Concord Camera Corporation
Concord Camera Corporation
Sales: $173.2 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: LENS
NAIC: 333315 Photographic and Photocopying Equipment Manufacturing
With low-cost manufacturing facilities operating in the People’s Republic of China, Concord Camera Corporation manufactures single-use and conventional cameras for its own labels, as well as for private labels and such major cameramakers as Polaroid, Eastman Kodak, and Agfa-Gevaert. Concord Camera’s entry into digital cameras and development of wireless picture delivery systems holds great promise for the company. A decade-long conflict, however, with its founder and long-time chief executive, punctuated by occasional charges and counter-charges of fraud and fiscal irresponsibility, has been both a source of distraction and embarrassment.
Establishing Concord Camera in 1982
Jack C. Benun started Concord Camera in Rahway, New Jersey, in 1982. He told the Wall Street Journal that he got his start in the business as a teenager when he resold pawn shop cameras out of a car on the streets of Manhattan. He claimed to later make $3 million as a minority partner in a Taiwanese camera business. Benun told Business Week that he made $1.8 million by the age of 30, decided to retire, but that within several weeks he was restless and returned to business by starting up Concord Camera. He turned to the People’s Republic of China, which was beginning to open its doors to foreign businessmen, and in 1983 began operating a camera manufacturing plant in Baoan, 15 miles north of Hong Kong, where he had a design team in place. Skilled labor was both plentiful and cheap in China, allowing Benun to make cameras that were extremely price competitive. He concentrated on the low-end camera market, building cheap but reliable models. By 1988 Concord Camera was generating almost $20 million in annual sales, and Benun was looking to take the company public. What followed would begin a series of investigations and lawsuits that would haunt both Benun and Concord Camera well into a new century.
Roland W. Kohl was a senior executive of Concord Camera’s Hong Kong affiliate, Dialbright Company. He and Benun were both directors of the company and stockholders. As part of taking Concord Camera public, Benun wanted to make Dialbright a fully owned subsidiary. The two men agreed to exchange their Dialbright shares for Concord Camera stock, with Benun further agreeing to buy 240,032 shares from Kohl to be paid for in six installments. In July 1988 Concord Camera completed its initial stock offering, selling 1.15 million shares at $5 each, and then consummated the acquisition of Dialbright, renaming it Concord Camera HK Limited, with Kohl serving as general manager. In 1989 the company used the funds its IPO raised to acquire the German company Peter Bauser GmbH, renaming it Concord Camera Gmbh, for approximately $1.6 million. Then in February 1990 Concord Camera formed a subsidiary in Canada, followed in June by another acquisition, the $2.2 million purchase of the Angus and Safari camera businesses from Optex, Inc. After the close of its fiscal year, which ended on June 30, Concord Camera reported a 1990 net loss of $3.2 million on $28.4 million in sales. The company attributed the loss in part to a poor U.S. economy, but in September it issued a statement that alleged its performance also was hurt by the wrongful acts of certain Hong Kong employees, in particular Kohl, all of whom had been subsequently terminated. The company said that legal proceedings against the employees also had been initiated in Hong Kong.
In the lawsuit Benun filed, he claimed that Kohl and his subordinates conspired to cripple the unit’s business in order to induce Concord Camera to sell a major interest in the subsidiary to them. Asking for $3.6 million in losses and unspecified damages, the suit contended that Kohl fired nine supervisors and almost 500 factory workers between March 1989 and March 1990, a period in which production orders were backing up. The suit further contended that Kohl used up Concord Camera’s line of credit by buying an excessively high number of camera parts. Publicly, Benun claimed that he had been preoccupied with the IPO and assured the press that he would never again let down his guard.
1992 Charges and SEC Investigation of CEO
Kohl would have his own grievances, which he would lay out when he sued Benun in 1992, but by that time Benun was already being sued by Concord Camera’s former chief financial officer, Michael J. Rea, who was suddenly terminated in January 1991. A month later he sued Benun and Concord Camera, alleging that he discovered Benun had been embezzling company funds and was wrongfully dismissed when he refused to cover up the matter. Rea claimed that on a trip to the Hong Kong unit he asked a production manager named Eli Shoer about a $150,000 bonus he had been paid after being hired, only to discover that Shoer said he never received the money, but that he had signed the check over to Benun, who when later confronted would deny the matter. Finally, according to Rea, Benun said, “Don’t worry; no one will ever find out. Nobody could ever trace it.” Rea further alleged that in November 1990 the Hong Kong subsidiary had arranged to buy equipment from a company owned by Shoer for $135,000 but actually paid $170,000. Confronted with this discrepancy, according to Rea, Benun replied, “Don’t be stupid. I need the money.” Rea further charged that he discovered checks worth $250,000 from Shoer’s company had been deposited in one of Benun’s personal bank accounts. Although the suit would be settled out of court, Rea’s charges prompted the Securities Exchange Commission to begin investigating Benun and Concord Camera. The company’s board also announced that it would launch an internal investigation, and as a result of this unwanted publicity the price of Concord Camera stock lost almost a third of its value in one day.
Aside from Rea’s allegations, Benun’s general conduct as an executive caused some concern. He typically drew his entire annual salary of $375,000 on the first day of the fiscal year, thereby hurting cash flow. Although he occasionally lent money to Concord Camera, he borrowed large sums as well, including $1.4 million in fiscal 1990 and close to $1.1 million in 1991. Nevertheless, Benun was cleared by his board, the company’s stock rebounded, and Concord Camera continued to grow. Amid the turmoil of 1991, the company created a British subsidiary, as well as acquiring Keystone Camera for $6.6 million. It also entered the single-use camera business, which would become a company mainstay.
Early in 1992 Kohl sued Benun in the U.S. District Court of New Jersey. His major charge was that Benun failed to pay the sixth installment on the Dialbright stock that Kohl had sold him in 1988, amounting to more than $140,000. Kohl also alleged that in June 1988 Benun borrowed $6,000, which he never repaid, and that later in the year Benun asked Kohl to lend $1,500 to Carla Drummond, described in the suit as Benun’s “friend and travelling companion.” That money as well, Kohl alleged, was never repaid. Speaking on behalf of the company, William Pearson, Concord Camera’s executive vice-president and a close associate of Benun, dismissed Kohl’s charges as retaliation over Concord Camera’s suit of Kohl in Hong Kong. Later in 1992 Pearson would leave the company, purchasing the Argus brand name and starting Argus Industries. By the end of the year, he would be suing Benun and Concord Camera as well, charging breach of contract, wrongful and malicious conduct, fraudulent practices, and violation of the New Jersey racketeering statute. In essence, Pearson alleged that Concord Camera tried to destroy his business. The attorney representing Concord Camera called the allegations “absolutely untrue.”
Concord Camera also was experiencing problems with its primary lender, Midlantic National Bank, after receiving a number of extensions on a deadline to repay a $15 million loan. The company found new funds when New York investor Ira J. Hechler provided some $3 million. Despite its debt and posting a $2.7 million loss for fiscal 1992, Concord Camera was still looking to expand. It announced in September an agreement to purchase the Vivitar and Hanimex businesses from British competitor Gestetner Holdings PLC for $50.6 million. Benun also announced that he would step down as CEO when the transaction was complete. Only a few months earlier, when Benun’s contract was set to expire and Concord Camera’s board of directors had the chance to ease out their controversial chief executive, he received a new three-year deal that increased his salary to $600,000 (albeit it stipulated that he was to be paid in biweekly installments instead of a lump sum). Under the terms of the contract, if Benun was asked to leave his job without cause he would be entitled to full salary and benefits for the entire three years of the deal. In the press there was speculation that funding for the acquisition was contingent upon Benun stepping down, thus raising the possibility that he might be able to collect on his contract even though he resigned.
Concord’s mission is to be a world class, high quality, low cost designer, developer and manufacturer of popularly priced, easy-to-use cameras and consumer products with performance results and appropriate equity returns for shareholders.
Discharge of Concord Camera’s Founder and CEO in 1994
The Vivitar and Hanimex deal fell through, however, and Benun continued as CEO in 1993, as did the SEC investigation about him. Hechler, in the meantime, was purchasing more stock and gaining control of the company. On the other hand, Benun, who had owned 60 percent of Concord Camera stock after the IPO, had been selling off his interest and now held just 25 percent, according to published reports. Although the company announced a return to profitability in fiscal 1993, industry insiders were reported to claim that Concord Camera was dumping product in the market to gin up its numbers. In October 1993 the new investors, according to newspaper accounts, pushed for a renewed investigation of Benun, apparently responding to pressure from the SEC. Rather than reforming an internal committee, which critics claimed had not interviewed key witnesses the first time, the board of directors hired the New York City law firm of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel to conduct the inquiry, led by the head of the firm’s white-collar crime department, Gary Naftalis. By July 1994 a confidential report was submitted, Benun was promptly fired, and the company then settled with the SEC. Although not admitting any wrongdoing, Concord Camera agreed to “cease and desist from filing false reports and proxy statements and keeping inaccurate books and records.” In September 1994 the SEC charged Benun with misappropriating $150,000 from Concord Camera. Without admitting or denying the allegations, Benun settled the complaint by agreeing to repay the embezzled funds plus interest, for a total of $215,000. In addition, he paid a $150,000 fine to the SEC.
At Concord Camera Benun was replaced by Ira Lampert, an investment banker with little experience in the camera industry who had served originally as a consultant in 1992 and then became the company’s president in July 1993. He soon found himself the subject of criticism by Benun, and the company the subject of litigation. At the company’s annual meeting in January 1995, Benun and his allies on the board charged Lampert with nepotism, demanding that Lampert’s son, who worked at the Hong Kong subsidiary, be fired. They also alleged that Lampert had bribed Chinese officials with $1,250 in connection with a land contract. In the coming months Benun would elaborate on the bribery charge in letters to the company’s board and to the SEC. Lawyers for Concord Camera would admit that certain Chinese officials were paid for travel and incidental expenses, but denied that the money was a bribe for signing a contract. Furthermore, Benun sued Concord Camera for $6.7 million over lost wages and benefits, claiming that he had been wrongfully terminated. The company then sued him, asking for damages of $2 million caused by “his frauds and embezzlements.” Separately, disgruntled shareholders also sued Benun.
Early in 1995, with all the controversy surrounding the company, Concord Camera stock dropped to $2 a share. Lampert brought in a new management team that shed nonessential businesses to cut costs, bolstered its design staff, and began investing in technology. After years of rushing out products to dress up its sales numbers, only to have a large number returned and see its retail reputation tarnished, Concord Camera decided to concentrate on doing one category well, the single-use camera, and rely on its low-cost China facility to give it a competitive edge. It landed a deal with 3M to manufacture its single-use cameras and other companies soon followed. Overall, the single-use camera category was experiencing robust growth. Concord Camera further capitalized on the trend by introducing a line of single-use cameras targeted at the under-12 market. Moreover, the outsourcing movement of the 1990s now extended to the camera industry, as both Kodak and Polaroid farmed out manufacturing work to Concord Camera and its low-cost China facilities. The company’s commitment to research and development also was beginning to pay off. Its Keystone brand introduced a patented system that could automatically imprint on pictures such messages as “Happy Birthday,” “Vacation Fun,” and “Stay in Touch.”
In December 1998 Concord Camera moved its headquarters from New Jersey to Hollywood, Florida. Its business now had a solid footing. It was producing point and shoot cameras for its own labels, as well as supplying private label cameras to major retailers such as Wal-Mart, Kmart, and Sears. It was a major supplier of single-use cameras for its own labels and major camera makers as well as toymakers Fisher-Price and Crayola. It also was working with Hewlett-Packard to develop a digital camera, as well as developing a digital image-capture device that could transmit pictures to a cell phone. In effect, Concord Camera was transforming itself into a technology company. By
1999 it generated $118.4 million in sales, after posting just $40 million four years earlier. By December 1999 Concord Camera stock was trading at more than $15, after a low of $3.50 in the previous 52 weeks. A few months later it introduced its first digital camera, “eye Q,” a low-cost product that it planned to sell on a private label basis to retailers and that industry analysts predicted would become a major success. The company’s stock soared past $45 in March 2000. For fiscal 2000, Concord Camera would generate $173.2 million in revenues and $19.6 million in net income, which represented a 154.5 percent increase over the previous year. It reached #20 in Fortune’s list of the fastest-growing companies and was listed #25 in Forbes 200 Best Small Companies.
Despite moving to Florida and establishing a solid reputation with customers and investors alike, Concord Camera was not free of Jack Benun. In September 1999 an arbitrator ruled that the company had just cause for firing him. Nonetheless, in December 2000 he was trying to stop the company’s annual meeting scheduled for January 18, 2001, contending that his six-year-old employment agreement entitled him to nominate six of nine directors. He and Concord Camera would turn to arbitration and, again, Benun would lose. He maintained that he would continue to explore his options. The company, in the meantime, was experiencing continued growth, although poor earnings forecasts from Polaroid and Kodak had an adverse impact on Concord Camera stock. Prospects appeared promising, but Concord Camera faced competition in its outsourcing business from Asian competitors. Its move into high-tech products was also risky, as digital technology evolved far more rapidly than film. Although Concord Camera clearly had reached a new level in its business, in many ways it was now performing on a high wire and would not be afforded the luxury of too many missteps.
Concord-Keystone Sales Corp.; Concord Camera Gmbh; Concord Camera France S.A.R.L.; Concord Camera HK Limited; Concord Camera (Europe)Limited; Goldline (Europe)Limited.
Fuji Photo Film Co., Ltd.; Vivitar; W. Making Enterprises; Konica Corporation.
- The company is created in New Jersey.
- The company goes public.
- The company acquires Keystone Camera.
- Founder and CEO Jack C. Benun is terminated for cause.
- Headquarters is moved to Florida.
“Auditors Halt Work on Concord Camera Pending Investigation,” Wall Street Journal, August 12, 1991, p. A3.
“Concord Camera Ousts Chief and Settles with S.E.C.,” New York Times, July 15, 1994, p. D3.
Eichenwald, Kurt, “Concord Camera’s Hefty Pay Deal,” New York Times, October 23, 1992, p. D6.
Henriques, Diana B., “What’s Keeping Concord on a Roll?,” New York Times, December 8, 1991, p. F19.
Laderman, Jeffrey M., “Smile—If You’re onto Concord Camera,” Business Week, October 10, 1988, p. 126.
Pandya, Mukul, “A Former CEO Battles Concord Camera,” New Jersey Business News, June 12, 1996.
——, “The Inside Story of How Concord Camera Lost Its Chief Executive Officer,” New Jersey Business News, July 27, 1994.
——, “The Picture at Concord Camera Keeps Getting More and More Fuzzy,” New Jersey Business News, April 1, 1992.
Pollock, Michael A., “Small Firms Face Big Headaches in Far-Flung Places,” Wall Street Journal, July 1, 1991, p. B2.
Rejtman, Jack, “Hollywood, Florida-Based Disposable-Camera Maker Comes Back Strong,” Miami Herald, December 6, 1999.