were able to get the cash to turn out new lines every season.
Had Margolies thought about going to a factor to finance his jewelry manufacturing business?
Margolies had not. Factoring was not a particularly common practice in the jewelry business, though it was done. Besides, Candor Diamond was a small company without much of a growth record. It was doubtful if one of the major factors would jump at the chance to finance his accounts.
Donât be too sure, Oestericher said. He himself knew plenty about factoring. After all, his father had been one of the earliest jewelry merchants to go that way. Perhaps Margolies was right that one of the long-established jewelry factors might look the other way if he approached. But, Oestericher said, he knew of a factor who might just leap at the chance. John P. Maguire and Company, the factoring division of Irving Trust Company, had, for some years and with considerable success, financed garment firms. But it was anxious to spread itself out from that highly volatile industry into one that might be less seasonal and a little more secure. Garments were garments, and if a line flopped, the factor was left holding a lot of cloth and some clothes that nobody wanted, and it would be lucky if it could sell off for pennies on the dollar. But the jewelry business was something else again. If the earrings and bracelets and broaches and other trinkets didnât sell, there were always the diamonds and the gold and the other jewels used to make them. They didnât lose their value. They always could be sold, and they would bring plenty on the market and so would be a protection against major losses. Oestericher knew people at John P. Maguire, knew how anxious they were to get a foot in the door of a new market for their money. Would Margolies like an introduction? Or, better still, why didnât he have his Scarsdale bank, which held the second mortgage on his home, make the opening contacts and thus provide an element of stability and probity?
The more Margolies listened, the more he liked the whole idea. He and Oestericher were not, that day, merely talking about finding a new source of funds to support Candor Diamond and help it grow, of course. What they were talking about, and both men knew it, was a scheme to take John P. Maguire not for thousands but for millions.
Soon after that discussion, Margolies approached officers of Scarsdale National Bank, told them he had heard that John P. Maguire might be interested in factoring jewelry manufacturers. Since he personally didnât know anybody there, would the bank make the necessary introductions? Scarsdale National was more than happy to comply. Within a few weeks, Margolies was deep in discussions with Maguire.
On March 21, 1980, the negotiations were completed to everyoneâs satisfaction, and a contract was signed between Maguire and Margolies. Under the agreement, Maguire would advance Candor Diamond up to 85 percent of the sales price of its merchandise, the money to be transferred to Candorâs account electronically once Candor Diamond shipped its merchandise to its customers and received invoices that would then be forwarded to Maguire. In exchange, Margolies personally guaranteed his companyâs debts to Maguire, and Candor Diamond gave Maguire a lien on its entire inventory of diamonds, gold, and other valuable gems and merchandise. Further, all the income from Candor Diamondâs sales was assigned to Maguire. Candor Diamondâs customers were to be notified, by a sticker pasted on the invoices and bills, that the companyâs sales were factored and that all payments were now to be made not to Candor Diamond but directly to Maguire, were to be mailed when due, normally within thirty to ninety days, to a post office lock box maintained by Maguire.
There was nothing unusual about the agreement; it was the standard way that factoring worked. Maguire had no suspicion that anything out of the ordinary was
Had Margolies thought about going to a factor to finance his jewelry manufacturing business?
Margolies had not. Factoring was not a particularly common practice in the jewelry business, though it was done. Besides, Candor Diamond was a small company without much of a growth record. It was doubtful if one of the major factors would jump at the chance to finance his accounts.
Donât be too sure, Oestericher said. He himself knew plenty about factoring. After all, his father had been one of the earliest jewelry merchants to go that way. Perhaps Margolies was right that one of the long-established jewelry factors might look the other way if he approached. But, Oestericher said, he knew of a factor who might just leap at the chance. John P. Maguire and Company, the factoring division of Irving Trust Company, had, for some years and with considerable success, financed garment firms. But it was anxious to spread itself out from that highly volatile industry into one that might be less seasonal and a little more secure. Garments were garments, and if a line flopped, the factor was left holding a lot of cloth and some clothes that nobody wanted, and it would be lucky if it could sell off for pennies on the dollar. But the jewelry business was something else again. If the earrings and bracelets and broaches and other trinkets didnât sell, there were always the diamonds and the gold and the other jewels used to make them. They didnât lose their value. They always could be sold, and they would bring plenty on the market and so would be a protection against major losses. Oestericher knew people at John P. Maguire, knew how anxious they were to get a foot in the door of a new market for their money. Would Margolies like an introduction? Or, better still, why didnât he have his Scarsdale bank, which held the second mortgage on his home, make the opening contacts and thus provide an element of stability and probity?
The more Margolies listened, the more he liked the whole idea. He and Oestericher were not, that day, merely talking about finding a new source of funds to support Candor Diamond and help it grow, of course. What they were talking about, and both men knew it, was a scheme to take John P. Maguire not for thousands but for millions.
Soon after that discussion, Margolies approached officers of Scarsdale National Bank, told them he had heard that John P. Maguire might be interested in factoring jewelry manufacturers. Since he personally didnât know anybody there, would the bank make the necessary introductions? Scarsdale National was more than happy to comply. Within a few weeks, Margolies was deep in discussions with Maguire.
On March 21, 1980, the negotiations were completed to everyoneâs satisfaction, and a contract was signed between Maguire and Margolies. Under the agreement, Maguire would advance Candor Diamond up to 85 percent of the sales price of its merchandise, the money to be transferred to Candorâs account electronically once Candor Diamond shipped its merchandise to its customers and received invoices that would then be forwarded to Maguire. In exchange, Margolies personally guaranteed his companyâs debts to Maguire, and Candor Diamond gave Maguire a lien on its entire inventory of diamonds, gold, and other valuable gems and merchandise. Further, all the income from Candor Diamondâs sales was assigned to Maguire. Candor Diamondâs customers were to be notified, by a sticker pasted on the invoices and bills, that the companyâs sales were factored and that all payments were now to be made not to Candor Diamond but directly to Maguire, were to be mailed when due, normally within thirty to ninety days, to a post office lock box maintained by Maguire.
There was nothing unusual about the agreement; it was the standard way that factoring worked. Maguire had no suspicion that anything out of the ordinary was
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