SMS’s Cash Catastrophe: A Tale of Debt and Default

by Stan Fichtman, PoliticsHawaii.com

On Wednesday, September 25th, 2024, lawyers representing a company called Seamless Funding LLC filed suit against SMS Research and other defendants in the Supreme Court of Ontario County, New York.

Seamless files suit, it seems, now and then against any company that is declared in default of the loans that they issue.

The significance of this specific court filing is that it was against the company in Hawaii--specifically, SMS Research and Marketing Services and its owner, Timothy James Carson. Reports suggested that  Mr. Carson was a top-notch choice when he took over the business in 2021.

Now, it seems the company has fallen on hard times, and Carson took out a loan to bridge the funding gap the company was experiencing, starting in August of 2024.

According to the filing, Seamless and Carson signed a loan document back on August 22, 2024, to provide him and the firm $22,500 in funding, minus 10% for fees. The terms and conditions spelled out that within 77 days from signature, SMS would pay back the loan in full.

With interest, the payback amount totaled $33,727. That is where this loan stops looking normal to anyone.

Carson used the expected payment from contracts as security for the loan. He anticipated that the company would receive $223,000 by the end of the loan term, but the contracts linked to this amount were not specified in the loan paperwork.

Secondly, to get the funds he needed, Carson agreed to terms and conditions that make this loan look like it comes from a “lender of last resort.” Carson agreed to the loan with an interest rate of 528.62%.

The terms and conditions required SMS to make daily payments of $655 to service the loan. This means that a payment needed to be sent to Seamless every day to continue servicing the loan. An analysis of the lawsuit reveals that SMS made most of the payments, sending payments every day from August 22 to September 17. However, on September 18 and 19, the bank rejected the automatic withdrawal of payment, most likely due to insufficient funds, and all payments stopped at that point.

On the 25th of September, when the loan termination date arrived, the loan was declared in default. On the same day, a lawsuit was filed against Carson and SMS. According to the Proof of Service record, Seamless’ lawyer, Mr. Boris Yankovitch, sent the lawsuit via certified mail to SMS’s Bishop St. address and Carson’s home in Kaneohe.

By now, Seamless and their lawyers most likely have discovered that the company is not in business, and the mail returned to them, as they sent it on October 2, which was after this blogger was told that the company shut down.

Talking about a timeline, it seems that whatever happened to SMS, happened quickly. Could it be that a state entity that awarded one of the larger contracts with SMS decided not to pay out? Was it another entity, as SMS had contracts with, among others, the County of Maui, that chose not to pay? And why did Mr. Carson suddenly in August choose to get a loan from a lender of last resort with horrible terms based on a payout of over $200,000 that never happened?

However it happened, the situation was made all-too-real by at least one now-former employee, named William Grant, who posted on his Facebook page the following on September 27th, two days after the lawsuit from Seamless was filed.

(Read the comments and who acknowledged the post. Interesting people commenting).

And, no doubt, more details of this story will emerge now that through all this, SMS’s closure is now confirmed.

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SMS Vanishes: State Contracts in Limbo

by Stan Fichtman, PoliticsHawaii.com, Oct 12, 2024

With the first article on the status of SMS Research and Marketing Services out, this blogger started getting tips and ideas from others about where else to look for information about the company.

Specifically, its work with government entities.

Turns out, with a little research into state procurement, a couple of messages, and at least one phone call to sources, it turns out that SMS had several contracts awarded to it for the last few years, at least two of them in the millions.

Furthermore, some of those contracts are still active, according to the State Procurement office. One wonders if they are aware that the offices of SMS, upon visiting them on Friday, October 11th, found the nameplates off the doors, and no answer at the door. You can see the photo in the revised Thursday, October 10th article.

As to those contracts, Politics Hawaii did a quick search of contracts that the company has been awarded as of late. According to State Procurement, they have been awarded contracts by the departments of Transportation, Defense, Accounting and General Services, DBEDT (Business, Economic Development and Tourism), Human Services and Health.

The amounts of the contracts run from small to large. The smallest on the list Is a $14,387 study entitled “HDOT – 2022 Statewide Attitudes and Behaviors Survey”, to a $1.41 million contract for “Med-QUEST Timely Access Secret Shopper Services”.

And that is not the only million-dollar contract that SMS has with the state. In total, according to the data from Procurement, SMS has been awarded $4.58 million dollars over eight contracts awarded from 2021 to 2023.

List of contracts, organized by date from 2021-2024, of all awards to SMS, with amounts
PC: Downloaded database from the State Procurement Office, Hawaii.gov

So the question now becomes more focused as to the current situation at hand, that a company with a large value, and with their work with Maui and the Lahiana wildfire, high profile studies, that in the matter of a few days, the company has shuttered its doors?

Additionally, what will happen to the contracts that are still outstanding, and how will they be handled? Sources indicate that there is a rush to re-award the contracts to other entities. Understanding this process, redoing the contracts, and reinstating the work could take months to resolve. Furthermore, acquiring all the materials that were produced by SMS for state custody may also be a challenge.

The story continues. More to come as details unfold.

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UPDATE: DBEDT, HHFDC navigate transition following SMS collapse

BACKGROUND: SMS Research Out of Business

ILind: State’s premier survey research firm abruptly folds | i L i n d