International Profit Associates, Inc.

International Profit Associates, Inc.

COMPANY FOUNDED: 1991

HEADQUARTERS MOVE TO BUFFALO GROVE: 1993

REVENUES REACH $250 MILLION: 2006

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

FURTHER READING

1250 Barclay Boulevard
Buffalo Grove, Illinois 60089
U.S.A.
Telephone: (847) 808-5590
Fax: (847) 808-5599
Web site: http://www.ipa-iba.com

Private Company
Incorporated:
1991
Employees: 1,800
Sales: $250 million (2006 est.)
NAIC: 561110 Office Administrative Services

International Profit Associates, Inc. (IPA), is a controversial small business management consulting firm based in Buffalo Grove, Illinois. The company claims to have helped more than 175,000 small and medium-size businesses by offering corporate strategy, tax advice, mergers and acquisitions help, and executive coaching services. Sister company Integrated Business Analysis provides similar services in Canada. IPA associates itself with prominent politicians, including former Presidents Gerald Ford, George H. W. Bush, and Bill Clinton, all of whom have spoken at the companys annual Christmas Celebration of Success dinner, and then touts these appearances in its promotional materials. IPA also makes contributions to politicians, but some have returned the companys money in light of persistent complaints from clients and employees and the criminal record of its chief executive, John R. Burgess. Clients are usually contacted first by a telemarketer who sets up an appointment with a field salesperson whose task is to persuade the business owner to contract for a survey analysis.

The companys main selling ploy is to promise that the client will see a three dollar return on every dollar spent on consulting fees. The survey analyst spends two or three days studying the business, then provides an oral analysis, the purpose of which is to convince the client to bring in a team of IPA consultants to address the problems the analyst has uncovered. IPA has received an unsatisfactory rating from the Better Business Bureau of Chicago and Northern Illinois because of a steady stream of complaints about its high-pressure sales tactics, the dubious suggestions it provides clients, and the aggressive way it pursues debts. The companys practices have also prompted an investigation by the Illinois attorney general, and the Chicago office of the Equal Employment Opportunity Commission filed a federal lawsuit in the early 2000s on behalf of more than 100 women, former employees who have alleged sexual harassment by Burgess and other executives.

COMPANY FOUNDED: 1991

IPA was founded in 1991 by Burgess and two colleagues, Charles W. Morton and Bruce Tulio, who worked for the consulting firm of George S. May International Co. Born in Cranston, Rhode Island, in 1949, Burgess grew up in less than privileged circumstances, according to a 2000 profile in Inc. magazine. At the age of 12 he launched his business career by selling eggs door to door, then held a number of jobs to work his way through school at Roger Williams College and later the New England School of Law. Instead of practicing law he spent three years working for Pillsbury Co. as a soybean-meal trader. When he left, Pillsbury sued to recover more than $70,000 in commissions that it claimed were based on inaccurate trading profits. In the end the two sides reached a settlement and Burgess paid Pillsbury $10,000.

While wrangling with Pillsbury, Burgess began practicing law in the Buffalo, New York area in the late 1970s. He developed a thriving practice that gained a reputation for representing women involved in divorce cases. After about five years his license was suspended when he pleaded guilty in Erie County Supreme Court, related to an incident with a 16-year-old prostitute in his law-office building, and he paid a $500 fine. He continued to practice law but complaints from clients began piling up at the Grievance Committee of the Eighth Judicial District of New York. According to Inc., the most serious charge was $40,000 inexplicably missing from an escrow account of a deceased 38-year-old nurses estate that Burgess had represented. As a result of that case, court records indicate he was disbarred in July 1987. Then, in March 1988 he pleaded guilty to attempted grand larceny, for which he was fined $1,000 and sentenced to three years of probation. Burgess reached bottom in May 1989 when he and his wife filed for Chapter 7 personal bankruptcy.

Undaunted, Burgess reinvented himself as a small business consultant, finding work with George S. May as an executive survey analyst. He was apparently well suited to the work, rising quickly through the ranks so that in a mere two years he was the head of the survey department. Just as quickly, Burgess left the firm, the circumstances of his departure proving somewhat murky. Burgess told Inc. that he was disenchanted with Mays perpetual turnover, and they expected me to yell and scream all day long. I was too young to have a heart attack and die. In subsequent court fights with May, however, a different story emerged in court testimony and sworn depositions. Mays president, Donald Fletcher, testified that Burgess brought a prostitute into the companys boardroom in August 1991 and when Fletcher confronted him, Burgess admitted the incident. Fletcher then said he gave Burgess the choice of resigning or being fired. In a sworn deposition Burgess acknowledged that he had a prostitute in the May boardroom, but maintained that it had very little to do with my resigning.

Regardless of the circumstances, Burgess left May in the late summer of 1991. Having signed a noncompete clause at May, which prohibited him for going to work with a May competitor, Burgess decided to start a rival firm. More than 20 former coworkers attended an organizational meeting at his apartment, and ten signed on, including his two cofounders and eight others. Cofounders Morton and Tulio were not strangers to legal problems either. Morton was convicted of a misdemeanor in 1988 for stealing Hummell figurines from three Pittsburgh, Pennsylvania, stores, while a year later across the state in Philadelphia Tulio pleaded guilty to involvement in the manufacture of a major ingredient of methamphetamine. Tulio would soon have a falling out with Burgess and leave IPA, and Morton sold out several years later and retired.

Burgess and his partners incorporated IPA in Illinois and set up shop in Wheeling, Illinois, the three of them sharing two desks. The company led a hand-to-mouth existence in the early days, relying on the credit cards of employees to make ends meet while it drummed up business and fought off the legal challenge of May, which took little time to take the new firm to court, alleging that IPA appropriated trade secrets and used Mays forms and programs. It was just the first of more than a dozen lawsuits the two companies traded over the next decade. In 1996 Burgess provided Crains Chicago Business with his explanation for the animosity between the two firms: They dont like us because of the 585 people who work here, 200 came from there. He added that May just wants to control the marketplace. They want to deny us our right to compete.

COMPANY PERSPECTIVES

As the largest management consulting company in our market, we have more experience in providing consulting services to the owners of small and medium-size businesses than any other company. We have analyzed more than 175,000 businesses and provided services to more than 45,000 business owners. It is widely held that we are the only management consulting firm in the world that delivers such a broad array of professional services to the small and medium-size business marketplace.

IPA would be taken to court by a wide variety of other litigants as well. According to Inc., employee Karen Marchesseault sued IPA and Burgess, Tulio, and Morton to recover $40,000 in travel expenses charged to her American Express cards. An employee temp agency, a snowplowing service, a bank, and even IPAs former law firm were among creditors who sued to collect on IPAs allegedly unpaid bills. Many other lawsuits would be filed by former employees over unpaid commissions and by clients dissatisfied with the work the company performed.

HEADQUARTERS MOVE TO BUFFALO GROVE: 1993

Although in the early months IPA spent more on legal bills than it received in revenues, it began to grow steadily. It claimed revenues of $5 million in 1992. A year later the company moved to Buffalo Grove, Illinois, where it built a new headquarters. In 1994 revenues reached $24 million, according to the company. IPA expanded into Canada with the launch of Integrated Business Analysis. With sales of more than $33 million in 1996, IPA laid claim to being the fastest growing management consulting company in the industry.

The company achieved this growth by churning through hundreds of employees who, according to Crains Chicago Business, had abruptly quit or been fired. Every two weeks a dozen to two-dozen business analysts were recruited, lured in part by classified ads that read, Self-motivated individuals with strong communications skills and a burning desire to succeed can realistically earn a six-figure income while enjoying extensive travel throughout the U.S. The accepted applicants then paid their own travel expenses in order to attend a one-week training class at the Buffalo Grove site. Here they learned how to condition prospective clients into contracting IPA consulting services by creating a sense of urgency. According to training materials quoted by Crains, Through the practice of dropping bombs on the client during the course of the survey, and leaving the client with a crisis at the end of the day, the clients temperature is risen and urgency is instilled. As a result, the client often sought IPA services and did not have to be sold directly. The next day IPA consultants arrived to begin work, giving clients little time to have a change of heart. At the other end of the transaction were telemarketers who worked in two six-hour shifts, cold calling small businesses and setting up appointments for the sales reps, who paved the way for the analysts by making a two-hour pitch that culminated in a flat-fee agreement for a survey. The analyst, in effect, was just another salesperson involved in the process of landing a client. Overseeing it all was Burgess monitoring whiteboards that kept track of hourly quotas and demanding that the different units keep up the expected pace.

Burgess spent some of IPAs profits on its annual Celebration of Success dinner and began inviting, and paying, politicians to be keynote speakers. In 1997 former President Gerald Ford spoke. A year later it was Bob Dole, former senator and unsuccessful presidential candidate. In 1999 former President George H. W. Bush spoke, receiving a reported $82,000. In 2001 the man who beat him, Bill Clinton, would be the Christmas speaker, his fee: $125,000. His wife, Hillary Clinton, spoke at the gala in 2004. Burgess was photographed with the speakers and the pictures were often included in sales materials, providing IPA with reflected credibility. Along the way, IPA executives contributed generously to a wide assortment of state and national officeholders, although a number of them began to return the money as IPA received increasingly unfavorable notice in the press.

In the second half of the 1990s, IPA expanded its service offerings by creating what it called strategic alliances but were in effect subsidiaries. It formed IPA Advisory & Intermediary Services in 1997 to help small companies in such areas as mergers and acquisitions, debt financing, and equity investments. To keep up with the companys growth, IPA began construction on a 50,000-square-foot headquarters in 1998. A year later the company said it topped the $100 million mark, and boasted that it had reached this distinction faster than any other management consulting company. Also in 1999 IPA formed a second strategic alliance, International Tax Advisors, Inc. This unit provided strategic tax planning services and also handled problems that clients might have with tax collection agencies. Moreover, at the end of the decade IPA began offering to business owners professional development coaching.

KEY DATES

1991:
Company is founded.
1993:
Company moves to Buffalo Grove, Illinois.
1995:
Canadian operations are launched.
1997:
IPA Advisory & Intermediary Services is established.
2000:
Second Buffalo Grove facility is acquired.
2003:
Accountancy Associates, LLC, and ITA Implementation Services are formed.

With business continuing to grow, IPA expanded its headquarters to 93,000 square feet by acquiring a second facility in Buffalo Grove. A year later the company reported $150 million in annual sales, and in 2002 claimed that between its U.S. and Canadian operations it employed more than 1,500 people. Two more strategic alliances were formed in 2003: Accountancy Associates, LLC, and ITA Implementation Services to provide such services as tax planning, estate structuring and succession planning, and accounting compliance.

REVENUES REACH $250 MILLION: 2006

In 2006 the IPA family of companies claimed to reach $250 million in annual revenues. However, IPA also continued to court controversy in the new century. Complaints continued to pile up at the Better Business Bureau, and although IPA maintained that it resolved all of them, it was classified as having an unsatisfactory record because the root causes had not been addressed. In February 2005 the company reached an agreement with the Wisconsin attorney generals office to cease deceptive business practices.

In May 2006 the New York Times reported that the Illinois state attorney generals office had received more than 200 complaints against IPA since 2001 and was investigating the company. Moreover, since the early 2000s IPA had been contesting a lawsuit filed by the Equal Employment Opportunity Commission on behalf of more than 100 women. The suit, the Times reported, asserted that IPA executives routinely harassed female subordinates with crude comments, groping and demands for sex. Mr. Burgess himself was accused by a former employee of making comments about her body and telling her that her future with the company depended on having sex with him, the lawsuit said. This is probably the most egregious case of sex harassment that the Chicago district office has seen, the commissions lead attorney, Diane Smason, observed. The owner of the company engaged in harassment, and that set the tone for the company, on down.

In addition to legal fees and political donations, IPA spent considerable amounts of time and money on charitable activities. It organized an annual company blood drive for the American Red Cross, and made contributions to such causes as the Chicago public schools, the Columbine Memorial, the Susan G. Komen Breast Cancer Foundation, the U.S. Holocaust Memorial Museum, and the Special Olympics Windy City Rubber Ducky Derby.

Ed Dinger

PRINCIPAL SUBSIDIARIES

Integrated Business Analysis; Advisory & Intermediary Services; International Tax Advisors; ITA Implementation Services.

PRINCIPAL COMPETITORS

The Corporate Executive Board Company; George S. May International Company; GP Strategies Corporation.

FURTHER READING

Fuller, James, Companys Founder Has a Past of Highs and Lows, Daily Herald (Arlington Heights, Ill.), January 10, 2004, p. 7.

Hall, Dee J., Businessman Settles Suit Against IPA, Wisconsin State Journal, April 15, 2006, p. B5.

Johnson, Julie, Complaints Follow Small Biz Consultant, Crains Chicago Business, February 16, 2004, p. 1.

McIntire, Mike, Rubbing Shoulders with Trouble, and Presidents, New York Times, May 7, 2006, p. 1.

Oloroso, Arsenio, Jr., This Consultancys on Fast Track, Crains Chicago Business, July 29, 1996, p. 1.

Rosenbloom, Joseph, Im John Burgess. Im Here to Help You, Inc., June 2000, p. 68.

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