Veteran ad man’s
agency files
for bankruptcy

The Schiller Group, saying
it couldn't overcome the loss
of 2 major accounts,
declares Chapter 7

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By Erika Engle
eengle@starbulletin.com

The Schiller Group Ltd. advertising agency has filed for Chapter 7 bankruptcy, listing nearly $1 million in debt.

The move to seek protection from creditors was sparked by a breach of contract lawsuit filed May 10 by WOR Radio Network in New York City, one of the agency's 61 creditors, according to President and CEO Martin Schiller.

Financial problems for the Honolulu-based agency began in 1999 with the loss of two major accounts, Castle & Cooke Homes and the Island of Lanai -- accounts Schiller described as having different decision makers but the same owner.

"We lost those accounts for the wrong reasons," he said, "and for 48 hours I did not have a feel for whether the agency would survive. It was devastating not just in terms of revenue, but for morale."

According to ad agency attorney Robert Faris, Schiller "has tried for a year and a half to reach a proposal that creditors can accept.

"It's a situation where they were asked to take a substantial discount and of course none were obligated to, but nearly all agreed," he said. In the coming days, the bankruptcy court will determine a date for and send out notices of a creditors' meeting, said Faris, of Gelber Gelber Ingersoll Klevansky & Faris.

The bankruptcy filing lists assets of $75,000 and debts of $978,000.

Of the 61 creditors, 57 early last year signed Schiller's proposal toward continued operations and repayment. In signing the proposal, the 57 signatories acknowledged that the agency could not afford to make payments on unsecured debts arising before March 1, 2000; that the agency would need to use its cash and receivables to cover operating costs and that clients henceforth would pay media outlets directly for ads placed by TSG. It was agreed the agency would repay each on an equal basis, making no additional agreements more favorable to one creditor than another. Also in the proposal, Schiller wrote, "Realistically, we don't see any payments to unsecured creditors for 18 months."

In a letter mailed by TSG yesterday, Schiller said he had been unable to negotiate an equal agreement with legal counsel for WOR, and that he was left with no choice.

"They want a separate deal," he wrote, "and I will not break the trust of the 57 that agreed to the initial plan." In addition to WOR, owned by Connecticut-based Buckley Broadcasting Corp., other nonsignatories are identified as Wash., D.C.-based National Geographic Society; New York-based Cahners Business Information; and Arizona-based New Planet Radio, the former parent company of KRTR, KXME and KGMZ radio in Windward Oahu. Debt to the four represents 4.4 percent of the company's overall liability; WOR's portion is 1.4 percent, Schiller said.

Faris said WOR is owed approximately $12,000 for commercials the station ran at the request of The Schiller Group, but that the amount is in dispute "because the ads ran late and they didn't provide documentation that a station is supposed to provide to prove that they ran." The WOR debt stems from a promotion where the radio network sent a reporter to Hawaii to travel aboard an American Hawaii Cruises ship for its program, "The Travel Show." The cruise line provided complimentary accommodations for the reporter, and TSG "got other businesses to buy commercial time on WOR," Schiller said. Honolulu attorney Greg Grab, representing WOR, declined comment on the matter.

Beginning today the 61 creditors will be notified of the filing by mail, personal phone calls and or visits from Schiller. In the letter, Schiller wrote, "Chapter 7 was never my first, second or third choice when the company started having financial problems. The staff over the last two years has been working to turn the agency around. And we did. We were awarded new business along the way."

Among the clients the agency added this year was SCD International, developer for the Peninsula at Hawaii Kai and the Waikoloa Colony Villas. Other current clients include AT&T, the Hawaii Visitors and Convention Bureau, the Polynesian Cultural Center, Molokai Ranch, Saturn Autos, the Hyatt Regency Maui and Radisson Waikiki.

Ken Berry, executive vice president of the Star-Bulletin and MidWeek, said "I'm a Marty Schiller fan. I think he tried real hard to overcome some adversity and apparently he didn't. I'm disappointed to hear this."

Berry, among the creditors, was COO for MidWeek prior to its purchase by Black Press Ltd. earlier this year, and is a signatory to the Schiller agreement.

"Marty's a really good ad man," Berry said, "He's been continuing to send a lot of business our way."

"I guess this could have happened to anyone," he said.

TSG's seven employees were to be notified yesterday that what they had been told was a possibility, had come to pass.