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Axium Rode In on Outsourcing, and Out on Scandal

February 7, 2008
Related Topics: Human Resources Management Systems (HRMS/HRIS), Contingent Staffing, Outsourcing, Featured Article
The rise and fall of Axium International is a tale of one company that tried to capitalize on the growth of outsourcing and the management of staffing vendors but eventually collapsed in a bankruptcy laced with allegations of intrigue.

Axium International started out more than two decades ago as a payroll services company catering to Hollywood, where film and television production companies make extensive use of contract workers.

Over the years, Axium expanded beyond Hollywood and the narrow business of payroll services, adding Ensemble Workforce Management, a managed services provider. Ensemble helped client companies select and manage their growing roster of staffing service vendors. By 2005, Ensemble was reporting operations in 30 states and 16 countries.

In the 1990s, software developers came up with sophisticated programs able to streamline and enhance the management and selection of vendors. Called vendor management systems, these programs could rate vendors based on client criteria, track performance, handle payments from clients to vendors and perform a host of other functions through a centralized platform. One of the more successful vendor management system companies was Chimes Inc., a subsidiary of Computer Horizons Inc. of Mountain Lakes, New Jersey.

In October 2006, Axium purchased Chimes for $80 million with the help of a financing from Green Tree Asset Management, a New York hedge fund. Axium created a combined vendor management company called Ensemble Chimes Global that quickly gained recognition as one of the largest vendor management system providers in the world.

But by the end of 2006, Axium was in financial trouble, with clients grumbling about late payments. On January 9 the company abruptly filed for Chapter 7 bankruptcy in Los Angeles, and the remaining assets were sold for a fraction of their worth only a year earlier. On January 23, two weeks after Axium filed for bankruptcy, Ensemble Chimes was sold for $8.1 million to MPS Group, a staffing services company based in Jacksonville, Florida. On January 31, the remaining Axium payroll business was sold to Entertainment Partners for nearly $7.1 million.

The reasons behind the collapse remain unclear. Some speculation revolves around the Hollywood writers strike and the impact that the idling of entertainment workers had on Axium’s payroll services. Others have suggested that the acquisition of Chimes created too heavy a burden on Axium.

Green Tree contends that the company’s demise had more sinister roots.

Green Tree responded to the bankruptcy with a civil suit filed in federal court in Los Angeles in January that alleges fraud and theft by Axium’s owners. According to the Los Angeles Times, Green Tree alleges in the suit that it advanced Axium $130 million between 2004 and 2007, and that the company’s principals squandered some of the money on luxuries, including Rolls Royce and Aston Marin automobiles, vacations, gifts, political contributions and secret bank accounts.

Details of the bankruptcy and the related lawsuit have been swirling around the staffing industry, prompting worries about how client companies will view vendors in the future.

"This boils down to a few individuals doing things they shouldn’t have been doing," says Jason Posel, senior vice president of the Albany Group, a company that manages contingent worker services. "But I think it will have an impact on the industry. There will be repercussions."

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