If you believe the adage that there’s no such thing as bad publicity, then MFP Financial Services should have had a banner year.
But after 20 years in the business, president and CEO Peter Wolfraim isn’t looking back on 2002 as one of the brighter years for his company.
MFP
has offices throughout North America and Europe, with services that include technology and equipment leasing and technology-based equipment trading.
But combine a flat tech market with headlines alleging the company misled some municipal clients with respect to terms outlined in financing deals, and business hasn’t been booming.
In fact, its 2002 annual report indicates its shareholder equity decline was caused by a $25 million special charge for litigation matters (most of which was related to MFP’s asset-based financing business, not computer leases, except for the City of Toronto).
For the full year, MFP had a net loss of $2.9 million or 30 cents per share, compared to a net income of $17 million in fiscal 2001. Market conditions also meant a reduction in MFP’s staffing of at least 15 per cent.
With a third of MFP’s technology business coming from the public sector, any bad press related to its dealings with local government clients made a tough year even tougher. The first sentence in the MFP annual report says it all: “The past 12 months have been atypical and among the most volatile in MFP history.”
The reference is to the sector’s lack of recovery, but could also apply to its litigation problems with clients such as the City of Toronto. Late last year the city launched an inquiry into its computer leasing agreements with MFP as well as with software giant Oracle Canada. Throughout the legal wranglings with the City of Toronto, Wolfraim has insisted his company did nothing wrong.
“How they chose to finance it is the only part we have to play in it – and I think they’ll find they got a good deal,” he said.
However, it hasn’t made it easy for prospective clients to pick MFP as their company of choice, Wolfraim said in an interview earlier this year. “But having said that, the business has been quiet the last couple of years anyway. Post-Y2K the whole technology sector has slowed right down.”
“It’s been harder to attract new customers for obvious reasons, but virtually all of our existing customers have stuck with us and we really salute them. It takes a lot of courage, it’s not the easiest thing to do. But I don’t know if we can point anywhere and say a customer has gone away from us or done business somewhere else because of all this,” he said.
Wolfraim says some of MFP’s bigger clients, including school boards and the province of Ontario, have not been spending on IT. While the company has done some municipal business over the years and continues to do so, the lion’s share of the government IT business has been at the provincial level.
When asked to talk about the brighter moments of 2002, Wolfraim acknowledges the support he and the company received from customers and staff through the continuing turbulance. As well, he says vendors and partners who supply the technology that MFP finances have also been supportive.
“Support (comes) from customers and signing new agreements with new customers and the support of staff. Anybody we deal with on a day-to-day basis. Ours is not a huge marketplace, we don’t reach the market through the mass media so most of our customers we talk to on a regular basis. And most have been very supportive and have said while they have followed some of the stories, they have not believed there was any wrong-doing here,” he said.
Recently, an Ontario Provincial Police investigation into possible criminal wrong-doing in the leasing of computers to the City of Toronto wrapped up, with no charges laid. It meant the start of the public Toronto Computer Leasing Inquiry – a proceeding where MFP principals will be questioned.
“We’re delighted to see it come to an end and get on with the inquiry once and for all – that’s where the facts will come out. We’ve said before we’re confidant we will be completely exonerated. There’s been an awful lot of damage done already,” said Wolfraim.
