Comeuppance: The Strange Life and Death of LEA, Part Three

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Editor’s Note: This is part three of a three-part series.

Part Three: The Final Bow

On Aug. 27, 2009, after significant maneuvering, the board fired Paul Feldman. A friend of Tony Rand’s, Alan Terry, was promoted to CEO. In a meeting with Martin Perry just before the firing, Rand tried to convince his fellow board member to stay. What he didn’t realize was that he was being secretly taped with Law Enforcement’s own equipment, and that this tape would later be used unsuccessfully in an attempt to discredit Rand.

Feldman suffered a “mini stroke” and wasn’t in attendance when he was fired, and Perry stayed away from work after the critical meeting due to stress induced flare-ups of multiple sclerosis. In September, the board let him go as well.

Both men submitted letters to the Department of Labor in 2009 in which they accused Tony Rand and Law Enforcement of insider trading (though Rand, unlike Feldman, never sold his LEA stock at the peak price in January 2005), stock manipulation, falsifying board meeting minutes, and omitting critical information in SEC filings.

Both also claimed they were wrongly terminated for disclosing the export information about Carrington, and on January 8, 2010, they filed suit.

While that was happening, Wortley also filed her initial suit (she would later sue Raymond James and four board members for conspiracy to breach a contract), Paul Briggs became CEO, and the stock price dropped to 8 cents per share despite $11.9 million in sales and a $127,000 net income.

In December, allegations emerged that the North Carolina state government had purchased more than $190,000 of gear from Law Enforcement in illegal no-bid contracts. A State Board of Investigations inquiry would go unresolved until February 2011, when Wake County District Attorney Colin Willoughby, a who had supported Rand politically as far back as a 1988 bid for lieutenant governor, cleared the company of wrongdoing.

To add insult to injury, Law Enforcement was forced to take an impairment charge on the assets they purchased from Wortley and the stun gun patent in the third quarter 2010. Along with a $1.26 million valuation allowance on tax assets that were finally deemed unrecoverable, and a $100,000 lawsuit settlement regarding an expired company trademark, sales in 2010 were reduced by almost half to $5.5 million. The net loss for the year was more than $4.2 million.

“Most of our customers are state and local, city, county governments,” said Tony Perry, the Law Enforcement controller. “It’s not big secret that state and local budgets have been cut, and that’s our customer base. So that certainly injures our success.”

Zoom in and scroll through the timeline to see the progress of LEA through the years.

2011 proved to be the death knell for Law Enforcement. Agents from the Federal Commerce Department raided the headquarters in March, seizing a surveillance van bound for Morocco that violated export restrictions. Evidence was found of six foreign transactions — to Egypt, the Netherlands, and Great Britain — that had already taken place without the required license from the U.S. Department of Commerce. No criminal charges were filed initially, but New Prime Holdings, the Moroccan company who supplied Law Enforcement with the van, sued in November, alleging that company officials lied to them about the documentation needed.

Efforts in March 2010 to dismiss Feldman and Martin Perry’s charges met with some success, as a North Carolina court threw out charges of civil conspiracy and wrongful termination while allowing charges of breach of contract and violations of the Americans with Disabilities Act to stand trial. (Feldman and Perry did not respond to requests for comment.)

But in the end, it was the Wortley lawsuit that brought the company down. Up until the trial date, the company maintained in a recent SEC filing that the asset purchase agreement “was not a valid contract.” This language represented a departure from a 10-Q filed soon after Wortley’s suit, when Law Enforcement admitted to being “currently in default of this agreement.”

Tony Perry said the company could not elaborate on why the agreement might be invalid.

“The public record is out there for all to see,” Joe Wortley said. “The question is, if you strike a bargain and shake hands and sign a contract, should it be enforced?”

Unfortunately for Law Enforcement, the jury said “yes.” In a short decision rendered just weeks after the trial began, on June 27, 2011, the jury found that Law Enforcement breached the Asset Purchase Agreement. They awarded Wortley $1.1 million in damages.

*

It was always clear that if the Wortley lawsuit was lost, the company’s meager store of $76,000 cash and $2.5 million in total assets wouldn’t be enough to avoid bankruptcy or worse. In that case, they would need help from Raymond James to maintain operations.

Raymond James representatives wouldn’t comment on their intentions last March, but it turned out that no help was forthcoming. On July 27, Law Enforcement filed for Chapter 11 bankruptcy. They listed debt liability of $1.7 million — most of it owed to Wortley — and assets under $50,000.

As the bankruptcy court process unfolded, the company sued Taser International in November for breaching a purchase contract relating to patents for the failed stun gun project. Meanwhile, Perry and Feldman’s lawsuits, along with the New Prime Holdings surveillance van case, continue to make their way through the court process, representing further potential liabilities.

The legal process drags on, but the company’s functional existence has come to an end. After more than a decade of avoiding the ultimate consequence for decisions that were questionable on business and ethical levels, one of the strangest chapters in regional business history draws to a conclusion — Law Enforcement’s number is finally up.

12 thoughts on “Comeuppance: The Strange Life and Death of LEA, Part Three

  1. This is a great article. The part I find particularly interesting is the “Final Blow” indicating that the company is no longer in operation. This comes as a bit of a surprise to me as I sit at a trade show in representing none other than the company in question.

    As a full time employee, I can assure you that this article was written with little to no research beyond July 27th 2011 and to be honest; it’s kind of sad that this was published. It looks like a report for a high school class that was due by the end of the summer…….

    If chapter 11 bankruptcy protection means the “end of days” for an organization, how are so many companies still here? Do some research, I’m insulted.

  2. I am also a full time employee of LEA. We are struggling , but not dead. We have a great sales team and our sales are growing. We have learned to do more with less and travel smarter. We have new products, a striaght forward approach, and a team trying to return to a profitable, growing company. With a little luck, good management and the support of our loyal customers and employees, we will again be hiring local employees, sponsoring local charities, and an example of success in possibly one of the worst economies in decades. I know scandal, gloom and doom, and failure sells more papers, gets more hits on line and are easier to cover then finding the good, the recovery, a scucess, or just a feel good story. my opinon, we need more puff and fluf than gloom and doom!

  3. Mike Wagner needs to look at his background before he makes statements. How many jobs was he walked out of because of sexual harassment? Mmmmmmm

    Ryan Mitchell was fired from LEA for dishonesty.mmmmmmmm

    If I were them I would worry about being sued for slander.

    Poor research, the facts are wrong

  4. Thanks Jack, I agree their has been more than one business bashing article posted here. For a business publication you would think they would want to promote local business. Pointg out the positive. Sure we are struggling, but the doors are open. We employee local residents and have employess throughout the US. Our customers are still placing orders, our phone is ringing and we are paying our suppliers. The Bottom Line is LEA is not the LEA of even a year ago let alone the LEA of Business past! the people mentioned here are no longer here. We have become a lean company and learned to get it done without a large credit line or deep pockets to back us. We earn every penny we make and it goes to pay our employees, keep the lights on and the doors open. with that said if anyone knows where to get some on the Solendra, or Fanny and Freddie Bailout Money, let me know. Babies need some new shoes.

  5. Joe,

    Who are you kidding, LEA is a criminal enterprise.

    The Feds wiretapped your phones, and all of the management is looking at felonies $6mil in fines and jail time.

    Read the article in the Fayetteville Observer.

    You’ll be out of business in thirty days.

    Say hi to Bubba your cellmate and bring the KY

    If you are employee, get you resume ready.

    You should be in jail for screwing investors.

  6. Wow, again little hate in your tone there Jack. Seems you are putting the some faith in the one sided, non comfirmed, reports of another journalist in stating facts which are not true, charged, based on anything other than what appears to be your inside knowledge and prehaps some guilty feelings? Again we will continue to provide the best service and products we can. If this is not enough we will all survive and move on to other things. I was looking for a Job when I got this one!

    Joe

  7. A North Carolina company with ties to former state Sen. Tony Rand is under investigation over deals to export surveillance equipment to buyers in Morocco, Egypt and other countries in violation of federal laws, according to court documents.

    Federal investigators searched Law Enforcement Associates Inc.’s Raleigh headquarters for evidence in March, according to a search warrant returned to a U.S. District Court this week.

    Investigators applied for the warrant on the belief that LEA, a security equipment supplier, contracted with a Moroccan company to outfit a van with covert surveillance gear, despite knowing that exporting the van required approval by the U.S. government.

    After the search, investigators found evidence of six similar transactions completed between April 2010 and January, according to court documents. Those sales were to buyers of surreptitious audio monitoring equipment in Egypt, Great Britain and the Netherlands.

    According to court documents, all of the exports would have required a license from the U.S. Department of Commerce. No such license was applied for or issued.

    No criminal charges appear to have been filed in the case. Messages left with an LEA official and the Department of Commerce were not immediately returned Friday.

    Rand, the former state Senate majority leader from Fayetteville who is now chairman of the state parole board, has served as chairman of LEA’s board of directors. Former state Transportation Secretary Lyndo Tippett of Fayetteville also has served on the company’s board.

    Neither man’s name is mentioned in the court documents. They could not be reached Friday for comment.

    The federal government limits the exportation of devices that could contribute to a foreign nation’s military potential, prove detrimental to U.S. national security or be contrary to foreign policy. Violations of those limitations are criminal offenses subject to 20 years in prison and a maximum fine of $1,000, the documents say.

    Investigators say LEA made three sales to Egypt-based ASTC Matrix International, two sales to Netherlands-based Safe Tactics BV and one sale to Griff Comm Limited in Great Britain, documents show.

    The companies bought body wires used to record conversations or key fobs that doubled as undercover digital and audio recorders.

    According to the search warrant, LEA had contracted with the Moroccan company, New Prime Holdings, to outfit a Renault van in March 2010 in return for a total of $209,902. Correspondence between officials for the two companies show that LEA purported that no government approval was needed to return the van to Morocco.

    But investigators say that LEA officials, including Vice President of Operations Mark White, knew the outfitted van would require a special license. He feared that disclosing that information would put an end to the transaction, the court documents say.

    The van was fully equipped with surreptitious listening gear. It was seized when the warrant was executed, according to court documents.

    The warrant also names LEA’s president and chief executive officer, Paul Briggs, as well as two officials of foreign companies.

    The investigation is headed by the Department of Commerce’s Office of Export Enforcement.

    An affidavit filed in support of the warrant makes reference to information from anonymous sources, including individuals familiar with LEA and former employees.

    It also refers to emails from accounts that have been monitored by law enforcement agents based on an earlier search warrant.

    During the search of LEA’s headquarters at 2609 Discovery Drive in Raleigh, agents seized business documents and files, according to an inventory of the items collected.

  8. No hate, just do not like people who lie or are totally clueless.

    You may be in fact looking for a new job soon, but as felon it may limit you some.

    Maybe you can get some retraining in prison making license plates.

    You can’t fix stupid- John Wayne

  9. I think it is pretty obvious “Jack” is none other than Paul Feldman.

    Here are some things I think are very interesting and worth noting:

    1. Paul Feldman spent a lot of time pumping the stun pistol and the company while AT THE SAME TIME SELLING THOUSANDS OF SHARES!!! Paul Feldman sold approximately $1.3M in stock that was largely given to him when the share price was the highest.

    2. Being that Paul Feldman never paid any money for the stock, all of the proceeds from selling those shares would be taxable. Wouldn’t it be nice to see if Paul Feldman reported his income and paid his taxes like he should have?

    3. I’m no Duke graduate (like Paul Feldman is, or says he is at least) but, as indicated in #1 above, Paul Feldman is clearly guilty of insider trading.

    4. Paul Feldman… errrr… “Jack,” says LEA is a criminal enterprise. It’s hard to understand why he would say this being that he was President and very much involved with the Morocco transaction before he was fired.

    5. “Jack” offers helpful guidance with, “Say hi to Bubba your cellmate and bring the KY” and “If you are employee, get you resume ready.” then finally, “You should be in jail for screwing investors.”

    Being that “Jack” is Paul Feldman, I wonder if Jack believes that he should be in jail for screwing investors. After all, he was the one that spent over $1M on the stun pistol debacle, he was the one pumping the stock while dumping shares at the same time, he was the one that purchased a company in 2007 in a transaction in which no one really understood what was even being purchased, and he was the one that failed to honor Barbara Wortley’s put option when it became due.

    Paul Feldman is the guy that should be in jail for screwing investors, no? Or maybe he already was in jail? Maybe HE is the person that initially met BUBBA in jail? After all, he could probably teach Bubba how to screw people over without even bothering to use KY.

    He certainly did a great job screwing over investors and employees during his tenure at LEA. I wonder if he screwed over the girlfriend he had in Colorado like he did the investors? I wonder if his wife ever met his girlfriend? I bet they would like to meet and have a sandwich together sometime. Who knows, maybe they could swap stories about why he and Marty always shared a hotel room when traveling together, or why Paul kept buying businesses owned by the Wortleys for so much money? Jeez, the whole reason LEA is in bankruptcy is related to Paul’s dumb decisions around buying companies from the Wortleys and not paying them like he said he would.

    6. I think it’s funny when “Jack” refers to LEA as a criminal enterprise. It’s funny because, if it actually is a criminal enterprise, it most likely became one while he was in charge for all those years. I mean, businesses don’t just become criminal overnight, do they? Especially when, as is shown in the Federal Government documents regarding the search warrant, Paul Feldman initialized the Moroccan transaction. So – if the vehicle situation was criminal in nature after all, Paul will probably be reunited with his friend Bubba. I wonder if Paul’s girlfriend in Colorado has met Bubba?

    That being said, if LEA is a criminal enterprise, it isn’t doing a very good job. It’s in bankruptcy and the financial results in the recent filings do not show a lot of excess cash.

    7. Lastly, “Jack” posted on March 7th about not liking people that lie or are totally clueless. Here we have come full circle: Paul Feldman, a confirmed liar and fraud, a foolish business man, and a man with such pathetic character, cannot even stand himself.

    Life sure is ironic.

  10. Thanks for the support. As we stated the current LEA is not the one that was left in the mess the former management swam in. We are a group of people trying to pull it from the fire and provided a good product to our customers. Some employement with good pay for some local Raleigh residents and move forward in the worst economic times in recent history. If we do not make it, it will be more from the failed management of our past then the hopeful that are currently employed.

  11. What a joke

    The company is worth $100k, when the former management was there it had sales of 11 mill and the stock was around 30cents

    I know who Paul Feldman is, I sent him a link to this page. He won’t comment, he said he has lawyers for that.

    If i were those guys I would sue Ryan Mitchell and Mike Wagner. I guess if they find out who you are they can add you for what you have saying.

    You sound like Obama, saying all the problems in world are because of Bush.

    The people who you keep blaming have been gone for years.