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That same month, SED’s board of directors held a special board meeting and agreed to hire Larry Ayers, a former CFO at the company, as a consultant to help close out the 2005 fiscal year books. Minutes of the meeting show that Mark Diamond “strongly disagreed and pointed out several financial mishaps that had occurred previously under Mr. Ayers’ watch.”
Allegations regarding Ayers’ previous tenure at SED were outlined in an Oct. 30, 2002, letter to the board from Michael Levine, Ayers’ replacement as CFO, which states that, under Ayers, SED’s accounting and finance department was “out of control and morale was terrible.”
Levine’s letter states that SED also was illegally doing business in California at that time because its status as an active corporation in California had been revoked. In addition, the letter states there were “significant misclassified balance sheet amounts including liabilities to state and federal tax authorities, and no control over Form 8300 process with more than $1 million outstanding, causing constant fear that the IRS would demand penalties and interest and potentially put someone in jail.” Ayers could not be reached for comment.
At the special board meeting, board member Melvyn Cohen asked Mark Diamond if he would “risk being terminated as CEO by not signing off on the year-end financials if Mr. Ayers were hired,” according to minutes from the meeting.
On June 13, 2005, Ayers was hired as a special financial consultant, and Cohen asked that a special board meeting be scheduled to remove Mark Diamond as CEO, according to the minutes. Cohen said the board was “tired of the ‘aggravation’ of having to deal with the constant animosity and dissension between him and the chairman [Jeanie Diamond],” according to the minutes of the meeting.
STRAINED RELATIONSHIPS
The Diamond family has long been synonymous with SED. Jerry and Jeanie Diamond co-founded the company in 1980. Mark joined in 1987. He gave up his last semester of college to help his father break into the computer products distribution business and rose through the ranks. “Work was a place that used to bring a lot of personal and professional enjoyment. It’s not every person that can go to work and see their dad every day.” Diamond told CRN last week.
Mark said he and his mother had a tenuous relationship for several years, but it deteriorated more quickly after Jerry Diamond shot himself with a .357 Magnum in the basement of his large home on the Chattahoochee River.
How exactly did it get this way? What created such spite between a mother and her only son? Former board members and employees offered some possible answers.
“She is the personification of a controlling individual,” Cary Rosenthal, a former SED board member for more than a decade and longtime friend of Jerry Diamond, said of Jeanie Diamond. “Mark has more education, more sophistication than she does. He knows the computer and electronics industries inside and out. From a business perspective, a problem between them could have evolved from her viewing his growth and sophistication as faster than some others in the organization.”
Rosenthal said Jeanie asked him to resign from the board after he would not support her request to receive $10 million from the key-man policy.
Former employees paint a picture of Jeanie Diamond as a domineering matriarch who could be your best friend or your worst enemy. For example, several solution providers and former SED employees only agreed to speak to CRN off the record for fear of reprisal from SED or Jeanie Diamond, including those now employed outside of the close-knit high-tech community of metro Atlanta.
“She doesn’t wear just her pants, she wears everybody’s pants,” said one former employee. “She was very, very, very dominating. If she didn’t like you, you were out, regardless of whether Jerry loved you. It was her way or no way. There were people she would stop talking to for years over absolutely nothing. If she passed you in the hallway, she would not even look your way or acknowledge you were alive.”
Meanwhile, Jerry Diamond was the exact opposite, said former employees. “Jerry didn’t know a stranger,” said a former employee. “He had his arms open to everyone. He always gave people a hug, always had a smile on his face and was full of energy.”
The couple formed a good-cop, bad-cop team that former employees say helped foster a fiercely loyal but competitive work environment. But then revenue started to falter (see chart). And, some former employees said, this was aggravated by family and friends being promoted over more competent employees not in the family’s inner circle.
SED would have been better off bringing in outside management to help grow the company, said Mark Flaxer, former vice president of marketing at SED, who left the company in 1998. Flaxer worked there for eight years before leaving to start his own audio/video/security company, AdTech Custom Solutions, Alpharetta, Ga. “It’s difficult for billion-dollar companies to grow using the same model they took to get to that level in the first place,” Flaxer said. “Look at what Steve Raymund did with Tech Data. That was a family-run business, but he went out and hired professional managers from other distributors or manufacturers and grew that business dramatically.
“SED was a great place to work. It was a lot of fun building that company,” said Flaxer. “But if there was anything they could have done differently, it was bring in professional businesspeople to manage the company. But when it’s your baby, it’s hard to give that up.”
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