NorVergence mastermind no stranger to bankruptcy

 

    By MARTHA McKAY STAFF WRITER
The Record, Bergen County, NJ

Running a phone company into bankruptcy is nothing new for Thomas N. Salzano. Before his ill-fated venture, Newark-based NorVergence, folded last month, Salzano headed up a different phone company.

In the early 1990s, after running a freight consulting business, Salzano founded Minimum Rate Pricing Inc. in Bloomfield, a reseller of residential long-distance phone service that eventually hired hundreds of people but ran afoul of federal regulators in 1998 when customers complained that MRP illegally switched their long-distance, a technique known as slamming.

A settlement was reached, and MRP agreed to pay a $1.2 million fine to the Federal Communications Commission. But over the next few months, MRP's business imploded. 

The company, which bought its long-distance service wholesale from WorldCom (now MCI), racked up $67 million in debt, according to court papers, and filed for Chapter 11 bankruptcy protection, along with some related companies, in February 1999.

"It was out of control," recalled Brian Engle, a turnaround specialist brought in by the creditors.” They weren't looking at their costs; the philosophy was, more revenue will solve the problem." 

Months later, creditors battled in court for the remaining scraps, saying in court papers that Salzano set up "The Telecom Education Trust," a college trust fund for Salzano's five children, into which was funneled $250,000 in company funds. 

Warren Martin, a New Jersey lawyer who represented the creditors' committee, said a judge ordered that money returned.

Creditors also accused Salzano of transferring $2.7 million in company funds to a Swiss bank while the company was in bankruptcy proceedings. But the creditors decided it wasn't worth the cost and effort to pursue those charges, Martin recalled. "Essentially, the business went away and there was nothing left but a bunch of lawsuits," he said.

In the end, the bankruptcy court allowed WorldCom, the largest creditor, to buy the remaining MRP customers, using part of its debt as payment, Engle said. 

MRP customers became WorldCom customers. And Salzano started to plan his next venture: NorVergence.

Martha McKay
Staff Writer
The Record
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