Two weeks ago, Dan and Lisa Boaz, owners of Santa Clarita based, Vital Express moved to North Carolina. In the wake of their departure, money is still owed to many Santa Clarita businesses and a group of investors and franchise owners are exploring their legal options, trying to determine if any assets remain to go after.
The Boaz’s sold their Sand Canyon home and moved on July 22nd to a million dollar plus home on Lake Norman, in Mooresville, North Carolina, a wealthy suburb of Charlotte.
KHTS broke the original story about the Vital Express scandal on July 21st. Since then, we’ve received a tremendous amount of feedback.
KHTS began investigating the Vital Express story last winter, when several individuals connected with Vital Express communicated with us. As word among insiders spread, a number of Vital Express employees, former employees, franchise owners and investors contacted us to share their concerns. KHTS chose not to break the story as investors tried to figure out their options. The radio station broke the story, only after it learned investors were not going to be able to place a lien on any proceeds from the sale of the Boaz’s Sand Canyon home.
Since then, a number of other franchise owners and investors spoke with us. However while they were willing to describe what happened in detail, and KHTS was able to secure documentation supporting their claims, they have requested they remain anonymous because of pending lawsuits. A few are fearful of retribution.
We apologize ahead of time, as we protect our sources, that we do not disclose names of a number of individuals or more specific details. But as we relay the facts, KHTS has been careful to make certain we either have written documentation to back up statements, or have separate confirmation from more than one source.
One thing is clear, as of this writing many high profile companies in Santa Clarita have been impacted by Vital Express. Money is owed all over town. One banker told KHTS, “It’s become a game to figure out who’s owed money.”
But it’s more than the money that’s the tragedy. People’s lives have been disrupted. It’s the stories of these individuals that really bring home the impact of what happened, as they attempt to pick up the pieces of what’s left of Vital Express.
Many of the investors were first introduced to Dan and Lisa Boaz through their involvement in the community. One investor told us he was impressed with what the young couple had accomplished. They had built an up and coming company in a very short period of time.
Vital Express, the Santa Clarita based Shipping and Logistics Company had everything going for it; top-notch equipment, a young, bright and energetic staff and charismatic owners. As the company grew, it maintained its “Mom and Pop” feel. Owners, Dan and Lisa Boaz became very active in the community. They were nominated as Santa Clarita Valley Man and Woman of the Year in 2005.
But, as the owner of one franchise told us things began to unravel as the company’s cash flow wasn’t able to sustain the Boaz’s lifestyle.
Jonathan Kraut is a name familiar to many Santa Clarita residents. The owner of a local private investigation company, Net Check Investigations, Jonathan ran for College of the Canyons Trustee in November 2005. He lost that election, but the race became a real eye opener.
During the election Jonathan used his detective skills to conduct due diligence on Vital Express. He saw the lack of payments for the performing arts center as a huge campaign issue. He shared with KHTS, “Everything happened backwards. Here was this $2 million dollar pledge the Boaz’s made to the College, COC scrambled to change the name on all of their promotional material, yet there was no contract, no pre-screening. The College had already given Vital Express the naming rights for perpetuity yet no one had done a background check to see if they had the financial resources to back it up. As it turned out, after only an hour of research last September, my staff determined that they didn’t have the resources to honor their $2 million commitment.”
By this time, KHTS had received a number of communications from individuals concerned about the Vital Express naming. There were a lot of allegations flying around and a lot of finger pointing.
Kraut also shared his concerns with KHTS. “When I ran a background check on the Boaz’s, I discovered a whole history of transferring assets, constantly moving of resources, spending lots of money, and even judgments against them.”
Jonathan Kraut spoke with a number of the franchise owners and investors. “It was the same story. The Boaz’s had made all these promises that weren’t happening. They were making transactions under five or six different company names at a time. I could see them planning to get ready to get a fresh start in North Carolina.”
As the Boaz’s were preparing for their move, many outstanding bills to local vendors had not been paid.
“It covered a wide range of people, many businesses in Santa Clarita,” Jonathan commented. “Records indicate well over half a million dollars in outstanding bills as of March.”
“The list covers other shipping companies, attorneys, cellular, computers, florists, printers, even a local pizza franchise that had delivered hundreds of dollars of pizza to Vital Express. And this figure doesn’t include $500,000.00 paid to the Corporation by investors, nor the money paid by the franchisees.” Will they take care of these Santa Clarita businesses?
KHTS called a number of these businesses in preparation for this story. Most of the money is still owed and in some cases the amount owed has increased. Several of the vendors had been paid, a few since the Boaz’s sold their Sand Canyon home. Most of the vendors who are still owed money told us the same thing. No one is returning calls.
Kraut’s gone public with his findings because he wants to prevent other institutions and businesses from making the same mistakes. “Whether it’s pre-employment screenings or checking into the financial stability of a company who just promised you two million dollars, you need to have due diligence.”
And remember the COC performing arts center story that broke last February when Lisa Boaz sent a letter to the College after COC had informed them they had defaulted on their payments for the naming of the Performing Arts Center? Lisa Boaz requested that they unilaterally terminate the agreement as of February 28, 2006, due to a slow-down of the economy, rising interest rates, increased cost of construction and the significant increase in fuel costs. Boaz promised in that same letter to pay the college the fee installments still owed for January and February 2006, totaling $25,641. As of this writing, College of the Canyons Public Information Officer, Sue Bozman told KHTS, “Those payments have not been made to the college.”
The college complied with Lisa Boaz’s request to terminate, having only received $74,359 of the $2 million dollars the Boaz’s had agreed to pay.
As for the percentage of money promised to the Henry Mayo Hospital Foundation for local companies who use Vital Express services, as reported in our last story, Vital Express still has the 5% offer posted on the home page of their website www.vitalexpress.com, along with a logo of the Vital Express Performing Arts Center. A few payments were made when the offer was first launched. The Hospital Foundation would not divulge specifics in respect for donor confidentiality.
Since the first Vital Express story broke last week, another key Santa Clarita investor decided to share his story. He told us he was attracted to Vital Express because, for a small investment, only a $35,000.00 franchise fee, investors could have an exclusive Vital Express franchise.
The Boaz’s had done it right; heavy marketing in franchise publications, the naming of the Performing Arts Center at College of the Canyons and the community involvement Dan and Lisa had coveted during their years in the Santa Clarita Valley. As they rolled out the marketing of the franchises the leads just poured in. In April 2005, Vital Express hosted a VIP luncheon during the Valley Industrial Association’s (VIA) Business-to-Business Expo. It was an elaborate presentation, with community leaders driven in limos from the Expo to lunch at the lavish Vital Express headquarters a short distance away. But very few of the Valley’s leaders made the investment.
“I should have realized something was up,” one employee reflected. “I mean here were Dan and Lisa’s friends and acquaintances, the power elite of the community. The ones who were sitting on the same Boards as they were. They should have believed in what the Boaz’s were doing, and except for a couple of them, they weren’t biting.”
The trouble started a few months later. All those leads didn’t really pan out. A lot of people had the $35,000.00 to get them in the door, the problem was most of them couldn’t come up with the $350,000.00 in Capital needed to successfully launch a franchise. In the end, only five franchises were sold, Phoenix, the San Gabriel Valley, Milwaukee, Seattle and Chicago. The Boaz’s held onto company stores in Valencia, Indianapolis, Charlotte and Houston, although Houston never became fully operational. Along with the franchise fees another $500,000.00 was raised from investors who bought shares in the Corporate Franchise Group. All these investors were from Santa Clarita or the Ventura area, where Dan and Lisa were renting an expensive beach house. One investor lives in Pasadena, but is related to a Santa Clarita resident and business owner.
By early summer 2005, things began slowing down with the franchise rollout. Cash flow became a problem.
“I remember one meeting in early August. I couldn’t believe it,” another employee told us. “Dan and Lisa came in and instead of rallying the troops they started threatening. Dan began putting heavy pressure on us, threatening our jobs. He actually said we have to bring in this kind of money to support their lifestyle. This is while they are driving new luxury cars and renting a home on the beach in Ventura. The staff walked away from that meeting, flabbergasted. That was the first of many similar meetings. And what’s funny is Lisa was worse than Dan. She’d get up there and talk about how we needed to support their lifestyle. She kept pushing and pushing. It was like they would sit home over the weekend and look at the cash flow and realize it wasn’t covering the bills, so they’d come in on Monday morning in a rage. What a great motivator for their staff. They had no understanding of the negative impact it was having.”
In better times bonuses were given to employees.
In late 2005, some employees’ paychecks stopped. The Boaz’s began positioning themselves to move to North Carolina. They had already established a number of other entities, including a company called Global Logistics, which they formed in partnership with former Santa Clarita resident, Rich Brulato, the former owner of Mama Mia Restaurant in Stevenson Ranch.
As they prepared to leave Santa Clarita, the Boaz’s purchased a million plus dollar home, on Lake Norman, in the suburban town of Mooresville, outside of Charlotte. Dan also purchased a boat to go with his new home, along with a brand new Infinity Q-56.
“It’s like he had no conscience,” another investor told us. “Here he wasn’t paying his staff or his vendors, but he had to brag about the new car he just bought to use at a location he wasn’t even living at.”
Several investors told KHTS that anytime they expressed concern they had to fear the wrath of the Boaz’s.
One investor expressed concerns the Boaz’s needed to increase their communication with the franchisees and investors. “There was no strategy. There was no vision. Nothing was being done to make things successful or make current franchises profitable.”
During another instance, when one franchise owner complained about vendors not being paid, and that was impacting his new franchise, Dan threatened him over the phone.
When KHTS contacted the Boaz’s for a response to the allegations told to us, Lisa threatened to sue the radio station, screaming over the phone for several minutes, shouting out the same unprintable expletive over and over again.
Another Vital Express employee however, sees things differently. As Senior VP of Sales for Vital Express, Tony Demma is poised along with other employees to purchase the Valencia operation from the Boaz’s.
“The KHTS article really surprised us,” Demma shared with the radio station. “The article devastated our employees. We have thirty great employees here in Valencia, providing awesome service. That article jeopardized everything and accomplished nothing. Vendors and customers aren’t going to want to do business with us. It’s so one sided. That part about the Performing Arts deal, COC (College of the Canyons) made their share of mistakes, as well.”
Demma, along with others, is trying to salvage the Valencia franchise and save the jobs of its employees. Hopefully he’s successful. He’s upset with KHTS for exposing the story.
A Midwestern franchisee also shared his concern about the story. He informed us, “We’re doing a different kind of business than the other franchise owners. We’re doing our own thing and we realize we need to make it on our own.” According to him, everything is squared away with Vital Express corporate. “We aren’t owed any money. The bad credit situation didn’t impact us much because we knew we’d have to pay deposits anyway. That would be the case with any new company.”
But this franchise owner seems to be the only one of the five franchisees who wasn’t impacted by the Boaz’s exploits. One owner has shut down his operation, a second opened and has distanced himself from Vital Express corporate because of the problems he knew the other franchise owners were experiencing, a third has yet to open and has told us he is unlikely to open and the fourth has left the franchise fold and is trying to make it on its own under a different name.
KHTS spoke with all of the franchise owners, one told us the following story, but he’s hesitant to be named pending legal action. He opened his franchise last year, along with his partner. His partner tragically died as they were getting their franchise off the ground, leaving behind a widow and three week old daughter. In January, the franchise picked up some of the overflow work for the Boaz’s on the lucrative Staples account.
He claims he is stilled owed tens of thousands of dollars for the work his franchise completed. “Dan Boaz never paid me a penny. He kept promising me I’d be paid, first saying, what’s the rush, then telling me he’ll take care of it. When my partner died, Boaz said don’t worry, he’d help out my partner’s widow and baby. That never happened. Recently, Dan gave me his word I’d be paid after they sold their Sand Canyon House. I still haven’t received any money.”
By late 2005, the Boaz’s were beginning to get behind on payments to a number of vendors. BAX Global was one of the largest and most important, since most of the franchise owners relied on BAX to handle many of their deliveries. Lisa Boaz sent an email to the franchise owners saying they were no longer using BAX because they’ve been breaking, merchandise, not delivering on time. What she did not reveal was Vital Express owed BAX a lot of money and BAX was cutting them off. Eventually, BAX was paid, but credit wasn’t reestablished. Money was also owed to many other vendors that franchise owners relied on to get the job done and be able to give competitive bids.
“We didn’t stand a chance,” the franchise owner told us. “Who would want to do business with a company that had bad credit? We couldn’t be competitive. It was costing all of us a lot more to move the freight. Now, there’s nothing left of our franchise and there is no way to resurrect it because the Vital Express name hurts a lot more than it helps.”
That franchise owner is stuck with a building and truck lease he still is responsible for paying, even with nothing left of his franchise.
“Maybe we could have made it with that additional infusion of money Dan Boaz had promised to pay. Who knows? I guess it was greed that got to the Boaz’s. Dan just forgot what it took. After he hit the big time with his franchises, he didn’t want to work anymore. He was never there. He just wanted to lead the good life.”
KHTS had learned there was not enough money remaining in the sale of the Boaz’s Sand Canyon home to make a dent on the monies owed to investors, franchise owners and vendors.
Since the writing of the first Vital Express expose, many people have wondered why KHTS would break this story. Rumors alluded to the KHTS owners, Carl and Jeri Goldman having lost a personal investment in Vital Express.
“Those rumors are completely false,” stated Jeri Seratti-Goldman. “We never have invested in Vital Express. We became interested in the story when the College of the Canyons Performing Arts Center problems started. We began receiving anonymous E-mails, followed by paperwork substantiating the allegations. It was not until the last couple of months that we realized the financial troubles that were impacting so many local businesses and community leaders. We did a lot of communication behind the scenes. After the Boaz’s house sold, it became apparent there was not enough money remaining to help the investors and vendors, so we felt it was time to go public. Maybe we can all learn from this and prevent something similar from happening.”