Some were stoic. Some cried. Ebbett, he says, ran out of the building.
"The only thing I had left was the element of surprise," Warner says.
"And then I made a terrible decision. An unbelievable decision," he remembers. "[The controller and assistant controller] talked me into letting them stay an extra day."

Warner says he wanted to make sure the clients were taken care of. Now, he thinks the employees destroyed records.

At 68 years old and after 40 years in business, Ron Warner began shoveling the ashes out of the store again and started over.

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In 1986, while Ron and Carolyn Warner were running a gubernatorial campaign, Gerry Ebbett hired a designer named Kirk Guthrie, primarily to work on a commercial job.

Guthrie is a thin, pleasing man with a soft voice, the kind of overly unoffending guy you immediately assume makes his living in sales. He is the son of schoolteachers, a husband and a father of four children and the sole support of his family.

After the commercial job was finished, Guthrie stayed on at Warner's full-time.

By then, Ebbett had built a high-end client base that included most of the social register of Phoenix. As president and director of design, he assigned them to the designers at Warner's he felt would likely best suit them.

Between Ebbett's referrals and customers who came into the showroom because of word of mouth, Guthrie built his own client base in short order.

In the design industry, it's not uncommon during the course of a big job to arrange for something to be done at cost or sell a particularly expensive piece at little profit to keep a good client happy. But those sorts of things are generally done cautiously and at the discretion of the business.

Guthrie and his fellow employees maintain that they had to sell things like antiques off the books of Warner's because they couldn't get a 50 percent markup on them. And that it was that practice that kept the business coming in the door for Warner's.

It began, Guthrie says, in 1988, when he approached Ebbett and told him that he had a client who was doing a lot of business with Warner's and, to complete the job, he had to buy some high-end antiques.

"He [Gerry] said, 'You can just handle it yourself.' I interpreted that to mean that there was no way we were going to get close to 50 percent [markup needed to earn a commission]," Guthrie said.

The Warners allege that it was the start of a scheme that would eventually divert more than $2.5 million in business from the store, business for which Warner's continued to pay the overhead. They allege that Ebbett, Guthrie and other employees all either participated in or knew about the deal.

Guthrie and Ebbett both maintain that they had to run jobs on the side because cash was too tight at Warner's to front the jobs, and that Ron Warner knew what was going on. The rest of the accused maintain that they had nothing to do with it.

Warner doesn't buy it. Mostly, he says, because as the side work escalated in 1992, his employees did more business than Warner's did. It was, he says, an elaborate scheme to put Warner's out of business. And it almost worked.

These are not allegations of merely moonlighting--working a second job that competes with Warner's. They are those of business theft--taking payment directly from a customer, paying a supplier and keeping the profit. All directed from the showroom of Warner's Furniture and Interiors.

Starting somewhere around 1990, there was other work done off the books, as well.

In a business like Warner's, designers may place a window at a certain location so that the client has a particular view from the breakfast table, knock out a wall, prescribe new lighting, redo the plumbing, add wall texture or any number of other configurations.

Guthrie says that sometime about 1990, Ebbett handed down a mandate that there was to be no more construction work run through Warner's because it created cash-flow problems and the potential for liens filed against customers, who, in turn, could sue Warner's.

"Gerry said, absolutely, we don't run any of the construction services through the company," Guthrie says. So he decided to handle construction-type work for customers on his own.

Guthrie paid subcontractors for work in his clients' homes in Arizona and California and then was, in turn, paid by the clients.

"I made that part of my services that was not run through Warner's," he says.

He says he charged a fee for this work and, on occasion, received a commission from some of the subcontractors. In one instance in 1991, Wang Electric did more than $1,200 worth of work in Guthrie's home after he hired it to work on a remodeling job for a client.

But there are a few problems with that. To begin with, Guthrie did not have a contractor's license, which, according to the State Registrar of Contractors, is against the law.

And, regardless of what Guthrie was or wasn't told, Warner's did jobs with contractors and subcontractors as late as 1992.

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1 comments
stoett22
stoett22

It always warms my heart to see how a small business can develop into a million-dollar enterprise with sheer hard work and talent. But when that same business shatters, the feeling can be crushing. Still, this incident at Warner’s not only opened doors to queries, but also opened eyes to the dirty world of money-making.

 
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