Officials knew of red flags with call center before bringing it to Myrtle Beach

The call center that was supposed to bring 317 jobs to Myrtle Beach before shutting down on Friday was operating at a loss, had “costly cash flow challenges” and did not have enough money to continue operations through May, 2018 according to documents filed with the Security and Exchange Commission.

Before the company moved to Myrtle Beach, the Myrtle Beach Regional Economic Development Corporation was aware of problems with Greenwood Hall, and brought the company here anyway. It closed several weeks after opening.

Some of the company’s 53 former employees had quit other jobs to work there before losing their jobs 10 days before Christmas, according to Horry County Council Chairman Mark Lazarus.

The jobs would have paid almost $40,000 each, including benefits, according to a fiscal impact disclosure produced by Coastal Carolina University for the Economic Development Corporation.

EDC President Josh Kay said that they had looked at the company’s SEC filings, and said the information was concerning.

“That’s why there was no upfront money given to Greenwood Hall,” said Kay. “That’s why we met with the new CEO and new management team. I did have a higher level of confidence in the new CEO and new management team than their financial statements represented.”

CEO Bill Bradfield stepped into his role in August, after former CEO John Hall resigned in July. KBTX-TV reported the company’s board had told Hall of its belief that he had committed “gross negligence in the performance of his duties.”

Greenwood Hall borrowed $3.5 million in 2016 and operated at a loss of more than $800,000 in the three months leading up to May 31, 2017, according to the report, which stated, “If the company is not successful in becoming profitable, it may have to further delay or reduce expenses, or curtail operations.”

The company was supposed to make a capital investment of $1.4 million when it came to Myrtle Beach, but in its second quarter report, the company listed only $800,000 in assets that included no cash or cash equivalents. In the company’s most recently available quarterly report to the SEC covering the nine months prior to May 31, 2017, just five clients represented 60 percent of the company’s revenue.

The company “suffered from costly cash flow challenges as well as associated costs, missed opportunities and inability to fully scale its operations,” according to the SEC filings, and that “caused the company to rely heavily on operating revenue as well as other sources of capital, such as debt.”

Kay said the EDC had been in talks with Greenwood Hall for three years, with communication starting before Kay took his job as president of the development corporation. When courting a new company, the EDC looks at two years of financial statements, performs site visits and holds meetings with companies that receive benefit packages, Kay said.

The EDC had gone to county council for a variance in order to offer an incentive to Greenwood Hall because the company had not met the county guidelines for the EDC to offer benefits. The problem was that the call center company had not promised the $2.5 million in capital investment required by the county, instead only offering $1.4 million.

Kay said that was because the company was leasing an existing building, instead of building a new facility. He said that despite having only $800,000 in assets, the EDC believed Greenwood Hall could grow because it was “adding contracts” and cutting expenditures.

“With the projections that they showed as well as new contracts that were being signed, couple that with the large reduction in expenses that they were undertaking, we believed they would be a viable company,” Kay said.

The company shut down its Texas location on Dec. 1, according to KBTX-TV.

In a statement, Hall said that he had heard the company was in “dire financial condition.” He said he was told the company could not afford to open its Myrtle Beach call center.

In its second quarter report to the SEC, the company said it didn’t have enough money for its planned operations through May 31, 2018.

Bradfield, said Friday that the company lost some clients Thursday night which prevented a deal to hire more employees and grow the company.

“We lost a couple of clients that we didn’t expect to lose ... and it ruined the financials and the deal didn’t go through,” he said in an interview Friday.

Hall disputed that in the statement.

“It is my understanding that many client departures occurred beginning in September and that the company was or should have been aware that others were likely to be lost well before the decision was made to commence operations in South Carolina on December 8,” he said.

Hall said in the year prior to his August 2017 departures, the company had signed 20 new clients.

If the company had made the $1.4 million investment and hired the 317 employees, it would have received $75,000 over three years.

This story was originally published December 18, 2017 at 5:29 PM with the headline "Officials knew of red flags with call center before bringing it to Myrtle Beach."