Hook, Online, and Sinker

Minneapolis neighborhood honchos are betting on Tyrone Reed's dot-com dream. But is there an operator error?

Becky Olson remembers the moment her neighborhood organization, the Whittier Alliance, made its first concerted foray into the digital age. For years the group had been struggling to come up with ways to connect with area residents; surveys, newsletters, and community forums all had failed to reach more than the usual suspects. Then last summer, one of Olson's fellow volunteers happened to visit a public school in Wayzata, where he saw a touch-screen computer kiosk in the lobby. Wowed by the technology, he passed along the information to the Alliance board. In short order the group tracked down the company that had installed the machine: Community and Family Information Centers, Inc. (CFIC), a small, privately held Internet startup based in Bloomington.

CFIC's president and founder, Tyrone Reed, was quick to pitch the Whittier folks a deal. He would provide a kiosk for the neighborhood, along with Web-hosting, design, and technical-support services, all paid for with advertising dollars and some public funds. Whittier would get wired, Reed would make a profit--his proposal called for his firm to keep 85 percent of any revenues from the project--and everyone would march happily into the cyberfuture.

Volunteers in Whittier, and Minneapolis officials, were enthralled, and soon all the usual dot-com buzzwords were flying. The kiosk, along with as many as five desktop computers set up in public locations throughout the neighborhood, would at last provide residents with "equal access" to cyberspace, allowing them to tap into a flood of information from government, business and nonprofit organizations, along with gobs of data on jobs, housing, the arts, and so on.

Neighborhood Revitalization Program director Robert Miller says Reed's info kiosks could soon pop up all over Minneapolis
Craig Lassig
Neighborhood Revitalization Program director Robert Miller says Reed's info kiosks could soon pop up all over Minneapolis

With the enthusiastic backing of the city's Neighborhood Revitalization Program (NRP), the Alliance agreed to commit some $28,000 in NRP funds to the project. Olson, a self-described computer novice who now chairs the neighborhood's Kiosk Task Force, says she is particularly excited by the possibility of acquiring translation software to help make community information accessible to Whittier's non-English-speaking residents. "Whittier is leading the pack, doing something new," she gushes.

Olson hasn't been the only cheerleader. NRP director Robert Miller views what he dubs a "one-stop neighborhood information resource center" as an example of both cutting-edge public-private partnership and democracy in action. Whittier--a square bounded by Lake Street, Franklin Avenue, Lyndale Avenue, and I-35--has a relatively large population of immigrants and poor people, Miller points out, and presumably a below-average level of computer ownership. The kiosk project, he suggests, could help close the "digital divide" between cyberspace haves and have-nots.

Civic boosters in Hershey, Pennsylvania (a.k.a. Chocolate Town), were similarly excited in the mid-Nineties when Reed--then CEO of another dot-com venture, Interactive Media Technologies--blew into town with a similarly attractive proposal--a touch-screen kiosk to be installed in the local theme park, Hersheypark. Members of a business group called the Hershey Partnership fronted Interactive Media from $250 to $1,500 apiece to advertise on the kiosk, according to Tony Nestico, an attorney representing the Partnership. But the deal quickly soured, adds Partnership member Tom George: "Once he got his money, he disappeared and never produced anything. "Everybody involved was upset. Ten or twelve people lost money."

According to an affidavit filed by Reed in connection with a lawsuit the Partnership ultimately filed against him, the group deserved the blame for his venture's failure because they "implied everyone was excited to be on our kiosks....The end result was a drastic lack of participation and very few ad sales," he wrote, adding that the project cost Interactive Media some $50,000. A Pennsylvania judge failed to see things Reed's way and in 1997 slapped the company with an $8,000 judgment. Collection was turned over to an Eagan lawyer, David Hellmuth; he won't comment, except to note that so far his client has not been paid and that "we'll probably be pursing this matter again."

None of the kiosk boosters interviewed for this story had heard of the Hershey debacle. But the Whittier project has set off a small fracas of its own--one that began, fittingly, on the Net. On Friday, February 18 Brad Canham, editor of the Whittier Globe, posted a brief note questioning the deal on a neighborhood discussion list, Whittier Onelist. Canham says he had become disenchanted with the endeavor as he and Reed negotiated over his monthly newspaper's potential involvement with the Whittier Web site. He hoped CFIC would pay a nominal fee for any content provided by the Globe--maybe $100 a month--but Reed argued that instead, the paper should pay a setup fee for the privilege of being featured. Canham also considered subcontracting for Reed through another computer-kiosk maintenance firm run by him and his brother, but that deal was derailed as talks over the Globe's role heated up.

Soon, Canham says, he began to wonder about the other financial aspects of Reed's project--in particular CFIC's plan to keep the lion's share of any revenues. His post concluded with a two-word warning: "Buyer beware."

Tyrone Reed wasted no time in firing back: In a response posted past midnight that same day, he pointed out that Canham had erroneously pegged the Alliance and NRP contribution to the project at $50,000 rather than $28,000. But what surprised Canham and other list members was the tone of the post--a major departure from the upbeat rhetoric that had characterized Reed's previous public statements.

"This is very slanderous to me, as well as the Whittier executive board and my company," Reed continued. "Your telling people and implying to the board that I am not trustworthy to do business with is stepping over the line." Absent an immediate retraction, he added, "my attorney will be in touch with you Monday morning." The Globe's board of directors, he vowed, would be included "in any lawsuit and depositions." (Canham never did hear from any lawyers; he says Reed "has burned his bridges with me.")

When City Pages contacted him last week, Reed was happy to discuss the kiosk project, but he ended the interview when the subject of his past business dealings came up. On the subject of the Onelist spat, he said he regrets the exchange. "I just want to forget it and move on," he offered. "Basically, I just took it too personally. He didn't have his facts straight and he was asking people to beware of the project without any substantial information to back it up."

 

Canham may not have had anything but gut instinct to fuel his distrust. But the paper trail on Tyrone Reed suggests that his skepticism may have been well-placed. In addition to the Hershey case, Hennepin County District Court records list nine civil suits filed against Reed and his companies since 1979, most of them over unpaid debts.

Perhaps the most striking one involves Steven Durenberger, CFIC's marketing director for a few months in 1997. When he first went to work for the company, Durenberger says, he was impressed with Reed's gung-ho mentality and jovial manner. But the founder's persona didn't readily translate into financial success for Durenberger: At the time, he says, CFIC was concentrating its efforts on pitching its kiosks to suburban malls where, it was hoped, advertisers would embrace the technology. But, says Durenberger, he had trouble selling the concept; according to a lawsuit he later filed, Reed abruptly stopped paying his $300-a-week salary after about a month.

Frustrated, Durenberger quit. When efforts to collect his final paychecks failed, he says he led a posse of friends to the Eden Prairie Mall with the idea of confiscating a CFIC kiosk. By the time he got there, the machine was gone; so, in August 1998, he sued CFIC and Reed.

John Tackett, Durenberger's lawyer, says he called Reed in an effort to settle the matter--which, he points out, involved the relatively paltry sum of $1,200. According to the lawsuit, Reed responded by saying Durenberger "would never be able to collect from him as he knew how to avoid paying bills and debts and that he would simply declare bankruptcy." In September of 1998, a judge issued a summary judgment in Durenberger's favor.

Tackett says Reed has yet to pay a penny, and that by now, interest and penalties have increased the total debt to about $4,000. "The reason I remember this case," the attorney adds, "was Tyrone's brazen attitude. He just said: 'Go ahead and try, there's a lot of other creditors out there.'"

According to filings with U.S. Bankruptcy Court in Minneapolis, Reed does indeed know something about credit disputes. He and his wife tried to file for Chapter 13 three times in the course of the past decade. All those filings, however, were dismissed owing to opposition from creditors--including the Internal Revenue Service, which in a 1998 affidavit alleged that the Reeds had failed to file income-tax returns from 1992 through 1997. At the time, the IRS estimated the couple's federal tax debt at some $218,000.

The Minnesota Secretary of State's office, meanwhile, lists CFIC's registration as "not in good standing" because the company has not submitted required papers for the past three years. Reed's other company, Interactive Media Technologies, similarly failed to renew with the state and is listed as "inactive." Reed did not respond to City Pages' written questions about those matters, except to say that he'd "had a person who had embezzled a lot of money" and that he'd worked to clear up the resulting problems.

The NRP's Miller brushes off questions about Reed's business background. "I'm not going to say that Tyrone's past isn't a little weird," he offers. "But there's lots of businesspeople who are just as bad, if not worse, in some of their histories, who finally find what they're supposed to do in life and make something work."

 

On CFIC's home page, Reed touts his company as "the foremost authority on Internet-accessible touch-screen kiosks and community-specific web sites." His promotional literature makes expansive claims about the firm's successes: "Along with serving all 81 Minneapolis neighborhoods, we presently serve 23 west-metro communities including Wayzata, Minnetonka, Plymouth and 17 others." City Pages could not locate evidence that CFIC provides services to any Minneapolis neighborhoods. The second claim, Reed acknowledges, is based on the fact that people from 23 cities may find something useful on two Web sites his company has created: www.wayzata.net and www.mtka.net.

The two sites are nearly identical in design, with cookie-cutter art and sometimes dated links sprinkled among pages full of as yet unclaimed advertising banners. While Reed boasts that "our content is updated daily or sometimes as often as every minute," the "Community Announcements" link on mtka.net leads to a blurb on a charity bike ride held last June. Click on the "School Lunch Menu" icon, and up pops a notice that reads: "The file you have requested does not exist on this server."

None of this does much to impress Langdon Winner, a political-science professor at Rensselaer Polytechnic Institute in Troy, New York, who has written extensively on the intersection of democracy and technology. After a few clicks through wayzata.net, Winner chuckles, "This is the way community bulletin boards looked in the Eighties. It's very cold and sterile.

"The model here is that you are basically a consumer of information," he continues. "And that's one of the functions of network computing. But we're way beyond that now. You want to encourage people to be creative. The powerful possibilities of the Internet is that people will reach out and initiate action online."

Actually, under the Whittier kiosk proposal, residents won't see much of the Internet's possibilities, powerful or otherwise. Users of Reed's public-access terminals will be able to view hand-picked sites on the Net, but they won't be able to surf freely or use e-mail.

To Winner, that notion could defeat the very point of the project: "All I can do is express my shock that they would build a system that seems so closed and confining," he says. "It's wonderful and laudable to reach out to people who might not otherwise have access, but that they would do this with this model in the year 2000 is astonishing. This is basically a digital billboard, and it's entirely possible that it won't even be welcome. Even people who don't have computers already know enough [to understand] that they won't be getting the real McCoy."

According to the NRP's Miller, the decision to go with a closed system in Whittier was based on a simple concern. "As we talked about this, we realized we did not want to get into a situation where kids are going to come here and surf every pornographic site on the Web," he explains. But that argument doesn't satisfy Winner, who notes that porn filters, albeit controversial, are readily available. "While there has to be some parental and community oversight," he contends, "you don't do young people a favor by being overly paternalistic."

Philosophical disputes aside, Miller says, Reed's offer seems like a win-win proposition for the neighborhood. CFIC's investment will be "significantly" higher than the $28,000 Whittier is slated to pitch in, he maintains, adding that CFIC has already purchased a number of expensive software packages for the kiosk. "This is not your typical vendor relationship," he argues. "This isn't a contract where we're going to pay the cost of the project, whatever cost overruns occur. Tyrone's taking a huge risk, and finding someone who's willing to take a risk is difficult."

Miller also believes that once Whittier is online, the project will catch on throughout the city. Already, he points out, CFIC has plans for a kiosk in the Windom neighborhood. (That kiosk, according to Miller, is not slated to receive any public money, but instead will be financed exclusively by CFIC.)

Reed says he hopes to recoup his investments, which he pegs in the "tens of thousands," by selling advertising. He says he hopes to have the Whittier kiosk up and running by March 30 so it can be shown off at the annual meeting of the Whittier Alliance--and, he points out, to date he has received "not a penny" of public money. Sales have been good, he reports, with "10 or 12 sponsors" already committed.

Steven Durenberger, the former CFIC marketing director, takes a dimmer view. "Bad things just happen sometimes," he says. "People go through tough times. But after a while, when you see a pattern, you've got to wonder."

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