The sudden closing of Craftworks stores throughout the United States this past summer left many artists owed thousands of dollars from sales of their work. Some additionally lost merchandise that was trashed or locked up and irretrievable in the stores.

At least 100 different craft artists from the United States and Canada are known to have had their work in the Craftworks retail sites, paying rent as well as commission for merchandise that was sold in the stores. Reports of 400 or more such artists could not be confirmed.

The company was responsible for staffing the stores and selling the artists’ work, maintaining records and paying taxes. Each month, craft artists were supposed to receive a check for the proceeds of sales of their work.

According to a statement on the company’s Web site, as of Aug 15, all 17 Craftworks stores were closed. The store in Tilton, N.H., was the first to close on June 18. The last store, located in Rehoboth, Del., closed on Aug. 15.

The Web site shut down in August but is now partially online again. However, none of the links on the site are operable and no one answers at the telephone numbers listed for contacting the company. The e-mail link was also inoperable as of Oct. 11.

Attempts to reach Craftworks owner and CEO Michael Daniels by telephone at his home in Montgomery County, Md., or his known places of business while preparing this story were unsuccessful. Until Sept. 13, Daniels’ voicemail message at his home number was still updated daily; however, the machine has since been disconnected.

Artists say that they began noticing problems with Craftworks in late 2001 and early 2002. Many related conversations from that time in which Daniels reassured them about the business. And the company newsletter had glowing plans for future growth from Daniels as late as April and May 2002.

“Our locations continue to provide crafters with some of the strongest sales figures in the business,” stated Daniels in April. “We have already witnessed a great improvement to our projected bottom line and we feel confident that our diligence will only improve Craftworks in the foreseeable future.”

Bounced checks alert crafters to trouble

Cousins Ann Kush and Lori Allen of Joshua’s Angels and Treasures in Jonestown, Pa., say they sold a line of wire angels in Craftworks stores. When their checks started bouncing in February, they called Daniels.

“The first time, he told us that he was changing banks and that is why the check bounced,” says Kush. “The next time it was a check from the new bank that bounced and he said there should be sufficient funds. I called the bank every day until there were funds in the account and then I drove two-and-a-half hours to collect the money.”

Kush was able to retrieve her remaining inventory when the stores closed, but believes she and her cousin are still owed about $4,000. “I feel burned from the experience,” she says.

Tom Brewer of Homespun Treasures in DuBois, Pa., says his checks from Craftworks initially began coming four or five weeks later than promised, but in March 2002, the checks started bouncing. Brewer says that when he called the company he was told that Craftworks was having computer problems and that the problem was being fixed.

Legal action begins

Gary W. Taylor of Country Home Store, based in Alabama, says three theft-by-deception warrants were issued against Daniels by the Baldwin (Ala.) County Sheriff’s Department after Taylor filed criminal complaints about “bad checks” and other money he was owed by Craftworks.

In a May 16, 2002, letter to Craftworks’ Chief Financial Officer Gary Endler, Taylor said the company was doing great harm to crafters and Taylor’s only recourse seemed to be criminal prosecution. “We have tried everything we could think of to get you to honor your contracts and checks,” wrote Taylor. “All we have received in return for our good faith is lies and more lies.”

In an e-mail to Taylor on May 17, Endler denied knowing that there was little or no money left in Craftworks’ bank accounts but stated “all parties knew [in 2001 that] cash flow was very tight and we were pursuing additional investors.”

Shortly after this exchange in May, Sgt. James Stallworth of the Baldwin County Sheriff’s Office says he was told Endler had resigned as CFO for Craftworks.

In addition to sums totaling almost $9,700 for net sales, NSF (not-sufficient-funds) fees, UPS fees incurred in attempts to recover merchandise, fax fees and lost security deposits for the Craftworks store in Foley, Ala., Taylor told the Baldwin County officials that he also was owed $2,555 in lost merchandise and displays that were in the Alabama store at the time of closure.

Stallworth says Daniels promised to pay Taylor the money he was owed. “I got a call from Daniels this morning,” Stallworth told Taylor in an e-mail on May 20, “wanting to know where to bring the money that … he owes you. I told him to have it sent to me.”

According to Stallworth, Daniels never delivered the money as promised. “Not only did you lie to me, but failed to return my calls,” stated Stallworth to Daniels in a letter dated June 14, 2002. “I have … been advised that your actions demonstrate that you knowingly and intentionally deprived the Taylors of their property.”

As of Oct. 9, the arrest warrants for Daniels were still outstanding in Alabama.

Employees, landlords first to learn of closings

Cheryl Bybee, a craft artist who makes novelty ties for men in Spanish Fork, Utah, says that she was told by some store employees, including those in Potomac Mills, Va., that they learned about the closings when local sheriffs arrived and served notices that the stores were to be shut and locked up immediately.

David Ober, vice president of leasing for the Outlets of Hershey in Pennsylvania, would only say that the Craftworks store at that location was “in direct default of their lease and we took action as required by law.”

Belz Enterprises, which leased to Craftworks in Pigeon Forge, Tenn., says that his company was not permitted to comment in what was “an ongoing case.”

On July 8, 2002, the North Carolina Department of Revenue seized the assets, including artists’ work still in the inventory, of the store formerly in a Smithfield (N.C.) mall.

According to the Johnston County (N.C.) Police Department, Craftworks was evicted from the Smithfield site for failure to pay the North Carolina sales and use tax. A sheriff’s sale was scheduled to take place on Oct. 21 and Johnston County officials say that as of Oct. 1, 100 vendors at that store had been notified about the seizure but only 35 had retrieved their property.

Other locations, such as the one in Tilton, N.H., closed when employees walked out. Sandy Shene, then manager at the Tilton store, says that she and other store employees never received their last week’s pay.

Carol Polizzano, former store manager at the Lahaska, Pa., location says she did not receive her last week’s pay or her vacation pay. Some employees also reported that money that was in their company 401K plans no longer appears to be there.

Marie Virtanen of The Namesakes Collection in Plano, Texas, who had her crafts in 17 Craftworks stores says, “Craftworks has really hurt a lot of people financially.”

Virtanen, who believes she is owed about $10,000 from Craftworks, says she had dinner in the spring of 2002 with Daniels and his wife and there was never mention of financial trouble.

“When my checks bounced in April, he said that he was going to get financial backing from an investor in New York City,” says Virtanen.
Chris Naughton of Mary’s Bears L.L.C. in St. Catherines, Ontario, says Daniels and Craftworks owe the company, operated by Naughton and his mother, in excess of $40,000. “I, too, have my bounced checks, and I have heard my share of lies from him,” says Naughton. “We had to personally go and collect our stuff as [Daniels] wouldn’t send them back to us or let UPS pick them up — and continued to sell our stuff after we told him not to.”

Before the closings, Mary Naughton says she went to the store in Lancaster, Pa., after that site reported a “suspiciously high shrinkage rate,” a term used to describe shoplifting. “I counted a line of keychains displayed near the cash register,” she explains. “When I went back six days later, 28 keychains were missing and none of them were listed in the [sales] books. Mary Naughton says the store manager told her she thought there were more sales [than reported].”

Chris Naughton says he considered, but later abandoned, plans for “taking over” Craftworks’ operations and would have worked out payment arrangements with crafters.

Another potential bailout for Craftworks came and went in 2001. Jim Miller of J & J Music Boxes in Port St. Lucie, Fla., says he was a vendor with Craftworks when they originally opened in 1994. “I was invited to be an investor in December 2000,” Miller says, “but by March 2001, I had not only decided not to invest, I reduced my inventory in the stores.”

Miller says he found out Craftworks was having problems in 2000 when J & J was owed over $40,000. “I had to take legal action and settled for $31,000,” Miller says. His company subsequently was never paid for sales in December 2001 nor any sales in 2002, which total more than $6,000.

Miller believes Daniels was a “money-maker” who just got caught in the country’s economic downturn. “In the late 1990s the economy was great,” says Miller. “When the bubble burst, Daniels’ got caught at the top of the bubble because the Craftworks company was a business built on the crafter’s money, and not built on their own product.”

Retrieving artist’s work from inventory

Some artisans lost — or almost lost — their work that was part of inventory stocked in the stores. Brewer, who had his work in many of the Craftworks’ locations, says that his craft works, “ended up in dumpsters when sheriffs came to close stores down.”

Bybee says former Craftworks employees retrieved her work from closed sites. Employees at the Tilton store say they started packing up merchandise to return to craft artists after receiving a memo from Daniels in June telling them all but five of the Craftworks stores would be closing within 10 days.

Brewer says he is compiling a list of people who are owed money by the Craftworks company. As of Sept. 16, he had more than 100 statements from artists who claim they are owed amounts totaling more than $700,000. Brewer hopes to file a class action suit “holding Daniels accountable for what he has done.”

According to information provided on the company Web site, Craftworks was founded in 1994 and had stores primarily in outlet malls on the Eastern Seaboard and in Alabama and Tennessee.

In addition to the stores already mentioned, Craftworks sites at the time of recent closings included Westbrook, Conn., St. Augustine, Fla., Queenstown, Md., Riverhead, N.Y., Gettysburg and Tannersville, both in Pennsylvania, Hilton Head and Myrtle Beach, both in South Carolina, and Potomac Mills, Va.

Company literature described Craftworks, incorporated under the name Artisans Choice L.L.C. and headquartered in Rockville, Md., as “one of the best craft distributors on the East Coast.”

Some people are trying to pick up the pieces from the Craftworks closings. A representative from the Tanger Outlet stores says that a Cape Cod Crafters store opened in October in the former Craftworks location in Riverhead on Long Island, N.Y.

According to Chris Naughton, seven former Craftworks locations could be re-opened under new owners in the next year.

“Cape Cod Crafters picked up the Riverhead location,” says Naughton. “This was the best location Craftworks had. They also might be picking up another one or two locations — Gettysburg and Tilton have been mentioned. And Jolene Fuller of LC Crafters has opened up the Lancaster store.”

Naughton has opened three stores selling crafts in former Craftworks locations in Hershey, Lahaska and Pigeon Forge under the name of Country Crafters, a new company based in Masschusetts. Three former Craftworks managers, including Shene and Polizzano, are now working for Country Crafters.

Naughton says that Country Crafters is looking for artisans to sell through their retail sites. Craft artists can contact them at www.countrycrafters.net.