Von Schweikert Saga Continues

Accidents and disasters have no sense of good timing, and when they strike have a way of fouling even the most promising love affairs. Case in point: loudspeaker manufacturer Von Schweikert Research and the small town of Watertown (pop. 30,000) in northern New York, about three hours' drive from Toronto.

A flood devastated VSR's facility in a partially renovated old industrial building in Watertown on Sunday, January 24. Unseasonably warm weather had melted accumulated snow, causing runoff from a landfill mound over a hazardous waste dump nearby. Water and mud---possibly contaminated with a wide variety of solvents, PCBs, petroleum products, and other dangerous compounds---reached a depth of 6" in the speaker production shop, damaging inventory whose value is estimated (by a source close to the situation who has requested anonymity) at approximately $400,000.

Had the flood happened two weeks later, owner Albert Von Schweikert told the Watertown Daily Times, all that would have needed replacing was the carpet. In the shop were dozens of speakers ranging in value up to $60,000/pair---all of them in the final stages of production and testing, or waiting to be shipped out to dealers. As a result, Von Schweikert was forced to close down his business, at least temporarily.

The flood was funneled to VSR's garage doors by hay bales, arranged by workers who had been cleaning up industrial debris at the site. "They could not have done a better job of directing the flow if they were trying," said our source.

All involved agree that human error was as much at fault as the whims of nature. How much at fault will be determined by the courts. Von Schweikert retained engineers and attorneys to build his case against whoever is to blame. There was no reasonable target for his understandable anger the day after the flood, but he was looking for one. "If we're forced out of business," he told the town's newspaper, "somebody's going to pay. I don't know who it's going to be."

As his relationship with the town deteriorated, Von Schweikert's statements to the Watertown Daily Times as to the inventory's value rose from $300,000 to $750,000. Seeking emergency funding from the Jefferson County Industrial Development Agency while awaiting insurance money, he restarted production with a skeleton workforce only eight days after the flood. General Signal Corporation, the owner of the hazardous waste dump, was expected to admit at least partial culpability and compensate VSR for its losses, but no money has come forth.

On Thursday, March 4, the JCIDA turned down Von Schweikert's request for $450,000 in emergency funding. The agency's determination was made after its examination of VSR's finances indicated that the company would be unlikely to pay the loan back---including an outstanding debt of $143,000 to the agency, which had already given VSR a three-month break from loan payments. JCIDA officials "don't know what they're talking about," Von Schweikert told the Daily Times. Agency officials said that of all the businesses that have received financial assistance from them, VSR has the lowest ratios of jobs to loan money and capital investment to loan money. Von Schweikert blamed his financial difficulties prior to the flood on a "stock market crash" in October.

By early March, VSR had exhausted its parts supply and was unable to purchase more, and the company's workforce had shrunk from 22 to 5. On March 22, the Daily Times ran a story suggesting that an unnamed Canadian loudspeaker company might bail out VSR with a mutual-aid pact. The arrangement would have Von Schweikert assemble lower-end speakers for the Canadians, in addition to building "boutique" products.

The story also reported that VSR's insurance claim had been denied, and that Watertown's Community Bank, owed more than $300,000 by VSR, had seized $30,000 from VSR's account---most of which was prepayment for products ordered by dealers in the past six weeks. VSR was in such fierce financial straits that it went to prepayment to maintain some cash flow. Manufacturers who reach this stage rarely recover. The potentially Faustian deal with the Canadians may be VSR's only means of survival.

The now-soured romance between Watertown and VSR was all roses and lollipops when it began three years ago. The small company was lured to Watertown from Hesperia, in Southern California, by promises of support and development money from several state and local agencies seeking to revive the local economy by attracting upscale high-tech industries, who would occupy renovated old industrial buildings. The promises were largely fulfilled. Townsfolk perceived aerospace engineer Albert Von Schweikert as "an eccentric genius," according to our source, and were awed by his products, which were described in any number of local news stories by their size, weight, and cost---referenced, with a degree of incredulity, to the price of a new car.

"Apart from a few high-ranking officers at Ft. Drum [a nearby Army base---Ed.], nobody in Watertown could afford his products," said our source. "But we knew he shipped all over the world. We felt like his presence here was the beginning of a renaissance for us." This hope is apparent in several WDT news stories---40 in the past three years mention VSR---from 1996 and 1997 that allude to turning Watertown into "the Silicon Valley of High End audio."

The idea was that VSR would attract other manufacturers---such as New Jersey's Melos, or Caztech, a Canadian electronics company---who would in turn attract others. In return for re-invigorating the town's economy, they would enjoy an idyllic small-town life, with affordable housing, good schools, and little crime. Hopes in Watertown were running so high that a favorable mention of VSR's flagship product in a 1996 Stereophile show report made the local news.

The VSR-ignited Watertown renaissance hasn't happened. Public agencies and private lenders in Northern New York are now reluctant to extend the welcome mat the way they did for Von Schweikert. The speaker maker feels "betrayed by the town," our source said. "But the fact is that we don't have any more money to give him. And frankly, with 6000 soldiers at Ft. Drum about to get shipped to Yugoslavia to be shot at, he really isn't a major concern anymore." E-mail and telephone inquiries to Von Schweikert went unanswered.