Surviving the ‘Black Bernie Madoff’…
March 19, 2010 by Staff
Filed under Money/Business, News, Weekly Columns
(Akiit.com) How a Cleveland entrepreneur lost everything and bounced back after tangling with an infamous con man…
How a Cleveland entrepreneur lost everything and bounced back after tangling with an infamous con man.
Entrepreneur Phil Davis has experienced his share of ups and downs in his business life, including shuttering his first Cleveland-based venture after losing his biggest client.
But nothing could have prepared him for the day he was forced to close his award-winning chicken-and-waffle restaurant chain–Phil the Fire–amid a swirl of financial fraud accusations, lawsuits and a damaged reputation.
“I couldn’t see the bottom,” said Davis, 50. “A con man is only as good as you are greedy.”
The con man Davis is referring to is Kirk Wright, who in 2008 was convicted for swindling just over $150 million out of 500 investors, including former NFL stars Steve Atwater and Blaine Bishop. Wright ran a classic Ponzi scheme, and to this day Davis calls him the black Bernie Madoff. Davis became a victim of the deceitful web after entering into a partnership with Wright to open a second restaurant in downtown Cleveland. Wright turned the tables on him, says Davis, by attempting to accuse him of fraud and forcing him out of his own business. Unable to get a job in the restaurant industry, Davis had to take an $8.50-an-hour job loading boxes for UPS.
It has taken the entrepreneur six years to rise from the ashes. This time around, Davis is pinning his hopes on iCubed International, through which he has designed one of the world’s smallest microwave ovens, the iWavecube. Measuring less than 12 cubic inches, the mini-microwave oven has caught on slowly during the economic downturn, but he has found an outlet through online retailing. He now has his eyes set on building a $1 billion company in five years.
“We’re on the cusp of doing something big,” says Davis, who declined to give revenue figures but expects to sell up to 100,000 units over the next 18 months. “There’s nothing I can’t get done.”
Davis–born and raised in Cleveland–tasted entrepreneurial life as a senior at Stanford University, when he revived the college’s yearbook for African-American students. After earning an economics degree at Stanford and an MBA at University of Virginia in 1985, he landed a position at Ocean Spray in Boston.
Within three years, he was pursuing his next project, BertSherm Products, Inc., which developed the children’s deodorant Fun ‘N Fresh. The health and beauty item took off, making it to the shelves of Target Corp., Kmart Corp. and Wal-Mart Stores, Inc.
“He has the ultimate belief in his ability to think like a customer,” says Boake Sells, former CEO of Revco, which also sold the deodorant.
Wal-Mart–the largest purchaser–stopped carrying the products as part of a reorganization of its merchandising. That spelled the end of BertSherm, and Davis went back to doing some consulting work.
In 1999, the avid cook and baker began a catering service. He grew that to a weekly Sunday brunch in a church basement to Phil the Fire by 2002, generating nearly $1.5 million in annual sales. He garnered high praise from area food critics, winning Cleveland Magazine’s Silver Spoon Award for best soul food restaurant two years in a row.
Then he met Wright through Earl Patton, the director of basketball administration for the Cleveland Cavaliers and a regular at Phil the Fire. Following initial meetings, Davis says Wright promised he would put up $1 million for a second location downtown. With that, the pair forged ahead to have it done by the start of the 2003 Cavs season–LeBron James’ rookie year.
Wright, however, failed to pay contractors for work that was completed to open the second spot. What’s worse, the hedge fund manager turned on Davis and tried to accuse him of fraudulently diverting money from the restaurant, according to Davis.
“He took my business right from under me,” says Davis. By April 2004, Phil the Fire restaurants were gone.
It would be a year later when Wright was finally convicted of investment fraud. He committed suicide just before being sentenced.
The damage was already done for Davis, who couldn’t even get a job as a restaurant manager and grew concerned about taking care of his daughter, now 9 years old. “This still ranks as the lowest point in my life,” said Davis, adding he had contacted federal regulators about Wright’s scheme. “I kept saying, I have to reinvent myself.”
At UPS, Davis rose through the ranks to account executive, but he stayed focused on moving onto his next enterprise and restoring his reputation.
The idea for the mini-microwave came to him while shaving. He wanted a hot towel and thought it would be great to have a microwave oven in the bathroom to heat it up. That notion blossomed into other ideas for a small microwave, including having one for long road trips, and Davis knew he had his next company.
In 2007, he launched iCubed International with the help of a few investors. The first year started off rocky as two of his initial buyers, Sharper Image and Linens-n-Things, went bankrupt and closed in 2008.
To keep it alive, he moved the entire operation online through his own site and Amazon, sold out of his inventory between last November to February of this year. He has a major push underway to sell the mini-microwaves in the European Union markets. By Christmas 2010, he plans to expand the product line to the iToastcube and iFridgecube.
Most important, he’s never forgotten his namesake–Phil the Fire. And he’s excited about reviving it this summer.
“There’s nothing more precious than your name,” he says. “There will be nothing more gratifying than getting my name back and serving people great food again.”
Written By M.F. White