Market Scene : An American in Estonia: Venture Brings Gain, Grief : * A former Detroit marketing director joined forces with a local couple to open a shop in Tallinn. But not all went smoothly, even though the store now makes a sweet profit.

Granted, it’s a strange place to go searching for the “American dream.” Nevertheless, Cary Harrell thinks she may have actually found it--right here in what used to be the Soviet Union.

But the story of how a 38-year-old Detroit marketing director set about making her fortune is not so much fairy tale as high farce, a black comedy, a surrealistic morality play whose choices come down to questions like this:

Is it better to invest in mammoth tusks or candy corn?

The strange but true tale began three years ago, when Harrell first came to Moscow for her firm, Michigan Trade Exchange International. Since the country was still Communist and short on hard currency, the idea was to barter American consumer goods for Soviet products.

“There were so many strange people coming to us with so many strange products,” she said, remembering the mammoth tusks from Siberia, knockoff icons, sap from pine trees and the murky jars of mystery chemicals someone wanted to swap for a computer.

“I was a little discouraged,” Harrell admitted. “I thought we’d get some top-grade marble or precious stones.”

She went back home and hired some Russian emigres to pursue her dream in absentia. They returned with good news: The market was opening up in the breakaway Baltic republics, and there was a promising entrepreneur in Estonia who was dying to set up a joint venture. (Back then, the only way for foreigners to run a business here was with a local partner.) Harrell was interested.

She flew to Tallinn and met Andres and Kuellike Neeme, a nice enough forty-something couple who owned a small cafe on the medieval capital’s outskirts. They had their own dream--to build a pretty little hotel over their cafe, and a hamburger stand on the corner. They also wanted a Buick in the worst way.

Harrell was impressed, and the new friends decided to open a hard-currency store stocked with American goods, which the Michigan Trade Exchange would pick up cheap at “distressed sales” of discontinued or out-of-season merchandise. (That explains the chocolate Santas and Halloween candy corn that graced Estonian shelves in late February.)

“We buy at close-out prices, 20 cents on the dollar, and mark it up 100%. We’re able to bring it in duty-free,” Harrell explained.

Andres Neeme’s job was to handle the Estonian red tape and official bribes; Harrell’s side would put up the capital. They would split the eventual profits 60-40, the smaller share going to Neeme.

Neeme soon unearthed a real treasure--vacant, affordable space in Tallinn’s beautiful old town. Harrell shipped over the paint and all the fixtures needed to fix up the place. Neeme got a warehouse.

Neeme then screened hundreds of job applications, which Harrell culled to 15 employees, making her choice based largely on who could smile, exude energy and speak a little English.

“I gave them 40 hours of training,” she said. She also gave them free deodorant and made its use part of the unofficial dress code. It was a struggle to convert her dubious staff from the Soviet approach to salesmanship (sullen silence and outright rudeness) to the American style (permanent smile and die-hard chirpiness).

“Hi, can I help you?” they practiced saying, again and again. Carefully, Harrell went over each product with the bewildered staff so they could explain unfamiliar items to the customers. “This is Saran Wrap,” Harrell tutored in one lesson. “It sticks to things and keeps food fresh.”

Within three months, Cary Harrell and Neeme had officially opened American Style--and a major can of worms.

In retrospect, the difficulties that lay ahead were foreshadowed on the first day of business. Harrell had shipped over an expensive American cash register for the store, along with a computer system. But the register key was nowhere to be found, and a duplicate was obviously unavailable in Estonia. So opening day calculations were made Soviet-style, on an abacus.

Alas, Harrell soon spotted another problem with her carefully trained, freshly scrubbed staff. They were locking customers out of the store.

She watched in dismay as the young employees grudgingly let curious shoppers inside only one or two at a time, as had been the norm in the old days. Nobody was saying, “Hi, can I help you?” The staff told her this would scare people who were not used to such friendliness from store clerks.

Those would turn out to be relatively minor headaches. Things still seemed to be going well enough that Michigan Trade Exchange invited the Neemes to America, showed them the sights of Detroit and helped them spend their entire hard-currency savings ($5,500) to buy their dream car--a 1985 Buick Park Avenue with 60,000 miles on it. Michigan Trade promised to pick up the cost of shipping the car to Estonia.

By last October, the store was doing a brisk business, and the inventory had expanded considerably from the cheap clothes and cosmetics it had started with. Now there were telephones, Barbie dolls, household cleaners and jars of baby food that sold out in a flash.

At about the same time, however, Harrell concluded that her partner “was stealing us blind.” And she began trying to extricate herself from the deal with the Neemes.

“The perception is that every American is a millionaire,” she charged. “He’d come in, take things out of the store and sell them for hard currency in his cafe. He’d demand the keys to the warehouse from the kids working here and go load up his truck. He demanded $1,000 for coffee machines for his cafe.”

Neeme thought he would be earning 40 cents on every single dollar rung up, never taking into account the need to reinvest in new inventory or pay for such things as the office computer. Feeling betrayed, he ordered the store shut in November, saying it was necessary because no taxes had been paid. Harrell thought he had taken care of that too. She reopened the shop.

“It’s a very long story,” Neeme says now. “It is not a good experience for me. I get really upset. I have nothing nice to say about the whole experience.” His wife snaps her chewing gum furiously. “We are totally innocent people!” she insisted. “Cary shamed us before all Estonia. We haven’t done anything wrong.”

The Neemes refuse to discuss what happened in detail, citing the confidentiality clause in an out-of-court agreement they eventually reached with Harrell. But they did acknowledge that the agreement includes a list of $21,490.51 worth of items taken from American Style by the Neemes and not paid for--from chewing gum to television sets. The settlement allowed them to keep this merchandise and reiterated the promise of free delivery for the Buick.

Neeme maintains that he, not Cary Harrell, was robbed.

“We were supposed to get 40% of all profits,” he pointed out. “After we had been working half a year, the American side announced there was no profit at all; we were in debt and therefore due nothing. The shop was making huge profits, though. Nobody believed this.”

Harrell maintains that start-up costs, customs bribes and building up the store’s inventory prevented American Style from showing a profit during the time Neeme was on board. Now, however, she estimates that it clears $21,000 a month.

The joint venture was dissolved after Harrell told the Neemes: “You walk away. Take what you’ve stolen from me. Or, we go to Sweden and I file criminal charges and use every resource I have to ruin your family name.”

Like most joint ventures in the Baltics--Estonia has the most with more than 1,200--this one had a clause stipulating that disputes would be resolved by a third country, in this case, Sweden.

The Neemes said they accepted the agreement because they had no other recourse.

Since the big blowup, Harrell claims she has discovered another $4,000 in cash missing--money Neeme was supposed to have used to clear the last container of goods through customs, which now maintains the fees were never paid. Harrell paid for her latest container and left customs the Buick to use as security.

Now fully independent from the ex-Soviet Union, Estonia has loosened up in the past six months and permits foreign investors to operate without local partners. That’s what Harrell has decided to do, visiting Estonia every few months and making expansion plans.

So, in the end, Harrell did find her American dream in this sometimes baffling, sometimes maddening place so far from Detroit. She is preparing to open a store in Minsk, the capital of Belarus, and an outlet in Moscow.

“I want to be the first chain store here. I want American Style shops all over the ex-U.S.S.R.,” she said. “This is the last frontier. I feel so lucky to have been born in the U.S. and so proud for what we stand for. I don’t want to fix up their whole world or anything. American Style is just a touch of America. It’s been a real interesting adventure.”

The Neemes consider it more an education than an adventure. Kuellike Neeme is especially bitter, though things seem to be going well for the couple. They have new partners--some Finns and Germans--and say they are in the process of opening a shop, a restaurant and a department store.

“My feeling is the American side took advantage of my husband’s work. They will profit from it for the next 10 years,” Kuellike Neeme said. “The Americans fly here and fly back. They come and go, but we live here; we’re trying to build ourselves a life. The big misfortune for Estonians is we don’t know how to do business. We just don’t know the rules.

“They have won. We have lost.”