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At the Green Valley Country Club where he brings business associates to impress them, Ben sat at his usual table feeling like there was a spotlight of accusation on him. People at the club acted friendly toward him, but something didn’t feel right. He was on the outs, no doubt. Even the waiter was eyeing him with disdain.
Across from Ben over salads of blackened Atlantic Ocean blue fish on microgreens, was Paul Strickland. Paul was tan, handsome and incredibly fit-looking under his pin-striped blue custom suit.
Paul was the CEO of Green Knight Organics, the well-diversified organic food maker that was poised to be the chief player in the purchase of Ben’s Best.
Paul was maddeningly reserved and emotionally neutral at lunch. He knew he had Ben right where he wanted him and he was going to leverage the situation to the maximum.
“Given the…” Paul was saying as he methodically tore off a piece of bread.
“Given the extraordinary circumstances of the last two months, accurately valuing the company at this point is going to be….challenging, isn’t it?” And as Paul finished this question he looked up at Ben with piercingly unforgiving, pale blue eyes.
“Challenging,” Ben thought bitterly to himself as he played poker and delayed his answer to Paul.
Ben signaled for the waiter to bring the check. He had to get this lunch over as soon possible.
“Challenging isn’t the word for it,” he thought to himself as he drove away from lunch, down the winding road from the country club past the eighth green. He used to love this drive. Now he just wanted to be somewhere else. Anywhere else.
Ben was kicking himself so much he was about to turn green from internal bruising. His insurance broker had been talking to him annually for the past six or seven years about product recall and product contamination coverage, but Ben had never imagined that the healthy products he made could be unhealthy for anyone, and he had passed on the opportunity.
Ben had been in the game a long time now, perhaps too long. He’d started his company in the 1970’s, and the cold hard facts were that certain risk elements had passed him by.
Not only was the company’s reputation in tatters but it was having basic operational issues. The sudden dismissal of Teague Ralston and the circumstances surrounding it had hamstrung the Ben’s Best procurement team. The vetting process for new sources of chia seeds and other ingredients had become so exhaustive that many of their cookies and breads were losers before the products even left the factory.
Once he understood the true nature of his spot-market supplier, Ben didn’t even try to file a contingent business interruption claim. Teague hadn’t done his due diligence. It had been painful, but firing him was the right thing.
The uninsured losses were starting to build to daunting heights. The cross-contaminated cookies were impaired, which was painfully obvious, but they weren’t damaged as such according to Ben’s liability carriers.
Depending on the consumer, they were perfectly fine to eat. So it’s doubtful whether Ben’s liability coverage is going to be triggered for losses sustained by the private label retailers that used his products for recall costs, loss of sales and brand damage. The uninsured exposure for Ben’s Best in this area is looking to be upwards of $3 million for recall expenses alone plus loss of profits and a huge drop in sales revenues.
Ben’s third-party brand owners are also facing massive uninsured losses due to loss of sales, recall expenses and loss of profit in lines where Ben’s Best was their sole supplier.
One afternoon Ben is sitting on the deck of his sailboat at the dock. He’s so down in the dumps he doesn’t even have the desire to set sail. Instead he fills another glass of white wine and watches the tourists go by.
Ben’s cell phone vibrates. He looks at the caller ID. His heart sinks further as he picks up the phone.
“Yes Harvey,” Ben says dejectedly. At the other end is Harvey Andrews, Ben’s longtime friend and attorney.
“My friend, my friend,” Harvey said.
“What is it now?” Ben can tell from Harvey’s tone that more bad news is about to drop.
“I just talked to Leon Fetters over at First Virginia National. It’s the opinion of the bank’s board of directors that you failed to adequately inform them of your supply-chain issues. They’re filing a lawsuit tomorrow in Richmond accusing you of misrepresentations in filing for the $5 million pre-sale line of credit you got from them.”
“Anything else Harvey?” Ben said as he realized he was spilling his wine on the teakwood deck of his boat.
“I think the best you can get for the company at this point is around $600 million, my friend,” Harvey said.
“It was worth a billion three months ago,” Ben said.
“I know Ben, I know,” Harvey said.
Just then a seagull flew by, making that seagull laughing sound.
Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.
(The Analysis is presented on page 4)