Axium / Chimes Files Bankruptcy

Axium / Ensemble / Chimes (The largest VMS player) files bankruptcy.

January 8th, Axium International, Inc. who is the parent company of Chimes Ensemble Group filed chapter 7 bankruptcy which has shaken the contract & contingent staffing industry.

Chimes clients included major players such as UnitedHealth Group, GM, Toyota Motor Company, Ford, Perot Systems, Morgan Stanley, Kaiser Permanente, AT&T, Bell South and many more are now scrambling to either find a replacement MSP/VMS or to bring their contract workforce management back inside the company – which is a daunting task. 

Many of the staffing vendors have been told that they won’t get paid for most of November and December 2007’s billable time – which leaves firms (and their consultants) in a really bad situation, not to mention the companies who have outsourced their entire contingent workforce management to Chimes.

This was a huge surprise to us in the staffing industry – and even to many of the Chimes employees who we work with everyday at major client accounts. Axium purchased Chimes from Computer Horizons in February of 2007 – so it hasn’t even been a year since the acquisition, which adds to the confusion, especially the inflated price of $80 million which had most of us in the industry scratching our heads. 

There is some speculation that the writers strike has a role to play in the downfall since Axium was a major player in payrolling the TV/movie industry which has all but been shut down since the beginning of the strike, however, the majority of people close to the business said it was mainly because of poor management and a complete failure of the integration of the Chimes business into the acquiring company, and a very paranoid set of lenders who jumped to swipe the bank accounts shutting the company down.

Most importantly, these companies will have to figure out how they’ll regain the confidence of their staffing suppliers, who are most likely not going to be happy losing 1-2 months of billable revenues (especially after they’ve been margin squeezed already), which could result in a large volume of contractors leaving their accounts with the pending loss of pay and future instability.

Some companies have reportedly converted the Chimes on-site program teams to their own full time employees – and are re-establishing direct vendor relationships with their vendors to return to their pre-outsourced state of internal and manual management.

Some staffing firms are excited about the collapse, with the prospect of working directly with their client managers again – and not having to deal with what they called bottleneck of the MSP/VMS program to fill contract positions, however, their excitement is tempered with trying to isolate the damage they may have suffered with any consultants currently engaged in the accounts.

For companies that are seeking VMS/MSP types of solutions – this will surely add another dimension to what strategy they select, and how they build their CWM strategy going forward. 

CONVERSATION:

• Does your company current work with any MSP/VMS partners?

• How does this affect your relationship with them?
• Where you considering an MSP/VMS in 2008?  (how would this effect your thinking?)

News Links:

LA Times

Staffing Industry Analysts

Comments

[Retroactively Unemployed.]

Well i think many former Chimes, ECG employees are finding out today that we didn't get paid.
What do we do? I'm owed 3 weeks worth of pay. Lot's of firms are offering to pick up my contract ongoing.
But am i really just SOL for last months hours.
I can't claim unemployment retroactively can I?
Anyone know what to do?

[robin c]

Another big question for all of the suppliers to chimes is whether they (the suppliers) can legally sign a direct contract with the client or another VMS - as the bankruptcy lawyers tell me that the existing supplier contracts with chimes remain intact - despite the company being in bankruptcy. So the suppliers are in a real squeeze. Anyone else getting this legal advice?

[Rich Wolfgang]

I would think that Chimes has violated their contract with most of their clients. The lesson learned would be to include a termination clause that covers catastrophic events like Chapter 7. The contract should also include a statement such as "...will comply with all state, federal and local laws, rules and regulations which govern or relate to Client's business..." so if they break the law the contract can be terminated.

[Chimes Vendor]

Our clients have offered us a six month agreement directly with them as so many have consultants/contractors still on board. Our clients are really working with us throughout the bankruptcy issues. Our clients however have been advised not to pay vendors for the period when Chimes filed Chapter 7.

[Staffing Firm Owner]

I have heard from another source (unverified) that $170M is ultimately at stake. WHERE IS THE MONEY? Someone should go to jail if end clients paid money and it wasn't sent to the supplying firms - that is theft - it is that simple. I haven't seen a VMS/single biller/payer yet that didn't ultimately rip off the supplying firm somehow.

[Amazed]

That money should have been in an escrow account and not available for cleaning out. Either the clients of Chimes set up very bad contracts or it may very well have been theft and the money will be returned and people prosecuted. Any VMS that co-mingles client money with thier own should not be in business.

[Steve]

My advice to everyone involved is get a good bankruptcy attorney. I'm not an attorney but I have gone through this before. One of my clients went bankrupt.

There are things about bankruptcy you need to be aware of and it's very important that you are filing your claims with the court before deadlines are missed. Otherwise you miss any opportunity of getting funds, if any, that are left.