Man-o-Mana, Vendor Bites Dust

Wal-Mart Stores Inc. pulled a $137 million rug out from under Mana Corp. in November 1998. But nine lawsuits filed in Benton County against the tobacco, phone card and bottled water company since 1997 suggest that it was time for a cleaning, anyway.

Mexican American-Native American Corp. of Bentonville enjoyed three years as a high-flying vendor to the world’s largest retailer before legal troubles, mismanagement and the savvy of AT&T chairman and CEO C. Michael Armstrong forced it into a Chapter 11 petition.

One of several former Mana employees who requested anonymity described the now defunct company as “exactly the kind of vendor Wal-Mart founder Sam Walton would have shunned” — a middleman that brokered other companies’ goods and spent its own profits like a kid going through shiny nickels.

Mana’s executives had cause to celebrate.

It took them all of one year to reach the brass ring of retail suppliers, an account with Wal-Mart and its Sam’s Club division. A sales pitch in late 1996 by Mana chairman and president Mark McKinney earned the company the 1997-98 prepaid phone card business in all Wal-Mart and Sam’s stores.

In a little more than two years, another former Mana employee said, the company moved $137 million worth of cards through Wal-Mart and Sam’s. McKinney, now operating Winchester’s gun store in Pea Ridge, refused to answer questions regarding Mana. His attorney, Tom Holbird of Atlanta, also declined to comment.

The deal was that MCI WorldCom supplied the long-distance service. The Milton Sternberger Co. of Memphis supplied the plastic cards. Mana, using pencil-thin magnetic strips on the cards, packaged the two products and baby-sat the account.

MCI WorldCom paid Mana a $3 million signing bonus just for getting it in Wal-Mart’s door, and then the real money started rolling in.

According to Mana’s 1998 independent audit by Berryville CPA David Killingsworth, the company showed $83 million in revenue, a 219 percent slingshot past the $26 million it reported in 1997. Most of that money, $82.3 million in 1998 and $24 million in 1997, came from Mana’s prepaid phone card division. Mana’s cigar division fell from $1.8 million in 1997 revenue to about $450,000 a year later, and its water-bottling business never really got off the ground.

Fall of a Vendor

After paying MCI WorldCom, Mana showed net gross sales of $3.4 million in 1997 and $8.2 million in 1998. But, one of the former Mana employees said, the company spent money as if it were getting MCI WorldCom’s cut. Tales of charter jets, limousines, high-roller parties, huge executive bonuses and perks like company pickup trucks are rampant. Much of the excess is borne out by Mana’s financial statements and court filings.

Lonnie and Nancie Deckard, who leased 8.3 acres and 3,200 SF of office space to Mana just off Benton County Road 40, on Oct. 11 won a $326,000 judgment against the company. For four years, the couple only received a fraction of what it was owed by Mana but has now regained control of the property.

“I noticed a difference when Mana got that first $3 million bonus,” Deckard said. “[McKinney] started living higher and faster. He started renting private jets and flying everywhere. Up until then, things had been OK. But we got the feeling it wasn’t going to work out, and finally it came down to us having to do something.”

Mana’s financial problems, which included a sordid litany of lawsuits filed both against the company and McKinney, were exacerbated in 1998 when it lost the Wal-Mart and Sam’s Club account. Not only did AT&T underbid Mana, but Armstrong flew in from New York to personally call on Wal-Mart buyers Bruce Clark and Clifford Young. MCI WorldCom sent McKinney.

The result is evident by the AT&T cards that now hang in most Wal-Mart and Sam’s Club checkout lines, not to mention the two bankruptcy petitions filed in 2000 by Mana. Both Chapter 11 petitions have been dismissed because Mana did not complete the filings. The company’s indebtedness totals about $6 million, according to court records.

Gary Halvorson, Mana’s former phone card division manager and only former employee who agreed to speak on the record, would say only that losing Wal-Mart’s business “put Mana in a very difficult position to continue operations.” Mana investor Ted Schermer of Bartlesville, Okla., blames Wal-Mart at least in part for Mana’s downfall.

McKinney has signed over his shares of Mana to Schermer and fellow investor John Mulkey of Tulsa, Okla. Schermer and Mulkey hope to collect part of their investments with an ongoing $23 million corporate lawsuit against MCI WorldCom.

They claim MCI WorldCom owes Mana revenue since the long distance provider stopped paying the company residuals after the Wal-Mart account was lost.

“Wal-Mart is the one that caused a big part of the problem,” Schermer said. “Mana was in good financial shape until it lost the Wal-Mart account. Phone cards just got so big, Wal-Mart got a cheaper price and maneuvered to get around things.

“I’m not saying Mana wasn’t mismanaged. Obviously it was, and they had all their eggs in one basket. If I had been running the company with the income they had, I could have made it.”

Wal-Mart does not comment on vendor relations.

Best Laid Plans …

Mana’s party barge came in, and sank, on a unique body of water.

The Deckards were selling water from their Ozark Natural Water Co. in 1995 to a local bottler. They wanted to build their own bottling business and put out several calls to local brokers after thumbing through the Yellow Pages. McKinney returned their call.

The Deckards own what has been described by many experts as one of the best natural resources of water in the world, a natural spring that bubbles 300 pure gallons daily out of an Ozark Mountain aquifer.

The water quality was good enough to persuade Fayetteville billionaire J.B. Hunt to invest $300,000 toward getting Mana’s bottling division going. Hunt is now one of a half-dozen lien holders against 40 adjacent acres to the Deckard property where Mana was supposed to have built a bottling plant.

Several former Mana employees said McKinney planned to use his connections in the magnetic-strip card industry to establish a good rapport with Wal-Mart that could later shoehorn Mana’s bottled water division into retail heaven. When the card account went south, loose corporate spending and legal bills left Mana strapped for cash.

The company borrowed money from investor Jim Eckerd to meet its payroll, and subsequently bounced a $25,000 check to Eckerd dated June 16, 1999.

“I don’t think Wal-Mart caused Mark McKinney’s problems,” Deckard said. “I think he made promises to Wal-Mart that he didn’t fulfill.”

Jason Wales, an attorney with the Everett Law Firm in Fayetteville, said McKinney made a promise to him in April. Wales was representing Bank of Arkansas in a case against Mana and had subpoenaed McKinney for a hearing in Benton County. Outside the courtroom just before the proceedings, McKinney offered to make Wales Mana’s corporate attorney.

“I guess he thought I would be impressed,” Wales said.