Steve Mills MRI Network Franchise Misrepresentation

In this letter to Roger H Ballou, I outline the scenario of the misrepresentation of Mr JW as a regular MRINetwork franchisee. The truth is quite different to the misrepresentation portrayed for years by MRINetwork. Mr JW was once a regular franchisee, but after his franchise contract had expired, for several years (over 3) MRI continued to represent him to all other franchisees as a regular franchisee with whom we were repeatedly encouraged to work. What is more, he was not paying MRINetwork his franchise royalties throughout all of this period, and was already in debt at the time of CDI Corporation's acquisition of the company in 1999. However, Mr JW's original debts pale into insignificance, as under Steve Mills' stewardship these debts were allowed to grow year-on-year to an astonishing debt of £170,477:60 UK Pounds (approximately $316,626 USD). When Mr Steve Mills found out that a real franchisee was inter working with Mr JW in the false belief that he was simply a regular franchisee, what do you think he did? Read on - you might be surprised. Look at the facts and draw your own conclusions on MRINetwork and CDI Corporation's ethics and demonstrable business approach.



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10th January 2008

Roger H Ballou
President and CEO
CDI Corporation

Mr Roger H Ballou

I am now going to start to detail the issues that arose through one of your senior managers, namely that of Mr Steve Mills and his approach and conduct and consequently the ethics and demonstrated business practices of your company; that is, both CDI Corporation and MRINetwork (Management Recruiters International). I believe that Steve Mills of MRINetwork has demonstrated a number of characteristics that are unethical and wholly inappropriate conduct of a franchisor. I believe that these include: misrepresentation and/or fraud, coercion, breach of contract, reneging on written agreements, unethical behaviour, lack of care to your franchisees. You will appreciate that this is a long list and here is far too much detail to include in this one communication, so I will break this huge amount of information into digestible parts. I will therefore be writing to you a series of letters providing and discussing the detail over the coming months. As before I will be publishing these ´open letters´ on my web site.

MRINetwork Misrepresentation (years of):

Let me start by reiterating the facts. Mr JW was originally a genuine and regular franchisee, he purchased a franchise in the regular way and I guess he was paying royalties initially. However, as you know, Mr Roger H Ballou, Mr JW´s paying of royalties was very short lived. At the time of your acquisition in April 1999 Mr JW already owed you outstanding royalties of £31,785 UK Pounds (approximately $59,000 USD). He did at that time still have a valid franchise agreement albeit that he was in breach of it through default of royalty payments. Just a few months after CDI Corporation´s acquisition, Mr JW´s franchise agreement expired - specifically on 1st November 1999, i.e. just 7 months after your acquisition. What is astonishing is that your senior executives did nothing to address this dire situation. What is even worse in my opinion Mr Roger H Ballou, is that instead they chose to continue with the false representation to the whole of the MRINetwork, that Mr JW was still a valid franchisee with whom we were trained and repeatedly encourage to inter-work with. As you know Mr Roger H Ballou, MRINetwork continued with the misrepresentation that Mr JW was a regular franchisee to the whole of the MRINetwork for several years. Specifically:

MRINetwork continued with the misrepresentation throughout the remainder of 1999.
MRINetwork continued with this misrepresentation throughout all of 2000.
MRINetwork continued with this misrepresentation throughout all of 2001.
MRINetwork continued with this misrepresentation throughout all of 2002.
MRINetwork continued with the misrepresentation for the start of 2003.
In fact it was not until 26th March 2003 that Steve Mills eventually corrected the misrepresentation and informed the MRINetwork in a newsflash that Mr JW was no longer part of the MRINetwork.

What is even more astonishing is that this situation went from bad to worse over the years of MRINetwork´s misrepresentation, a lot worse! Mr JW´s debts grew year-on-year throughout MRINetwork´s years of misrepresentation. In fact at the time when you eventually decided to address the issue in 2003, his debts had grown to an astonishing amount of £170,477.60 UK Pounds (approximately $316,626 USD). How bad is that Mr Roger H Ballou? Your company had maintained this misrepresentation for around 3.5 years! Also, during that period, your MRINetwork managers repeatedly encouraged real MRINetwork franchisees to inter-work with Mr JW, who your company chose to falsely represent to us as a regular bone-fide franchisee! All of that time his debts were growing uncontrolled towards £170,477.60 UK Pounds (approximately $316,626 USD) and you still encouraged other franchisees to inter-work with him. That, Mr Roger H Ballou, is in my opinion, disgraceful and unethical behaviour of a franchisor. However, that is just the start of the issues that followed and that I shall be detailing over the following letters.

Now I wish to address the first of the many issues surrounding Mr Steve Mills of MRINetwork.

Steve Mills and the years MRINetwork Misrepresentation:

In this first discussion I will address Mr Steve Mills´ involvement in perpetuating years of the misrepresentation across the MRINetwork. As you know Mr Roger H Ballou, the MRINetwork is a global franchised recruitment organisation. Mr Steve Mills was at the time in question, your Managing Director of MRI Worldwide and responsible for the corporate control of many franchisees around the globe. His UK based office was responsible for the day-to-day issues and for updating MRI franchisees on most issues. It was Mr Steve Mills´ office that repeatedly provided us with the ´current´ list of fellow franchisees with whom you trained us and encouraged us to inter-work with. Mr JW was listed on the information provided to us by Steve Mills´s office. Mr JW´s telephone numbers, his emails, his address, his web site, the specialist areas that he worked in. All of that information was regularly and repeatedly supplied to us from Steve Mills´ MRI Network Corporate office. In other words, all the information that every real and genuine franchisee would receive from your corporate MRINetwork office about other real and genuine franchisees. My fellow MRINetwork franchisees had no way of knowing the truth because your company (MRINetwork) chose to withhold the fact that Mr JW had no current franchise agreement, and that he was in serious financial and growing debt, culminating in owing you more than £170,477.60 UK Pounds (approximately $316,626 USD). That misrepresentation was not a one-off ´clerical error´ Mr Roger H Ballou. It was a problem that not only known to Steve Mills of MRINetwork, but also to senior members of CDI Corporation too. For example, as far back as early 2000, Jonathan Taylor (MRI´s financial controller) wrote to Mr JW chasing the growing debts, saying:

"Please remember the agreement includes a commitment to pay current royalties as they fall due. Without doing this you will find that the overall debt will continue to rise, instead of going down."

Of course, Mr Roger H Ballou, you and I know that this repayment plan, like others, was not followed and the debts did simply just grow and grow uncontrolled to an astonishing amount of more than £170,000 UK Pounds (approximately $316,626 USD) over the following years.

Jonathan Taylor went on to say in the same letter:

"We are being pressed very hard by both MRI and CDI on this so I would be grateful if you would confirm the above in writing."

The point here Mr Roger H Ballou, being the confirmation that CDI Corporation were fully aware of the problems with Mr JW for years too.

And yet, throughout this period whilst all of the problems about Mr JW were clearly known about within the management of MRINetwork and CDI Corporation, Steve Mills still continued to represent Mr JW to the other MRINetwork franchisees as simply another bone-fide franchisee, with whom we were repeatedly encouraged to inter-work with. That, in my opinion Mr Roger H Ballou, is fraudulent misrepresentation. What is your opinion on that point Mr Roger H Ballou, are you comfortable with that misrepresentation? That is not a rhetoric question Mr Roger H Ballou, what is you opinion on those facts?

What does that all say about your company ethics Mr Roger H Ballou? You train franchisees to inter-work with other franchisees. I still recall my training and how we were ´sold´ the benefits of inter-working with other franchised offices. It was portrayed as we all use the same methodology; we all have the same high ethical standards; the same controls from the common franchisor. It was portrayed as a ´safe bet´. We were repeatedly encouraged to inter-work with other franchisees again and again by your people. This underpins your whole methodology and is a good selling proposition for new prospective franchisees. But here Mr Roger H Ballou, I believe you have destroyed the whole fabric of your methodology by your actions, your inactions, lack of control and inept management. That is, by continually representing Mr JW as a regular franchisee for years, when he was nothing of the sort. I also believe that your stance on refusing to address these issues is damaging the MRINetwork as well as to CDI Corporation´s bottom line. In other words, damaging to your CDI Corporation shareholders.

Now if that is not bad enough, things actually got worse. When I (as a real MRI franchisee) did ´as trained´ and encouraged by MRINetwork, I joined Mr JW to bid for a large contract of work. I did this in the false belief that he was a genuine franchisee. Of course, that false belief came from the misrepresentation of Mr JW, under the ´leadership´ of Mr Steve Mills. As it turned out, Mr JW and I were successful in winning the bid. The work was substantial. It covered multiple sites that were increasing in both numbers and size. In order to maximise the fulfillment and utilise the strength of the MRINetwork, Mr JW and I sent out a UK wide email to all other MRINetwork franchised offices inviting them to join in the contract. Of course, at that time, I was still under the false impression at that time that Mr JW was a real and bone-fide franchisee. The point of real significance Mr Roger H Ballou, is what happened next. We know at this point that your misrepresentation around Mr JW was still in tact and had been continued with and reinforced by Mr Steve Mills. But here we have the situation that Mr Steve Mills of MRINetwork received explicit personal knowledge that I as a real and genuine franchisee was actively inter-working with Mr JW in the false belief that he was a regular franchisee. Anyone would have thought that despite the management inaction up to this point and the misrepresentation that Mr Steve Mills propagated, that he would have taken some action to protect a real franchisee from the known peril of inter-working with Mr JW, whose debts were growing uncontrollable year on year and who´s franchise agreement had long expired. But that was not what Mr Steve Mills of MRINetwork decided to do Mr Roger H Ballou. Instead he decided to send Mr JW and me a congratulatory email on winning the work. How unethical is that Mr Roger H Ballou? Steve Mills knew of the problems with Mr JW. Mr JW was a long-standing problem internal issue, not only to senior managers in MRINetwork (including Steve Mills) but also to senior managers in CDI Corporation. Steve Mills had explicit knowledge that I as a real franchisee was entering a problem by inter-working with someone who´s franchise agreement had expired years earlier, who was not paying MRINetwork royalties and who MRINetwork had falsely represented as a real franchisee by Steve Mills and his MRINetwork Corporate office for a number of years. How unreasonable is that Mr Roger H Ballou? Steve Mills of MRINetwork falsely and repeatedly represented Mr JW as a real franchisee when he was nothing of the sort. Steve Mills of MRINetwork encouraged all franchisees to work together. Steve Mills of MRINetwork had explicit personal knowledge that I was inter-working with Mr JW, but instead of correcting the MRINetwork misrepresentation about Mr JW, Steve Mills decided to send me a congratulatory email! So we have the situation Mr Roger H Ballou, that Steve Mills of MRINetwork led franchisees into this trap by falsely and repeatedly representing Mr JW as a regular franchisee. Steve Mills repeatedly encouraged us to inter-work with fellow franchisees. When I, as a real franchisee did exactly that, i.e. by inter-working with Mr JW, Steve Mills of MRINetwork actually congratulated me on doing so. That, Mr Roger H Ballou, is in my opinion, unethical! I also believe it shows a remarkable lack of care to your franchisees and to the long-term business model of MRINetwork. However, as I said Mr Roger H Ballou, that is my opinion. What is your opinion Mr Roger H Ballou? Are you comfortable with that misrepresentation? Are you comfortable that the misrepresentation to the whole of the MRINetwork went on for years? Are you comfortable that having created this misrepresentation, that Steve Mills sent out a congratulatory email to me on inter-working with Mr JW in the false belief that he was simply another regular MRINetwork franchisee? Do you think that Mr Steve Mills was surprised when Mr JW defaulted on payment to me in the same way that he had been defaulting on payment to MRI for years earlier? This is not a rhetoric question Mr Roger H Ballou, what are your views? Your continued silence on these issues makes me wonder if you are actually comfortable with these issues and the underlying ethics and business practices. Are you, Mr Roger H Ballou?

Just to expand on the implications of this demonstrable track record of yours, it appears reasonable to me to suggest the following as a ´realistic´ advert for MRINetwork:

For example: Come and join MRINetwork as a franchisee. We will train you, support you and repeatedly encourage you to inter-work (IOR) with our global network of like-minded and similarly trained franchised offices, sharing work and resulting money. But let me just point out that some of these offices that we will list for you and encourage you to work with as franchisees, are not actually regular franchisees. That is to say they used to be, but their franchise agreements expired several years ago and they owe us a hundreds of thousands of Dollars in unpaid royalties and their debt is growing year on year. However, you will not know which offices fall into this category, as we will continue to represent all offices as good bone-fide offices. If you are unlucky enough to pick one of these ´bogus´ offices to work with, one of our senior managers may send you a congratulatory email. You should not be surprised when the office defaults on payment to you, as we know they have been defaulting on payment to us for years. Also, I would suggest that you do not raise any formal complaints about this, as our management will not address any specific points you raise.

I believe that the above advert fairly represents your business ethos and practice based upon my personal experiences. What do you think Mr Roger H Ballou?

There is a substantial amount more information and detail, and much of it is, in my opinion, even worse. Some of it I only came to light relatively recently, when MRI were forced to release documents through ´discovery´, the legal process that precedes litigation. However, I feel that this is enough for one letter and I will elaborate the rest over the coming months.

As before Mr Roger H Ballou, I ask you to address these issues and not sidestep them again. My door has always been open for discussion and remains so. You may wish to reflect on the implications of your historical stance and demonstrable business practice and start the long overdue dialogue.

Sincerely

Bob Stewart
CDI Corporation Shareholder



------------------------ End of email described above sent to Roger H Ballou ----------------------

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