A Lakeland businessman says an Ontario-based high-tech company has taken him for a $100,000 ride.
Ken Richardson, 57, a former Polk County commissioner, has been wrangling with Route1 in Toronto since 2008.
In late October, he sued the company in Bartow-based 10th Circuit Court, charging he is the victim of grand theft, fraud, breach of contract and deceptive and unfair trade practices.
Richardson accuses Route1 of changing the terms of an investment agreement he had with it to sell a high-tech component. He said the bad business deal has just about bankrupted him and has forced him to sell personal possessions and cash-in a life insurance policy.
State Attorney Jerry Hill said Richardson's problems illustrate some of the dangers involved when doing business with foreign companies.
"You assume some risks when you deal with folks in a different jurisdiction," he said.
What's happened to Richardson may be criminal or may be cause of a civil case, Hill said.
"There's no question that the man was clearly wronged," he said. "But we do not have jurisdiction."
Repeated phone messages left by The Ledger this week for Route1 CEO Tony Busseri and President Brian Brunetti were not returned.
ACTIVATION DISAGREEMENT
The relationship between Richardson, his company Six X Telecom and Route1 started off just fine. Richardson said he was the chief Florida vendor for the company's MobiKEY device, which allows computer users to have controlled, remote access to their computer systems.
A lot of devices do the same thing, Richardson said, but he said Route1 offered people dealing with sensitive-stored information a higher level of security against unauthorized access. Route1 has customers across America, including the U.S. government.
"We have developed electronic security and identity management solutions specifically designed to meet the high standards of the military, as well as identity validation that is compatible with government-issued identity cards, such as the U.S. Department of Defense Common Access Card (CAC), the Personal Identification Verification (PIV) card and the First Responder Authentication Credential (FRAC)," Route1's website says.
In January 2007, Richardson bought 500 small "MobiKEY" units from the company for $102,000; $204 each. He sold 150 of the keys, shaped like small flash drives, in the following months.
Richardson said he charged $361 to governmental entities and $438 to businesses. He said those prices were approved by Route1.
Richardson said the deal he paid for included a year-long MobiKEY subscription, which he passed along to customers who bought the key. Route1 activated the keys; without such activation, the keys don't function.
After the year, key owners were to renew their subscriptions with Route1.
But months after he bought the MobiKEYs, Richardson said, Route1 issued a newsletter saying it intended to "unbundle" the hardware and service, meaning vendors would be selling just keys, not service activation.
Then he began to have problems with Route1. In a memo to the State Attorney's Office in Bartow, the company said the one-year service activation started the day Richardson bought the 500 keys.
There seems to be no dispute that Richardson was provided the service activation in the beginning of his agreement. The activation codes came in the boxes containing the keys Richardson bought.
But, he said, when the company recalled the keys for technical upgrades, it didn't return codes with the keys.
Richardson said there was no question that keys he sold early on were activated for a year starting the day he sold them, not the date he bought the 500 keys.
RISKY BUSINESS
Richardson has said he sold 20 MobiKEYs to the Florida Department of Education and had to reach into his own pocket — to the tune of more than $6,000 — to get those activated.
Without the one-year activation of the keys he bought, the product "was absolutely useless to me," he said. "If I had to buy the activation service, again, I'd be selling the product for a loss."
Richardson, through a second company, Secure Link Technologies, bought some service activations. He said he had no choice but to do that so he didn't leave the state hanging with 20 useless keys.
The State Attorney's Office conducted an inquiry, one step less than an investigation, into Route1's dealings with Richardson. But it didn't proceed because of the lack of jurisdiction.
Jeanette Dugas, who at the time worked as an assistant state attorney, corresponded with Route1 executives and the company's lawyer, who wrote that Richardson's separate purchase of activations a year after his purchase of 500 keys evidenced his acceptance of the policy.
"I would hesitate to interpret that action as acceptance," Dugas wrote back. "What recourse did he have at that time?"
Dugas sided strongly with Richardson on the issue of when the year-long subscription activations began.
"Why would they not commence from the date of purchase of the end user?" she asked. "It doesn't make any sense to punish your final customer for the amount of time the MobiKEYs sit in inventory. Otherwise, what would be the point of any authorized re-seller holding any inventory at all? They would only purchase MobiKEYs as sales were made."
Richardson said he thinks Route1 will have to defend the lawsuit because to fail to do so would result in the company owing a judgment. He is asking for treble damages on his $102,000 investment.
He said if the lawsuit doesn't help, he intends to bring his case to the Canadian attorney general's office. He said that's something he should have done sooner.
Gordon Kettle, an economics consultant and professor at Polk State College, said investments in foreign businesses — even Canadian ones — can be risky.
Even though the Canadian criminal and civil court systems are similar to ours, Kettle said, there can still be substantial legal obstacles to business harmony.
"It can be very frustrating," Kettle said. "Let the buyer beware."
[ Rick Rousos can be reached at rick.rousos@theledger.com or 863-802-7509. ]