You just have to go file for unemployment.’ ”
She said clients had “no idea” eShowings had shut down.
“No email was sent out,” she said. When she left the office last, “pendings were at 400 — that’s how many homeowners we had to call to let them know the Realtors wanted to show their properties. There’s no notice being given, to anyone.”
Cale was at the local unemployment office this morning, along with Kot and other eShowings employees. Kot said it was Catherine Smith, Charles Smith’s wife, who told him to shut down the company.
“It definitely was a surprise. I was told everything was going to be fine,” Kot said.
He confirmed that no one on the payroll, including himself, had received their paychecks on Friday.
Catherine Smith declined to comment for this story. Jay Lantz, who took over as the company’s director of operations after Charles Smith’s resignation, did not respond to a request for comment.
Lantz told Inman News last week that eShowings had been bought by a private investor after Smith’s sentencing, but Darryl Dickerson, formerly eShowings’ accounting director, doubted that assertion.
“If there was a private investor, I don’t know why he couldn’t [pay] payroll salaries last week. There should be no excuse for the account to be empty if there was a private investor,” Dickerson said.
“Even after [Charles Smith] stepped down, he was still in full control of the finances of the company,” Dickerson added.
Kot also was not sure who owned the company “on paper,” but he took his order to shut down from Catherine Smith.
Smith had no official title or duties at eShowings. Dickerson said she was put on the company’s payroll in March, after Charles Smith received a letter saying his pay would be garnished for unpaid Delaware state taxes.
“He had his salary stopped and put her on salary,” Dickerson said.
Dickerson joined eShowings in June 2009 as its chief financial officer and spent six months “cleaning up” the books.
“That’s when I realized how large the problem was with the payroll taxes he hadn’t been paying for the last 10 years. He’s been stealing from the company since the inception of the company,” Dickerson said.
Dickerson said he relinquished the title of CFO about a year ago because Smith refused “to clean up anything having to do with the company. I knew this day was coming and I didn’t want to have anything to do with it.”
Smith always said that “he would shut the business down before he let anyone take over,” Dickerson said.
Management “knew what was going on” when it came to Smith, he said, but looked the other way because Smith gave them gifts, trips, and “outrageous” salaries in the $70,000-plus range. Operators who scheduled showings for agents did not receive even half of that.
Kot said he did not know what Charles Smith was doing until the court information came out. He denied receiving any gifts or non-business-related trips.
As of today, some employees, including Dickerson, had yet to be officially informed of the closure, hearing about it from co-workers. At least one went to work on Tuesday and was turned away by a sign handwritten by Kot: “eShowings is closed. Company has closed.”
Some employees had tried to cash some of their older checks but had been unable to for reasons that were unclear, according to Dickerson. He said there was “more than enough money” in the account to pay employees the wages they were owed. That’s because on Tuesday, the North Carolina-based Wilmington Regional Association of Realtors had made a payment of about $25,000 for showing services for their nearly 1,700 members, he said.
Jody Wainio, WRAR’s president-elect and MLS president, declined to confirm the payment or the length of the trade group’s agreement with eShowings, saying she was “not at liberty to discuss our contractual obligations with them.”
But she did say eShowings had yet to officially notify WRAR that it had shut down.
“We just know that their office is not open at this time,” she said.
Up until the closure, the association had been “very satisfied” with eShowings’ service, she added.
In a notice on the association’s website Tuesday, she informed members that the trade group’s MLS leaders were working diligently on how to proceed in light of eShowings’ closure.
“Despite eShowings’ assurances to WRAR-MLS, in addition to their assurances communicated to all MLS users in October, the company’s owner decided to discontinue services last night after the close of business,” she wrote.
“Your MLS leadership is consulting with legal counsel as to the contractual obligations each party has to the other. At the same time, we are actively pursuing alternatives to provide appointment services to our members as soon as possible. We promise to keep you informed of our progress.”
She instructed members to call the listing firm or agent to make showing appointments until further notice.
“It’s back to the basics of how things used to be before we had all this sophisticated technology. They have to contact the listing firm to schedule the appointment instead of calling eShowings … so, they’re still able to show properties as usual,” she told Inman News.
The closure is an inconvenience, especially to some of the association’s larger brokerage members that may not be staffed to handle the volume of inquiries they are receiving, she said.
“Some of our large firms have come up with a contingency plan to allow for appointments to be made in-house while we work through this situation,” Wainio said.
Wilmington’s largest brokerage, Coldwell Banker Sea Coast Advantage, has formed its own call center to deal with showing inquiries by hiring two of eShowings’ previous employees from the company’s Wilmington office and plans to hire a third tomorrow.
David Benford, the brokerage’s vice president and director of operations, said the eShowings closure had affected about 220 of the firm’s 380 agents.
“It has certainly added a lot of work to our agents and to our staff,” he said.
Because all of the firm’s showing instructions — sellers’ names, contact information, what to do with pets, and other details — were in the eShowings database, the firm had to go back and compile that information to distribute to its buyer’s agents.
“We are hoping for our MLS to come up with a solution very quickly, but we have houses to sell. We can’t put that burden on our listing agents. Unfortunately, that’s something not a lot of smaller companies are able to do,” Benford said.
Before eShowings shut down, the brokerage had “no complaints” about its service, he said.
“It did what it was supposed to do. We’d be very happy if tomorrow morning we had an email saying it or something similar to it was back up,” he said.
When asked whether WRAR was considering other showing service providers, Wainio said, “We’re looking at a lot of options.”
For now, “we’re working through this the best we can,” she added.
The trade group, which started using eShowings in 2009, was the largest remaining eShowings client, after defections from several others including Prudential Fox & Roach (now Berkshire Hathaway HomeServices Fox & Roach, Realtors), Re/Max Action, Re/Max Town & Country, Keller Williams Realty, and Re/Max Main Line, all in the Philadelphia metro area. A North Carolina multiple listing service, Jacksonville MLS, also dropped eShowings.
Although Smith claimed the lost business made up about 30 percent of the company’s gross income, Dickerson said it was more like 60 or 65 percent.
“Which is why the company could no longer afford to pay anyone. Everyone who started learning about what was going on there was jumping ship left and right,” he said.
Dickerson estimated the company had about 14,000 clients left, including individual agents and offices. That’s far below the more than 25,000 clients Smith claimed in an August court filing. Smith also claimed to have 180 employees, but Dickerson said there were only about 85 employees left (Kot said about 100), the vast majority of them operators who scheduled showings for agents.
Cale said it seemed to her that cancellations were coming in every day, but Kot said that there were “not an unusual amount of cancellations. It’s something that happens all the time in real estate,” he said.
“This time of year, the real estate business, it’s slow. People try to adjust their finances. The fourth quarter is just like it’s always been in the real estate industry.”
Kot said BHHS Fox & Roach had changed service providers because the brokerage was acquired, not because of Smith’s case, but said he did not know why the others had canceled their service.
Regardless, there were signs of the company’s impending demise.
“Rent wasn’t getting paid,” Cale said. “The office was filthy because the cleaning service that we had stopped coming because they had stopped receiving payments. We had operators who would get off the phones to clean the whole office.
“We had roaches everywhere. It was horrible. I remember one of the employees started screaming. I didn’t know why [then I saw] there was a roach on her book. There were electrical wires everywhere. I don’t know if they were allowed to have the wiring out like that. It looked pretty unsafe though.”
After Smith’s sentencing, some of the employees had their hours cut, and others worked overtime taking up the slack, Cale said. She’d clock in 42 or 43 hours a week, but would only get paid for 40, she said.
“It was scary. Everybody was wondering when our last day was going to be. Everybody kept lying to us, saying everything was fine,” Cale said.
Kot said some employees had their hours cut due to seasonal factors.
In the month of November, after Smith had supposedly resigned and Lantz had been named head of operations, Smith was in the office more often than he had been in the past two years, according to Cale.
“It’s ridiculous all the lies that were told to us. They could have at least given us a warning, so we could have even been more prepared,” she said.
“It’s just devastating. I thought we at least had until after the holidays. Unemployment already takes a couple of weeks. And what about the previous checks that we haven’t received? My car is going to be cut off.”
Cale, who had been with the company for five years, has set up a Facebook page for employees to air their grievances against the company and hopes to use it in a lawsuit. She also plans to file an official complaint with the Department of Labor to recover unpaid wages.
One possible reason that employees have not been able to cash old checks can be ruled out: Kim Reeves, a spokeswoman for the U.S. Attorney’s Office for the District of Delaware, said that the government had not seized eShowings’ bank account, as some employees had speculated. She declined to comment on whether there was any pending litigation against anyone else at eShowings.