Wednesday, May 15, 2013
The details of a dispute between Jackson mayoral candidate Jonathan Lee's family company, Mississippi Products Inc., and an MPI customer that Lee has refused to name is becoming more clear.
In late April, when information came to light about legal judgments against MPI, Lee starting backing away from his campaign-long claims about being a second-generation business owner and attributed the default judgments against MPI--four in all, with a fifth lawsuit pending--to a disagreement between his company, vendors and a former customer/contractor who had ordered the products through his company and then decided they didn't want them.
"Ironically, this has all kind of come to a culmination since I stepped away from my position as president," Lee told JFP editors in April, adding that he stepped down as president on Dec. 31, 2011. (State records indicate Lee helmed the company until October 2012). "But this has been an ongoing dispute and, because of that, there's very little I can say about it."
Lee provided a statement to the JFP indicating that MPI was caught in the middle of a three-way dispute between a local customer/contractor he refused to name and out-of-state vendors.
Sources close to multiple campaigns later told the Jackson Free Press the customer/contractor might be the University of Mississippi Medical Center. Documents obtained through a public-records request helped to begin piecing together a complicating puzzle linking MPI, UMMC and other companies.
In addition to a copy of the UMMC's contract with MPI, the hospital provided a list of payments to MPI over the past few years. Since fiscal year 2009, UMMC has paid MPI $1.9 million for various disposable products. The sums paid to MPI dropped off substantially in 2012, when UMMC bought $127,572.20 worth of goods from MPI compared to $463,661.61 in fiscal year 2011 and $952,850.95 in fiscal 2010. So far, in fiscal year-to-date, UMMC has paid out only $14,025.70 to MPI, records show.
Jack Mazurak, a UMMC spokesman, told the Jackson Free Press Monday afternoon that the hospital decided to allow the three-year contract between UMMC and MPI to expire in 2011. Mazurak said it was a "business decision" to allow the MPI contract to expire, but declined to provide specifics.
Mazurak added that the hospital was still looking into a JFP public-records request seeking information about whether the hospital ordered supplies from MPI without paying for them, leaving MPI responsible for the costs.
"To the best of my knowledge, we worked with Mississippi Products to buy out the stock that we had ordered when we were winding down the contract," Mazurak, adding that Lee was a "stellar" supplier and that UMMC continues to use MPI as a vendor, but not under its group-purchasing agreement.
Lee has staked his candidacy on his business background, but few people understand what MPI does or how the company makes its money. A certified minority- and veteran-owned company, MPI is a disposable-goods distributor and warehouser--a "middleman" between large institutions such as hospitals, government agencies, manufacturers and procurement clearinghouses known as group-purchasing organizations (GPOs).
Since 2008 UMMC has had a group-purchasing agreement with Dallas-based Novation LLC and University Health Consortium. Under the agreement, UMMC uses certain vendors under Novation's umbrella for specific merchandise--janitorial products from Georgia Pacific in the case of the 2008 contract provided to the JFP between UMMC, Novation and MPI.
The relationship between the companies is complicated, but Lee explained it in his endorsement interview with the Jackson Free Press in April:
"What manufacturers (such as the companies suing MPI) will do is that they will sell us goods at what's called an inter-dealer stock price for a contract company (such as UMMC), and that price is artificially high, OK? So let's just say a truckload of something may cost us $120,000. I turn around and sell it to my customer for $100,000," Lee told the JFP editorial board.
"I have to provide what's called a chargeback or sales tracing to prove that I sold it to the right person (meaning a contractor like UMMC). When I provide that documentation, they (the manufacturers) charge me back, or rebate me back, the money on the back end, once I can show that I sold it to the right person at the right price."
MPI owes what Lee said is approximately $200,000 to five companies, all of which are headquartered out of state, with one at least outside the country. In June 2012, Hinds County Judge Melvin Priester Sr. signed three default judgment orders against Mississippi Products Inc. for at least $123,296.71 to three vendors. Diversey Inc., has also sued MPI in Hinds County for $ $23,923.75. In its response, Mississippi Products denies the company owes Diversey.
In addition to UMMC, Mississippi agencies--including Mississippi State Hospital at Whitfield, Boswell Regional Center, Mississippi State Tax Commission (now the Department of Revenue), Mississippi Department of Finance and Administration and Mississippi Department of Human Services--have paid MPI $168,401.66 since 2003.
When pressed about the judgments, Lee added: "What happens when there's a contract dispute, without warning, is I can't sell the goods to the customer because they're not going to give me my back-end money."
What isn't clear is why MPI has no recourse to deal with unsold inventory from a variety of vendors, including Georgia Pacific, particularly if it's true that the contract with UMMC is the one that led ultimately to the default judgments. In March 2013, Georgia Pacific was granted an Order Allowing Examination of Judgment Debtor against MPI, enabling them to move forward with an audit of MPI's assets.
Despite multiple requests, Lee declined a followup interview with the Jackson Free Press.
UMMC's Mazurak also pointed out that UMMC and MPI are not suing one another, nor are there pending legal disputes between UMMC and group purchaser Novation.
Comment at jfp.ms. Read more about this dispute, and hear audio of Lee's initial response, at jfp.ms/jonathanlee.