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‘Pinnacle Conference’ held in Boston

BY HBSDEALER Staff

Boston The theme for the Pinnacle Conference was winning — specifically, “Winning city. Winning conference. Winning team.” While technology and efficiency were the major topics at the Activant users group meeting held here, there was also a good amount of old-fashioned money-saving business strategies.

More than 750 attendees from pro dealers, hardware stores and home centers took part in the three-day conference. That number “demonstrates the commitment of this marketplace to the future,” said Steve Bieszczat, senior vp and general manger of Activant’s hardlines and lumber divisions, during the opening session. While he pointed to softness for pro dealers, he described the hardware and home center businesses as holding steady.

“On the LBM side, people are looking to get greater automation and efficiencies and less dependency on adding head count,” Bieszczat said. “In hardware and home center, what you see is an inordinate amount of demand for all things retail — having the same kind of POS as some of the more innovative chains and those taking customer relationships to a new level.”

Some of the educational sessions accentuated some positive news from the housing industry: specifically, the growing population. Household growth from 2005 to 2014, according to Harvard’s Joint Center for Housing Studies, should exceed by 2 million the growth of housing during the boom years 1995 to 2004.

Still, the conference spoke to the difficult market partly through a session titled, “Customer success strategies for succeeding in today’s market.” The session pointed to a number of tactics companies can employ right now to optimize operations during tough times.

In addition to limiting hours and reducing head count, the ideas brought forth included implementing more aggressive measures in accounts receivable, raising deductibles for health insurance plans, using bank issued payment cards that offer rebates and even replacing company e-mail systems with free Google e-mail.

“If it doesn’t add value, quit doing it,” said Johan van Tilburg, president and CEO of Knoxville, Tenn.-based Tindell’s Building Materials.

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The house on Hamlet Way

BY Brae Canlen

The house at 3161 Hamlet Way NE in Marietta, Ga., has close to $300,000 in upgrades, according to its listing. Fitness room, rec room, climate controlled wine cellar, custom bar with marble countertops, Sub-Zero appliances and a hometheater. And that’s just in the basement.

But U.S. authorities claim that most of these home improvements were financed through bribes paid to Ronald Johnston, a former Home Depot flooring buyer who owned the house. Johnston is the subject of a federal investigation and asset forfeiture action, along with two other flooring merchants who worked in the Atlanta retailer’s Store Support Center on Paces Ferry Road.

No criminal charges have been filed against Johnston or the other two individuals, James Robinson and Anthony Tesvich, named in a civil action filed last December by the U.S. Attorney’s Office in Atlanta. Alleging mail and wire fraud and attempted money laundering, prosecutors are trying to seize property, vehicles, gym equipment and cash.

In an interview with federal agents, Johnston denied ever accepting bribes or kick backs. His attorneys did not respond to Home Channel News’ requests for an interview. Tesvich and Robinson could not be reached for comment.

At least one vendor, a Venezuela ceramic tile manufacturer named Mega trade Corp., has admitted to making payments to Robinson, court papers state.

Home Depot spokesman Ron DeFeo said the company continues to cooperate with the authorities in their investigation, which so far has involved the Internal Revenue Service; the FBI; and the Bureau of Alcohol, Tobacco and Firearms. A spokesperson for the U.S. Attorney’s Office would not comment on the case. But a number of details have emerged in court papers filed since December, and the government’s case looks far from completed.

Prosecutors portray Tesvich, Home Depot’s former product development merchant for flooring, as the kickback scheme’s mastermind. Tesvich was forced to resign in 2005 after internal security officers suspected him of accepting $4,900 a month in bribes from one supplier, according to the complaint. What the company didn’t know was that, from 2002 to 2005, Tesvich had funneled $10 million from international Home Depot suppliers in to four bank accounts he controlled, court papers state.

Tesvich’s departure from Home Depot in 2005 marked the beginning of his role as a middleman, according to investigators. They claim he formed a number of shell companies that acted as import brokers for overseas vendors who were doing business with Home Depot’s flooring department. Between the end of 2005 and July 2007, these companies processed millions of dollars worth of orders from suppliers in Turkey, India and Hong Kong. Payments came via wire transfers, and ultimately, more than $3 million was deposited in a business checking account controlled by Tesvich.

Tesvich used this account to fund the kickbacks, which were of ten paid for by his personal credit card, prosecutors say. In October 2006, Tesvich used his credit card to order a Sub-Zero ice machine, refrigerator and wine cooler; a Fisher & Paykel dishwasher; and a Dacor microwave for Johnston’s basement remodeling project. Hired by Home Depot in 1991, Johnston worked as the company’s global products manager for rugs since April 2005. He was responsible for the purchase of all rugs and related accessories, control of inventory levels, vendor selection and the maintenance of vendor relationships.

At the time, Home Depot’s corporate policy prohibited employees from accepting gifts from vendors in excess of $50 without supervisory approval. The company has since changed its gift policy from $50 to “zero,” according to spokesman DeFeo.

Over the next seven months, Tesvich paid a local construction firm $82,451 to do finishing work on the Hamlet Way property belonging to Johnston. A media room with theater seating and a 106-inch projection screen was installed in the basement, along with a fitness room with gym equipment, interlocking rubber flooring and mirrored walls. All of this was paid for by Tesvich, according to the charges.

The six-bed room, five-bath home on Hamlet Way is now on the market for $839,000. The real estate agent representing the property was unaware of the home’s involvement in the case when contacted by Home Channel News. She would not disclose if the house was still occupied by Johnston.

While Tesvich was footing the bill for Johnston’s home improvements, prosecutors claim, he was also using the business checking account to make purchases on Robinson’s behalf. Hired by Home Depot in 1999, Robinson began working as a global products manager for tile in 2001. He was promoted to the position of divisional merchandise manager, where he oversaw the purchase of all hard flooring materials, in April 2006.

In May 2006, according to the complaint, Robinson purchased a 2006 Infiniti SUV with a cashier’s check drawn from Tesvich’s account. Robinson also began receiving payments, the complaint states, through two banks accounts controlled by Roberto Jakubowicz, a Venezuelan supplier whose firm, Megatrade Corp., sold millions of dollars of ceramic tile to Home Depot between 2004 and 2007.

Robinson received more than $400,000 in kickbacks, which he used to pay off a $33,575 loan for a 2004 Cadillac Escalade, federal authorities claim, and to purchase two homes in Gallatin, Tenn.

Agents from the Internal Revenue Service and the Bureau of Alcohol Tobacco and Fire arms interviewed Robinson on July 10, at which time headmitted paying for the Infiniti with money from Tesvich, according to court papers. The next day, July 11, Robinson changed the registration papers on the Cadillac to the name of a friend, prosecutors claim.

Federal agents seized both vehicles this past December and posted forfeiture notices on the doors of Robinson’s properties in Tennessee. On Dec. 21, in the presence of his attorney, Robinson voluntarily turned over to the U.S. government $146,000 in cash, which he admitted he had received from Tesvich, court papers state.

Johnston was interviewed by federal agents on the same day as Robinson. But Johnston said he never received a bribe or kickback from any Home Depot vendor, according to the complaint. Johnston specifically denied accepting appliances or other gifts from Tesvich.

The U.S. Attorney’s Office has also initiated forfeiture proceedings against Johnston’s house on Hamlet Way and seized the gym equipment in the fitness room.

The U.S. Attorney’s Office has also filed a lien on six pieces of property owned by Tesvich.

Although no criminal charges have been filed, the civil complaint makes numerous references to “unlawful activity” as the basis for its forfeiture claims. The court document states that the three merchants “conspired to transmit…wires in interstate and foreign commerce to effectuate a scheme to fraudulently deprive Home Depot of its intangible right to the honest services of its employees.”

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Pier 1 Imports in the black

BY HBSDEALER Staff

Pier 1 Imports returned to black in the fourth quarter, and recorded its first comparable-store sales gain in 17 quarters.

The Fort Worth, Texas-based company had earnings of $13.7 million, up from a net loss of $58.7 million in the same period last year. Sales declined for the fourth quarter, down 7.8 percent to $436.7 million from $473.7 million last year.

“Total sales were negatively impacted by the net closure of 79 stores,” the company said in a statement, adding that last year’s fourth quarter included an additional week by comparison. Comparable-store sales rose 2.5 percent.

The company saw a big decline in costs related to personnel and marketing — this included “savings of approximately $13.6 million in payroll, $9 million in marketing expense and $11.9 million in other general administrative costs when compared to the same period last year.”

For the full year, the company saw much narrower losses. Pier 1 lost $96 million in the most recent fiscal year, compared with $227.6 million in the prior year.

Pier 1’s president and CEO Alex W. Smith said the fourth quarter was “energizing” as customers began returning to Pier 1 stores.

“We have confidence that if we concentrate on developing powerful assortments that speak to our customer base and further enhance our customer service and in-store presentation, that we will continue making progress in returning our company to profitability and beyond,” he said.

Regarding the sale of the company’s headquarters, announced last month, Pier 1 Imports noted the transaction is expected to close no later than June 30.

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