October 18, 2021

Promises that didn’t pay off

Envirogear vowed to bring jobs and profits to Cortland, but failed to deliver

Cortland Standard file photo

Richard Malcolm stands in 1993 with Envirogear’s signature product, an extreme-environment sleeping bag meant to sell for nearly $700 — 30 years ago. The company promised, in return for public loans, to create dozens, then hundreds of jobs. It didn’t.

Richard Malcolm was a brilliant man. No one ever questioned that. A retired major from the Canadian Air Force, Malcom held a PhD in neurophysiology from McGill University; he trained as an astronaut but never went to space; and he developed a specialized cockpit instrument used in the SR-71 Blackbird spy plane.

No one ever questioned his intelligence, but they would later question his judgment. And years later, after everything collapsed, his business acumen, too, would be doubted — even by Malcolm himself.

But in the late 1980s, Malcolm and Envirogear — his cutting-edge sleeping bag manufacturing company — were seen in Cortland as a needed boost to the faltering local economy. Malcolm, who compared his startup to Apple computers in its early days, initially promised to create 40 jobs and eventually bring big profits to his investors.


The rise and fall of envirogear

The Cocoon4 was always a risk: an ultra-tech sleeping bag that could keep people warm to 45 below zero. Yet Envirogear and its founder, Richard Malcolm, saw so much potential.

Potential for sales, for growth, for manufacturing jobs in a community — Cortland — increasingly eager to keep what it had, and get more.

Nearly three decades later, all the city has to remember it is the need to write off hundreds of thousands of dollars in public loan as bad debt.

Here’s what happened.

TODAY: Richard Malcolm comes to Cortland with a dream and a promise for dozens of jobs.

Monday: The business evaporates. So do the jobs, the loans. And the dream.


Those promises never materialized. And when it was all over, more than $3 million in public and private funds had been spent, and the city of Cortland was out $390,000 in unpaid community development loans. Jobs were created, but no more than two dozen at the company’s height, and only a few hundred sleeping bags were ever made.

When the city Common Council voted May 19 to write off $774,000 in bad loans the city had made over the past three decades, it turned out that nearly half of that money had gone to Envirogear. Questions were raised about the loans, but neither the mayor, nor any of the aldermen, nor any of the city’s department heads, were in office when Envirogear was in business. To them, it was all ancient — and mostly forgotten — history.

A calculated risk

In the late 1980s, Cortland, once a thriving Rust Belt manufacturing center, was on the decline. Wickwire Brothers and Brockway Trucks were defunct, and Smith Corona, reeling from the personal computing revolution, was slowly but surely shipping its production jobs overseas to Singapore. The city was eager for something — anything — to replace what it had lost.

In April 1989, Malcolm, an energetic Canadian inventor with a thick dark beard and wild graying mad scientist hair, came to Cortland with a plan. His new company would crank out high-quality sleeping bags, but to get started, he needed about $900,000, most of which he hoped would come from state and federal loans.

Envirogear’s main product, the Cocoon 4, was an inflatable, outdoor, waterproof, goose-down insulated sleeping shelter that served as both tent and sleeping bag. Inflated, it kept the user warm at temperatures as low as -45 degrees. The most advanced version included an insulated blanket, an inflatable toe piece, a padded collar, an insulated pillow and a detachable canopy. The whole package rolled up into a 11-by-17-inch pack and weighed 9 1/2 pounds. A lighter, leaner threeseason version, the 4/SL, weighed 1 1/4 pounds less. These were high-end products designed for extreme environments. Malcolm sought to market them to military agencies, rescue workers, hunters and alpinists.

Photo provided by Victor Siegel

A promotional shot of the Cocoon4 sleeping bag, Envirogear’s signature product.

 

Malcolm needed the city’s help. He asked for $205,000 in community development loans — federal money administered by the state but directed to recipients by municipalities.

Martin J. Mack was mayor at the time. The city, he said, was struggling.

“The world was changing in the ‘80s,” Mack said. “Manufacturing was going to die.”

The loss of major employers didn’t just mean increased unemployment, it meant decreased city tax revenue. City officials were searching for ways to cut spending, increase revenue and attract new businesses, Mack said. Malcolm came at just the right time.

Todd R. McAdam/managing editor

Former Cortland mayor Martin Mack stands Thursday in the doorway of the former Envirogear, a high-tech sleeping bag manufacturer on Elm Street. In the 1980s and ’90s, the city lent the start-up hundreds of thousands of dollars, money that was never repaid and only recently written off as bad debt.

 

Mack was impressed. Malcolm was smart and talented, and he clearly had a superior product. Yet Envirogear was also a risk, which city officials recognized.

But because competition was fierce, Mack knew the city needed to act if it wanted to snag Envirogear.

“Municipalities would compete for what were essentially risky ventures,” he said. “So that made them (startup companies) a more valuable commodity than they maybe deserved.”

A chance meeting

Cortland wasn’t the only city trying to lure new businesses, but Malcom decided to check out Cortland because of Frank Neuperger, Envirogear’s senior vice president.

It was a fluke that Neuperger had even heard of Cortland. His mother owned a company that made machinery used to manufacture aluminum siding, and a Cortland company had bought one of these machines, which needed servicing. Neuperger’s mother asked him to fix the problem. Neuperger normally didn’t do repair jobs, but it was an emergency and his mom was asking, so he agreed, and in the spring of 1989, he headed south to Cortland.

“Had I not done that, Envirogear would not have happened,” he said. “So I look at it as my fault.”

While he was in Cortland, Neuperger was impressed with the aluminum siding company’s facilities. The owners had clearly invested a lot of money in the place, more than Neuperger was used to seeing in a small manufacturing facility. He asked the owners where they got the money.

Dick Teichman, they told him.

That was Richard Teichman Jr., the head of the county’s Business Development Corp. and Industrial Development Agency. When Neuperger had finished the repair, he went to see him.

Teichman locked on Envirogear like a tractor beam. The following week, Teichman and Margo Yager, president of Economic Development International, a Homer-based economic development group, flew to Oakville, Ontario, where Envirogear was initially based and where the first prototype Cocoon sleeping bags were made.

“He was a real hustler,” Neuperger said of Teichman, who is now 94 and lives in a retirement community in the Philadelphia suburbs. “This guy was a spectacular salesman.”

Within three weeks, Teichman and Yager had a line on all the funding sources. In April 1989, Malcolm was standing before the city Common Council, asking for a $200,000 loan.

The Common Council decided to take a chance on Envirogear, which also secured loans from the county IDA, as well as from similar entities elsewhere, including Broome County, and from local banks and private investors.

“We were just one pot of many pots of money that these companies used to set up,” Mack said.

Malcolm was backing the venture with his own funds. The city was taking a risk on Envirogear, Mack said, but it was one city officials felt was worth it.

Malcolm set up shop at the former Thompson boat factory at 127 Elm St., but he wasn’t there long before he learned that not all the financing would come through.

By September, Malcolm was back in the city council chambers, hat in hand. While the U.S. Department of Housing and Urban Development had signed off on a $167,750 loan, Malcolm failed to get about $300,000 from the state Regional Economic Development Partnership Program. Malcolm asked the council for an additional $40,000. He also asked Key Bank to add another $40,000 to the $190,000 Small Business Administration loan he’d already received. Some $180,000 Malcolm said Envirogear would provide itself.

Malcolm apparently got the money he was looking for. These problems were seen as just a minor glitch, instead of as a warning of more serious problems ahead.

No compromise

Neuperger was a fellow Canadian who started working for Malcolm as an intern in 1982. He believed in the new company, and he believed in the product. In 1989, he moved to Cortland with Envirogear, and he bought a house. But he didn’t even last to the end of the year.

It quickly became clear to Neuperger that Envirogear would not survive without making major changes to the Cocoon’s design. The hand-sewn prototype cost $5,000. Malcolm wanted to automate the process to bring the cost down. That’s why Neuperger was hired — to design the machinery.

Cortland Standard file photo

Envirogear employee Juanita Bush trims inflator sacks in July 1993. The sacks would be used with the company’s Cocoon4 sleeping bag, of which only a few hundred were ever sold.

 

Neuperger did what he was asked, but the machinery only did so much. The price came down, but the Cocoon was still really expensive. The prices would vary slightly in the early and mid-90s, but according to a 1991 write-up in the New York Times, the Cocoon 4 cost $676, and the 4/SL cost $560.

Neuperger argued that many of the Cocoon’s features were too expensive. They’d have to cut corners and use cheaper alternatives to bring down the price, he tried to tell Malcolm.

But Malcolm wouldn’t hear it. He wouldn’t compromise, and their friendship soured.

“He thought I was hostile and treated me that way,” Neuperger said. Malcolm basically told him to leave, “but he handled it very poorly,” he said.

When Neuperger left in the winter of 1989, Malcom hired a security guard to keep him off the property, and he initially refused to pay him severance, although Neuperger eventually got a severance package.

Deeply disappointed, Neuperger moved back to Canada and went to work designing 911 systems. He and Malcolm didn’t speak again for 15 years.

‘It just never happened’

Neuperger’s departure was the first major warning sign. On the outside, Envirogear looked to Mack like a struggling startup going through growing pains. He periodically dropped by to see how things were going. There was always a lot of activity, and Malcolm was always right in the middle of it, he said.

“He was committed personally,” Mack said. “So he wasn’t some guy hanging back in an office and just spending the money. He was up to his neck in it.”

Yet Neuperger said these early missteps were indicative of Malcolm’s business skills, or rather his lack of them.

Sandy Mudge was one of the first workers to join Envirogear. She stuck with it for three years, cutting out the material for the sleeping bags and running the machine that Neuperger designed. Mudge believed in the product, and she wanted to help the company succeed, but somewhere in the early 1990s, things began to come apart.

“It got to the point where they were running out of money,” she said.

One day, her paycheck bounced and so did everybody else’s. That was it for her. She quit.

But other people stuck around. Malcolm kept saying he was on the verge of getting a major contract with the Canadian military. In the meantime, his wealthy uncle would keep them afloat. “They were just holding onto that hope,” she said, “and it just never happened.”

A pattern

In the years that followed, a pattern would emerge: Malcolm would come before the Common Council and say he needed more money. He’d say that success was just around the corner, but he needed only a little boost to see the company through until he sealed the deal on a big contract. And every time he came back, he would promise to create jobs — only the numbers of jobs kept getting bigger.

At the end of 1990, he told the council he actually needed $1.5 million, not the $900,000 he had thought. The additional money was needed to fix a design flaw. Malcolm originally predicted he would create 40 jobs, but now he was saying he’d create 45 by the end of 1991. At the time, 22 people worked there, just near the peak of 23 workers which would be the most that Envirogear would ever employ.

But by the end of 1992, Malcolm was back before the Common Council, which called a special afternoon session just to vote on a loan to bail him out. This time, Malcolm said he needed a $250,000 community development loan, in addition to $150,000 he expected to receive from a private investor. If he didn’t get the money, he told them, Envirogear would collapse, and all that money that the city had previously loaned him would be lost.

Envirogear, it turned out, had been losing money for two years, and the staff had been slashed to six employees. Yet now Malcolm claimed that he would create 162 jobs in the next five years.

Mayor Ronald Walsh Jr., Mack’s successor, admitted the new loan was a risk, but “the possibility of creating over 100 jobs outweighed the downside, the possibility of the loan defaulting,” he said at the time.

The Common Council barely had a quorum at the special meeting — three aldermen were absent. All five aldermen present voted to approve the loan.

But there were conditions: Envirogear would get part of the loan, but to get the rest, the company had to sell 350 sleeping bags between January and May. Failing that — and it failed — Envirogear would have to get a letter of credit proving it had sold some of its products overseas before the May deadline. It would fail that condition, too.

Seven months later, Malcolm was back. The song remained the same: If Envirogear didn’t get money soon, the whole operation would fall apart. Envirogear hadn’t fulfilled the conditions, but he wanted the money anyway. Success was just around the corner.

He had failed to sell 350 sleeping bags but he now predicted he would sell 4,500 sleeping bags by the end of 1993, bringing in $2.69 million while spending $2.68 million.

To sum up, Malcolm was claiming the company could make a profit of $10,000 in a year’s time if it sold more than 10 times the number of products it had just failed to sell.

If you’re beginning to notice a pattern, so did city officials. Malcolm never got the money.

But neither did the city. Malcolm never repaid the $390,000 in community development loans he had already received, which stayed on the books until the city wrote them off in May.

Editor’s note: This story was updated to reflect that Neuperger eventually got a severance package.