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Exergy leaves riders, races reeling from failed sponsorship commitments

By:
Pat Malach
Published:
November 29, 2012, 18:08 GMT,
Updated:
November 29, 2012, 18:11 GMT
Edition:
Second Edition Cycling News, Thursday, November 29, 2012
Matthew Cooke (Exergy) on his way to winning stage 3 on Mont-Mégantic

Matthew Cooke (Exergy) on his way to winning stage 3 on Mont-Mégantic

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Sam Johnson was taken aback Tuesday night when a friend called to console him. Problem was, Johnson, who turned pro two years ago with the Team Exergy UCI Continental program, had no idea what the person on the other end of the line was talking about.

"It was pretty rough," Johnson said of the phone call. "I was hanging out with some friends and I got a call from another cyclist friend of mine offering sympathy, saying, 'Man I'm so sorry.' And I'm like, 'For what? What are you talking about?' He says, 'You didn't read the article?'"

Johnson immediately jumped online and started refreshing the website where he was told he could find the relevant news, but nothing immediately popped up.

"At that point he basically just bows out of the conversation and tells me to call him when I needed to," Johnson said. "So I find the article and read it. And that's how I found out."

What Johnson found out was news that Boise-based Exergy Development Group CEO James Carkulis had issued a late-night statement saying the company would not renew its title sponsorship of the team it had supported for the past three seasons, citing the recent doping scandals in cycling as the main reason for the his last-minute decision to withdraw.

The news will effectively end the professional team managed by Escalera Racing, whose owner Remi McManus assured Cyclingnews just last week that the team would return next season. McManus could not be reached for comment this week.

Delinquent sponsorship payments plague energy company

The bad news didn't end with just the demise of the men's pro road team. Following almost immediately on the heels of Tuesday night's statement, organizers of February's UCI Cyclo-cross World Championships in Louisville, Kentucky, announced Wednesday that they were terminating their sponsorship deal with the Exergy Group after the company fell more than $250,000 behind on payments, with another $100,000 quickly coming due.

Multiple race promoters and vendors throughout the US had already complained earlier this year that the Exergy Development Group had failed to meet sponsorship obligations to their events, including the US Gran Prix of Cyclocross (USGP), which nearly canceled its 2012 series before alternate sponsors stepped in to rescue the event. Exergy had been title sponsor of the 2011 series.

Besides the men's team and the USGP, Exergy Development Group also sponsored the women's Exergy-Twenty12 team, this year's inaugural women's UCI stage race in Idaho, the 2012 Nature Valley Grand Prix sprinter's jersey and the most aggressive rider jerseys for Medalist Sports-run Tour of California and Tour of Utah. The company was also listed as a Founding Partner, the highest level of sponsorship, for the 2012 USA Pro Challenge in Colorado, also run by Medalist Sports, and it sponsored the race's yellow jersey.

Exergy is one of USA Cycling's sponsors as well. Sean Petty, USAC's chief operating officer, confirmed Wednesday that Exergy had not submitted an application for a UCI license and that it had not paid its sponsorship obligation to USAC for 2012. A source familiar with the deal said Exergy had promised as much as $250,000 to USA Cycling, and its total commitment to races across the country likely topped $1.5 million.

The sponsorship news was not all bad, however, as Nature Valley Grand Prix race director David LaPorte told Cyclingnews Wednesday that Exergy had paid half of the money it still owes for the 2012 sponsorship, and it had made arrangements to pay the rest. LaPorte said he fully expects the company to fulfill its obligations to the Minnesota race, a non-profit entity that serves as a fundraiser for a local children's hospice. He said the delinquent Exergy money would have come directly from the race's contribution to the charity.

"Maybe that motivated them," LaPorte said. "It certainly motivates us."

Exergy faces federal lawsuits over energy projects

Carkulis founded Exergy in Helena, Montana, 11 years ago, and the company flourished in the intervening years as investment in sustainable energy grew. But reading the recent archives of Boise's Idaho Statesman is to witness a never-ending stream of building conflict and misfortune for the alternative energy company that claims to have projects in 17 states, and internationally from Argentina to Canada.

Exergy's problems include $323 million in suspended Idaho wind projects, loss of control of a Minnesota wind farm, federal lawsuits by suppliers targeting it for not meeting financial obligations and the possible cancellation of two bio gas-to-power projects amid a dispute with utility Idaho Power Co., which, among other things, is asking the Idaho Public Utilities Commission for permission to pursue Exergy for undisclosed damages for not delivering electricity when it said it would.

Carkulis, who was not available for comment Thursday, has blamed regulatory uncertainty and a "flurry of legal complaints" from Idaho Power for dampening investment in renewable energies, leading to the company's current woes.

Riders left out in the cold

Although the high-stakes games that take place across corporate conference tables and in federal courtrooms would seem a distant world away from the lives of modestly paid riders who compete in the US domestic peloton, those riders certainly feel the effects of the decisions made there.

Now as many as 13 of the team's 16-man 2012 roster are left looking for work at a time when most teams have already finalized their rosters for 2013. And although riders received their last paychecks for the 2012 season in October, most of them expected the checks for 2013 to start up again in January.

"I'm calling every director I know, and even ones I don't know," said former team rider Matt Cooke. "I'm calling and emailing everyone and begging. I'm begging for a job, and I don't think I should have to beg. I had a good year last year. I would like us all to be some place because we're all talented riders and have a lot of ability."

The sudden lack of employment without notice has already begun to cause financial hardships for riders like Cooke, who made plans and commitments while under the impression he would have a job next year. In his Tuesday evening statement, Carkulis hinted at a possible severance deal for riders who had signed for 2013, but Cooke said he hasn't heard any details about what that might entail.

"I use the money that I get from cycling to buy food," Cooke said. "It's like a regular job, and I work super hard at it. I'm pretty frugal, and I've always been that way. But even now I've over-extended myself. Everything would have been fine had the team continued. But all of the sudden I have the commitments that I've made. I leased a home in Arizona this winter so I can train and have a great season with my sponsor's name on the front of my jersey. Now I'm stuck with that."

All the riders Cyclingnews spoke with Wednesday said they had been assured repeatedly by team management that the squad would return for 2013. Despite the broken promises, none of the riders blamed McManus or Escalera partner Dave Beck for the current state of affairs.

Former team rider Quinn Keogh, who had already decided to retire from the professional level the sport next year, said he believes the sponsor over-promised to management, and management over-promised to riders.

"It kind of flowed from the top down," he said.

Cooke agreed with Keogh's assessment, adding that he believed the management team had done everything it could to make sure the riders were taken care of. Cooke also took exception to Carkulis' statement, which blamed recent "scandals and deceit" in cycling as his reason for pulling the plug without notice.

"I don't buy it," Cooke said. "Our team is as clean as it comes. We're the good guys here. If one wants to support clean cycling and show clean cycling can be done successfully, our team is a great example."

Cooke also hasn't lost hope that Carkulis and Exergy Development Group will follow through on the promise to take care of the riders who have been hit pretty hard by the news.

"Maybe James [Carkulis] comes through, maybe he does," Cooke said. "He's come through in the past, so I'm not going to slag him off. It hasn't been great, but what else do we have at this point except hope. He was always a really nice and genuine person when he talked to us. He came to the races and shook all of our hands. He knew us by name, and that felt really nice."

While Cooke is desperately seeking a new ride for 2013, Johnson appears to have all but thrown in the towel on his pro career.

"I love cycling and love to do that for my job," Johnson said. "But I'm going to be 30 this year, and I'm not willing to go back to my vagabond cyclist days where I made no money and had to wear out my welcome on every couch and basement floor between here and the coast to make it work. There's a lot I want to do in this life, and I don't know how much I want to keep chasing cycling. This could be it."

Johnson, who turned pro when he was 28, said the abrupt end to the Team Exergy ride has been pretty rough, but he believes after the shock wears off he will look back on the past two seasons fondly.

"Team Exergy was hitting snooze button on the alarm clock and getting to go back to sleep and keep dreaming this awesome dream for a couple of years," he said.

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