November 29, 2021

Envirogear’s investors left holding the tab

Cortland Standard file photo

Richard Malcolm stands in 1996 with his signature product, the Cocoon4 sleeping bag. Only a few hundred were ever sold, although hundreds of thousands of dollars of public investment went into the company.

Richard Malcolm, a Canadian inventor, came to Cortland in 1989 with a vision: to make one of the best sleeping bags in the world, capable of weathering harsh, windy conditions of up to -45 degrees.

Malcolm promised that his company, Envirogear, would create dozens of jobs — in 1992, he projected as many as 162 new positions — for a city starved for the once-plentiful manufacturing work that was rapidly disappearing. He convinced the city and various local and regional agencies, as well as private investors, to loan him hundreds of thousands of dollars. Malcolm would owe the city $390,000 after Envirogear finally collapsed — loans that the city council wrote off in May.

George Leber, who came in as vice president after Sandy Mudge left, had been as enthusiastic about the Cocoon as Mudge was.

“It was exceptional,” Leber said. “There isn’t a cold weather product like it anywhere that I know of.”

It was Leber’s enthusiasm about the Cocoon that led him to meet Malcolm, which led to a job offer he wasn’t expecting.

Leber, a biologist by training, had retired as a high school and college teacher and was living in Cincinnatus when Malcolm convinced him to join Envirogear. Leber had no business experience, but he would spend the next two years with the company, serving as vice president in the mid-1990s.

Leber also invested $1,000 of his own money in Envirogear. Not only did he never see this money again, he basically did all the work he did there for free.

“There wasn’t any money to be had,” he said. “We didn’t get a plugged nickel out of that thing.”

He wasn’t the only one. Toward the end, no one was getting a regular paycheck.

“I know that that makes a lot of people look very, very foolish,” Leber said. “It was false. It was just not right at all. Dick Malcolm was not as straight a shooter as I thought he was.”

Malcolm, however, was not a con artist, he said, although his own description almost makes him sound like one. Malcolm wasn’t trying to rip people off, Leber insisted. Malcolm truly believed in what he was doing, “but he didn’t have the business sense to accomplish the things that I thought were going to happen.”

Hope and greed
Victor Siegel of Homer was one of the private investors. Envirogear, he said, “was very glamorous,” and Malcolm “an incredibly creative person.”

Like many other people, Siegel saw the product, and he saw Malcolm’s intelligence and charisma, and he, like Malcolm, predicted profits just around the corner.

But Siegel wound up losing all the money that he invested, too. His investments followed a similar trajectory that the city’s did — a pattern he characterizes as “essentially tossing good money after bad.”

Siegel would frequently stop by 127 Elm St. after work. While there was always a lot of activity, the promised results kept failing to materialize.

Perhaps the biggest blow was Malcolm’s failure to get a contract with the Canadian military, where he had contacts. The Canadian military definitely did evaluate the Cocoon, and a report on the Cocoon can still be found online.

But that report found the Cocoon required modification to be considered for purchase. Whether those modifications were ever made or met expectations no longer matters. The reality is the Canadian military never bought the sleeping bags.

Why did people keep investing in this company, after years of it failing to deliver? Siegel has a one word answer: Greed.

He doesn’t like admitting it, but he said he was deluded by the promise of what looked like easy money.

“When dollar signs are in front of your eyes, they blind you,” Siegel said. “And so people were blinded.”

As far as the city’s motivations, Richard Elliott, director of the county BDC/IDA during the 1990s, thinks it was out of an almost desperate need to attract new businesses.

“Cortland went through quite a change in the late ‘90s,” Elliott said. “They lost a lot of the traditional businesses that were there. … So I think people were looking for replacements for what they had lost. So you get a little optimistic and see only the positives, I guess.”

The fall of Envirogear
Incredibly, Malcolm hung in there. Envirogear’s involvement with the city would span two mayoral administrations — from Marty Mack, the then-youngest ever mayor to the then even younger Ronald Walsh Jr. It also outlasted entire generations of reporters, from Mike Mittelstadt to Margaret R. McHugh, to Trish Prospero, Jon Blackwell and Maria Korolov. The last bylined article about Envirogear in the Cortland Standard was published on Nov. 19, 1996, and written by Katie Hall — now Katie Keyser, the living and leisure editor.

In that article, Malcolm prophesied big things right around the corner, although the company had laid off nearly a dozen people in two years. The company was back to a skeleton crew, but he now said he’d create 110 jobs over the next three years.

Envirogear wouldn’t last much longer. But that was not the end.

Bad vibrations
Malcolm refused to give up. Instead, he started a new company, Pneugear, which picked up where Envirogear had left off. The only difference was that now he could only rely on the money of private investors, because he had already burned all the government sources he had failed to repay.

Malcolm, who had always been into Eastern religions, karma and reincarnation, got increasingly mystical.

According to Tara Emm, Malcolm’s daughter, her father became preoccupied with the law of attraction — the idea that by sending out positive thoughts he would bring in positive results, particularly to his business.

Emm thought her father was taking it to the brink of insanity. What she observed was a lot of people talking and brainstorming at 127 Elm St. while nothing of substance was being accomplished. A shaman was hanging around. Meanwhile, money kept getting spent — or wasted, she felt.

“It was run like hippies,” said Emm, who worked for Pneugear until its collapse. “It made no fricking sense at all.”

The only major change was the price of the Cocoon 4. In 2001, it was selling for $1,700.

Things got so bad that investors wrested control of the company from Malcolm, and put another man, Russ Darr, in charge.

‘Ahead of its time’
Pneugear collapsed in 2001. There were lawsuits; there were federal, state and local tax problems. It went on for years.

“We were basically starving because we weren’t getting money or anything,” Emm said. “As for income, there wasn’t any. I’m sorry. That’s the way it went. We were losing the house every other week.”

“For us it was a very trying time,” said Claire Malcolm, Richard Malcolm’s widow, who still defends her husband, saying he was the victim of political and personal betrayals. But she, too, acknowledges her husband made mistakes.

“I guess in retrospect he was not a very business-minded person,” she said. “It was tragic, because it was an incredible product. It was ahead of its time.”

‘A higher form of life’
In the mid-2000s, after Pneugear had collapsed, Neuperger and Malcolm finally patched things up. They let bygones be bygones.

Malcolm admitted he had never been cut out to be a businessman, something he wished he learned earlier in his life because this basic mistake had brought so much misery to himself and others.

“This is not my bag,” he told Neuperger. “I am not good at this.”

“He was super well-intentioned,” Neuperger said, “but it just didn’t work out.”

His old boss wasn’t a bad person, Neuperger said. In fact, Malcolm always tried to do what was right, even though, as a businessman, his decisions sometimes led him astray. Neuperger remembers talking early on to Malcolm about karma and reincarnation, and Malcolm telling him he didn’t want to accumulate bad karma so that he came back as a rat or a cockroach.

“I want to come back as a higher form of life,” Malcolm told him.

‘We’re out of that business’
Ultimately, what does the write-off of the loans to Envirogear mean for the city?

Not much. Those loans came out of a special account separate from the city’s general fund, so writing off that money won’t affect the city’s budget, or bond or credit rating, or the city’s property taxes, said Mack Cook, the city’s director of administration and finance.

But the bad loans did have an effect in the past, he said. Because those loans were not paid back, they were keeping a lock on money that could have been redirected to other recipients.

“It would limit the amount of reloaning that the city was able to do,” he said.

But in March 2019, the state rules on municipal revolving loan funds changed drastically, Cook said. For decades, municipalities could manage these funds and choose to re-allocate loan money as they saw fit. But the state put an end to that.

“We’re out of that business,” Cook said. “We closed up the revolving loan fund.”

City officials took so long getting around to writing off the bad loans because of the undeserved blame they would likely have to take, former Mayor Marty Mack said.

Every administration since his and Walsh’s wouldn’t have wanted to touch them, because they’d be the ones to take the heat, when they hadn’t been in office when the loans were secured, he said. There was no incentive to writing off the loans — quite the opposite — so settling the accounts was put off indefinitely.

‘The longest of long shots’
The collapse of Envirogear is the loss of what might have been — something that could have put Cortland back on the map after the loss of Brockway Trucks and Smith Corona.

“We could have been the sleeping bag capital of the world — if it had worked,” Cook said.

City officials also knew back in 1989 that Envirogear was a risk, yet that’s exactly what those community development loans were for, he said.

“The money is actually risked with the expectation that it’s not coming back,” Cook said. “Sometimes — not often — you get a win….You lose a lot, but you were supposed to lose all of them. It’s not that the city made mistakes. What this money was for was to take the longest of long shots.”

In the case of Envirogear, that long shot didn’t pay off.

“Sometimes it works,” Cook said. “Sometimes it don’t.”