So, I lied, a little. That first opinion piece I wrote about Dennis Smith is going to be the third to last, not the second to last piece I write about this. I had reached out to Ron and Annette (hereafter referred to as IRTA) to get their response to Dennis’ allegations and we ended up having a nice interaction. One that I’m publishing below in it’s uncut, glorious entirety.
Me: Dennis Smith has been giving your organization a lot of his particular brand of vitriol over the last month. What is going on?
IRTA: Mr. Smith has told us in writing that “we are now paying the price” for turning a “deaf ear” to his offer to help as a strategy consultant to IRTA. He states the same in one of his blogs.
We don’t want to speculate on Smith’s motives but based on his own statements, you likely called it very well. It seemed to be quite a coordinated effort between Richard Logie and Dennis Smith in terms of writing and distribution on Think Barter.
Me: He suggests IRTA had some kind of secret agenda to replace your software. Was the agenda secret? Or public? Were deals done behind the scenes as it is purported?
IRTA: We have had a UC software Sub-committee for the past 4 years to examine various software options for UC, so it’s not much of a secret that UC was looking for a software solution for UC as well as the possibility of providing high-tech software to lease to third party users.
The notion that IRTA did something secret regarding the BPS software initiative is not based on the facts, which are simple;
· IRTA was presented with a software proposal shortly before the Global Board Retreat at the end of February, 2014.
· The Global Board reviewed the proposal, the existing BC software and future IT plan at the retreat and resolved to move forward with a contingent contract with BPS, subject to IRTA legal counsel approval and with the condition precedent that BPS must have a successful IPO in order for the agreement to become operative.
· It took from late February until July 2nd, 2014 to hammer-out a mutually acceptable agreement between UC/IRTA and BPS.
It’s not customary for a professional business organization to announce a contract/business relationship that has a condition-precedent in it that delays the commencement of the agreement to a future date, unless the condition precedent has first been achieved. The BPS IPO was not completed until September 2nd, 2014.
In one of his early blogs, Mr. Smith pondered as to why IRTA never consulted him about barter software, he said, “Surely I would be the first person for an analysis…no personal offense, but something is not right if I don’t even know about it.” So, it instantly becomes a “secret” matter because Dennis Smith did not know about it? Mr. Smith is not even an IRTA member and never has been, IRTA does not have a duty of disclosure to Dennis Smith.
Me: He’s called for your resignations over the Bartercard agreement. Are you going to resign?
IRTA: No, we have not had a request or suggestion to resign, nor do we have plans to submit our resignations. IRTA has received two calls to date voicing concerns about the BPS software initiative, one from an IRTA member who owns an exchange in Charleston, SC, where BC/USA is headquartered and one from a NATE officer who was worried about BC/USA potentially entering their market.
Me: It has been said by Dennis that you’re hiring out the Bartercard software is some kind of endorsement of their organization. Have you exclusively endorsed GETS in the past? If the deal goes through with Bartercard, are you going to exclusively endorse Bartercard?
IRTA: BPS is a separate company from Bartercard so any endorsement would be of BPS (the Technology Company), not Bartercard (the Barter Company). Any software that UC uses already receives an implied endorsement. The software committee recognized that from the beginning. The goal of the committee was to find a long term solution (best technology) for UC, cost savings and/or potential revenue stream.
We now have the opportunity to work with a software development company committed to building the best platform with latest technology enhancements that we know has the ability to continue development at that level. That’s the key difference – based on a clause in the BPS/UC/IRTA contract the software must continue to evolve and STAY on the cutting edge.
To our knowledge, no other barter software company has made that kind of commitment to their users regarding ongoing enhancements. Because BPS now has the financial resources and they are a focused technology company, they have the ability to keep their commitment to maintaining the software’s excellence. Barter software is only one of the BPS technologies so they are not dependent on that one product for success. Due to all of the above, we believe this makes it worthy of an endorsement and it is a benefit to the industry.
Me: Why did you start considering switching platforms? And when?
IRTA: The software committee was formed 4 years ago. There was a serious effort made to find an open source option that resolved the long term issues that UC has had with proprietary software vendors.
The open source options were not viable because of their stage of development and the lack of financial resources to develop. There are some interesting systems evolving and the future will likely tell a different story as they continue to develop in innovative ways.
Every barter software user has their own take on the challenges with barter software and what they prefer for their own company. There are many good software companies serving the industry.
What we accomplished with BPS is an agreement that has better guarantees of confidentiality and data security then any we have seen. Additionally a listed company has much more stringent oversight. The penalties for any data compromise would be significant and we have additional warranties. Concerns that BPS would share data with Bartercard to gain market advantage are difficult to comprehend. Besides the warranties and penalties mentioned, no software company could build market share if they compromise the confidentiality of the data of their customers.
Me: I had heard rumblings about this more than a year and a half ago. How many providers offered their services to you in the selection process?
IRTA: Most of the software companies provided proposals. We also worked for months on a JV agreement with GETS in hopes of moving the software forward. We looked at all options over a long period of time – even some that we didn’t request proposals from were considered. The first time we talked to BC about the BPS technology plan was late last December.
Me: Dennis accuses IRTA of being lax on the issue of deficits. When did you release your guidance on deficits?
IRTA: The advisory memo was released on March 28, 2012. The IRTA Regulations Committee worked on the advisory and made the final recommendation to the board which voted to approve it. There was an extensive study done by a large accounting firm in Australia and a couple of the committee members have an accounting back ground and all have a long history in the barter industry.
The advisory makes a distinction between “System Deficits” and “Exchange Deficits” and addresses the need for adequate money supply to provide reasonable liquidity to satiate the purchase needs of exchange members. It does not recommend exchange deficits (actually warns of criminal implications) and further recommends that all exchanges have a bad debt reserve (or loan fund as it can be called) to offset system deficits. The maximum recommendations are there to increase understanding that an exchange is at risk of failure beyond those thresholds.
Me: Do you consider it the job of IRTA to police every one of its member’s books to make sure deficit guidelines are being followed? Do you think it is IRTA’s role to force people in to adhering to best practices? If so, where do you store your guns?
IRTA: It is really not possible. This is an unregulated industry (and most people would prefer to keep it that way) so anything IRTA recommends is only that, a recommendation. IRTA has found that being inclusive is the best route to encourage best practices. There have been a number of efforts to create standards and certification levels of membership that have not worked well. This remains an important goal of IRTA’s but we need more member and industry buy in. When we worked with the British Standards Institute on a proposed project, they also concluded that it will only work with wide scale participation from the industry at large.
Me: Have you had “widespread dissent” or “turmoil” or a “barrage of negative comments”?
IRTA: As stated earlier, we have had two calls and that was early on. Both with concerns about Bartercard as a competitor to them. One of them requested the board minutes that led to the decision, which we provided. We haven’t heard back since despite numerous follow up calls. **Update** On September 8th, an additional request for board minutes was requested and sent.
Me: Have you had a major exodus of members?
IRTA: None so far. According to Dennis Smith, we lost a potential member from Canada
because of his posts. The same person had been liking and commenting on Richard and Dennis’ Linked In posts for weeks before he contacted us about joining. He is also a GETS software user. It appeared to be disingenuous so we didn’t expect him to become a member. He was sent the applications and was responded to in the same way we would respond to any inquiry.
Me: Are you going to respond to the defamation lawsuit in the UK?
IRTA: First of all, a letter of representation from an attorney does not constitute a law suit. IRTA’s legal counsel will likely send a response letter. Smith’s claims that he has been defamed are rather ironic when you consider the level of defamation against IRTA and many of us individually (even if you just read the headlines). Interestingly, the attorney that sent the claim letter was originally referred by Bartercard to IRTA so that we could talk about legal issues in the UK related to Ormita. Dennis Smith was on the first call with the UK attorney with Ron. In all likelihood Dennis is using Bartercard trade credits that he earned via UC to pay this attorney. IRTA didn’t want members to have to pay for the Ormita report, so we paid Smith in UC to email The Ormita Report to barter industry recipients. Smith then requested that the UC credits he earned be transferred to Bartercard New Zealand.
So he hired a Bartercard member in London (that IRTA introduced him to) to claim that he has a defamation case against IRTA. Using a currency (BC) that he claims is a Ponzi scheme no less. Smith’s actions raise questions:
1) How credible are you to pass on a currency that you believe doesn’t have value and is a Ponzi scheme?
2) Why would anyone who believes the currency is a Ponzi scheme ask UC to transfer their balance to the very currency they claim is a Ponzi scheme?
3) Is it disingenuous, or a publicity stunt, to have an attorney in London make your claim when none of the parties reside there and they have NO jurisdiction?
Me: He insinuates that there are all sorts of back end deals with all sorts of people. Outline your process of software selection for us.
IRTA: The Global Board did their proper due diligence in examining the BC/BPS proposal in a prudent and professional manner. There were no back-door deals and it’s ludicrous to assert that there were.
Me: He also says UC is worthless. Are you experiencing any kind of price inflation in a general sense?
IRTA: The most common complaint regarding UC is that it’s too difficult to earn which is not a sign of an inflated currency.
Me: What say you about his accusations about board member deficits?
IRTA: No board members have individual accounts as claimed. As far as the credit lines of board member companies, there are currently 5 out of 13 that are not in the positive and there is only one that is in deficit beyond the issued credit line. The majority of it resulted from IRTA conferences in 2005, 2006 and 2007 when he was asked to be a platinum sponsor for each of those years. We don’t know what the plan was then to help them earn the UC to pay it off but he’s had difficulty being in a location with few close by trading partners. They are one of the largest, most successful companies in Europe, have had some strong sales historically and continually make offers. We also don’t have concern about the deficit because we expect them to be the key supplier (rather than a sponsor) for the next conference in Europe. It is NOT considered a bad debt.
Me: When do you anticipate your head rolling?
IRTA: For “heads to roll” there needs to be some inappropriate conduct somewhere. No such inappropriate conduct has occurred.
Me: How do you respond to the GETS audit?
IRTA: Much of the so-called GETS audit not surprisingly focuses on Bartercard’s UC accounts.
Bartercard was issued a special line of credit for the Bartercard/USA Recovery Program, whereby they wanted to give trade credit back to U.S. barter companies that were affected years earlier by the Bartercard USA bankruptcy. BC had no obligation to do it since the U.S. company that declared bankruptcy was a totally different entity with different ownership. The Board of IRTA viewed BC’s offer to pay 50% of the trade balances of a legally discharged in bankruptcy company as an extraordinary act of good will and a benefit to many IRTA and non-IRTA barter companies. The initial 20% disbursements were made almost two years ago. The BC/USA Recovery Program and credit extension were unanimously passed by the Board of Directors based on its faith in the goodwill and financial stability of Bartercard and its new management team.
Any trade risk UC might have had regarding negative Bartercard balances has been significantly mitigated by the successful BPS IPO. Bartercard/BPS are arguably the most financially strong barter organizations in the world. BC’s negative UC balances are not considered toxic unrecoverable debt as Mr. Logie suggests. Another Logie argument made about “toxic debt” in UC was based on a projection into the future of what the BC/Recovery Program could eventually pay out. The BC/UC/IRTA Recovery Program agreement states that the additional disbursements don’t get paid out until BC has made sufficient sales in UC to cover future distributions. Hence, there is in fact no debt risk for the future BC/USA pay-out of $210,755 as Mr. Logie alleges, since future pay-outs are conditioned upon BC sales, so as to mitigate UC’s overall exposure in the program.
Other allegations against Ron or the UC Committee are off-point, since the decisions made by both were well within their discretionary authority.
Mr. Logie further argues in his report that UC is hiding accounts, but a closer review of the facts shows the so-called hidden accounts are in collections or are house accounts, none of which are active trading accounts in UC. The house accounts (all of which are in order), are for staff and other obscure accounts opened over the years for convention speakers, convention printers, our attorney and accountant – ie., all accounts that DO NOT sell to normal UC members.
UC members have asked repeatedly that these types of accounts NOT BE listed on the active traders screen. It’s extremely confusing to see inactive accounts on the trading screen that members use to identify companies with UC balances to market their travel and other goods to.
The last page of Mr. Logie’s report states the UC “All Positive Balances” to be +1,742,735.81 and the “All Negative Balances” to be -1,742,735.82 – a difference of one penny. But, Mr. Logie argues that the BC alleged unrecoverable “toxic debt” has jeopardized the financial security of an otherwise balanced trading system. Again, there is nothing toxic about Bartercard’s UC debt – Bartercard is a large company with substantial offers out to high balance UC members and is in a very strong position to satisfy its UC debt.
There are a few accounts that could be written off after all collection attempts are exhausted. That decision will be made by the UC Committee at the appropriate time.
Lastly, Mr. Logie is not on the UC Committee that manages UC, nor is he an IRTA Global Board member. Nor does he have any right pursuant to his contract with UC to dictate UC policy. Mr. Logie is a software vendor that was retained to provide a software platform to UC, period.
1) Tyler – we had completed the answers to your questions when Dennis’ blog came to our attention (“IRTA’s IRTAcard – SK-Hype & Interviews”). Of course we were never interviewed for this and the introductory “transcript” of a conversation between us and Bartercard is a complete fabrication. He has since admitted it was a “joke”. A “joke” that is obviously intended to confuse as many people as possible in regards to its authenticity.
We believe that this kind of tactic is clear verification of a lack of credibility on the part of Dennis Smith and justification for our policy of not responding directly to his outlandish blogs.
2) On August 28, 2014 Mr. Logie from GETS gave UC 14 days notice that he would be shutting-down UC’s software due to the threat of a class-action suit from Mr. Smith, and the alleged findings in Logies so-called audit of UC. As of 7:00AM east coast time on September 12, 2014, Mr. Logie followed through with his threat and shut the UC system down.
UC’s attorney, Carl Steinbrenner has responded to Mr. Logie Friday morning, September 12, 2014 stating that UC no longer desired to be on the GETS platform, based on Mr. Logie’s deplorable conduct and erroneous audit report.
UC has transferred its members’ data to Bruce Kamm’s Virtual Barter platform successfully. His team has been working tirelessly to meet an almost impossible deadline. UC and IRTA thank Bruce Kamm, and his excellent work in helping preserve the continuity of UC trading for its members and the barter industry.
Me: Now that we’re all settled, I hope you all have a great time at the convention in Cancun.