Absence of Cash Cancels World Mail : Once Promoted as Postal Alternative, It Never Fulfilled Plan
Neither rain, nor snow and nor gloom of night could stop World Mail Center. But red ink finally did.
The chain of private post offices, founded nearly five years ago in Camarillo with a highly publicized splash and touted as an innovative alternative to the U.S. Postal Service, disclosed last week that it had run out of money.
World Mail said it closed its 19 outlets in Texas, Illinois and California, fired all but one of its 50 or so employees and had its entire board of directors quit. The company also said it might seek protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Four of the company’s locations--one in the Mid-Wilshire area and three in Century City--have been sold to Stellar Communications, a Los Angeles firm that sends packages and transmits facsimiles and telexes.
Company Intrigued Investors
World Mail’s disclosures appear to signal the last chapter in the bizarre and chaotic history of a company that never made money but nonetheless intrigued investors. At one time, investors included former President Gerald R. Ford and former Postmaster General Winton Blount, who was a director.
In the past three years, World Mail has gone through 10 presidents, including the head of a casket company, a former Navy civilian administrator and a Canadian trucking executive who later sued the company for breach of contract. The most recent World Mail president, John Alexander, resigned last month after five months in the job.
Last fall, Texas real estate investor Louis G. Reese III bought a controlling stake of 31% of the company from the Farkas Group, a Denver-based real estate concern that is World Mail’s largest secured creditor and is owed $300,000. Reese became chairman, moved the company’s headquarters to Dallas and disclosed plans to open 1,000 outlets in five years.
World Mail, however, never turned a quarterly profit. According to Robert Farkas, one of the principals in the Farkas Group, Reese decided to cut his losses after investing about $2.5 million.
Securities and Exchange Commission filings show World Mail lost more than $4.5 million since it was founded by former Navy civilian administrator Scott Adler in Camarillo in November, 1981.
Concept Drew Widespread Attention
Adler’s concept of a computerized post office system received considerable national publicity when the company started. The idea was for World Mail to find the fastest and cheapest mail or courier services for its customers’ packages. World Mail also sold stamps and rented out post office boxes.
Blount, postmaster general in the Nixon administration, became a major investor and a director in 1984. He resigned from the board in January. Last fall, a spokesman confirmed that former President Ford briefly invested in the company at the urging of his friend and neighbor, Kaiser Morcus, a Colorado developer who once was a World Mail director.
Former directors and officers have attributed the company’s problems to such factors as excessive overhead, poor store locations, failure to collect bills and excessive management turnover. Some critics also questioned whether a chain of private post offices could ever compete with the U.S. Postal Service and private mail carriers.
In an SEC filing in January, World Mail disclosed that its current liabilities exceeded current assets by $487,813 and that it was in default on its notes.
Wade Davis, chairman of Stellar Communications, said he bought the four World Mail locations for 25% of any profit they make over the next six months. He said he hired four World Mail employees.
Will Pick Up Packages
Publicly held Stellar Communications was founded two years ago by Davis, 46, a former real estate executive and Harvard Business School graduate. It now has six outlets in Los Angeles. Davis said he believes his centers will be more successful than World Mail’s, in part because they offer the added attraction of picking up packages from customers.
Davis said he turned down an offer, however, to buy World Mail sites in Newport Beach, San Francisco, Chicago, Houston and Dallas.
Robert Hawkins, a Reese executive who is now World Mail’s only employee, said he is contacting creditors and shareholders to discuss plans for World Mail that he wouldn’t specify.
