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Olivia: Out to
Sea

Olivia: Out to
Sea

Cruise_ship

Will an ongoing lawsuit by former executives mean stormy weather for Olivia?

Having charted the challenging waters of lesbian entertainment and travel for 35 years, you'd think business would at last be smooth sailing for Olivia. But for the past several months the brand has found itself in troubled waters after former chief executive officer Amy Errett and three members of her senior management team filed suit against the company, claiming they were unjustly fired or forced to resign in March 2007 by Olivia founder and chairwoman Judy Dlugacz. The plaintiffs -- who include Olivia's former chief financial officer Dianne Dubois, chief business development officer Brad Lande, and chief marketing officer Sabrina Riddle -- are seeking several million dollars in unpaid severance, bonuses, and stock options. Not surprisingly, Olivia has countersued, claiming in court documents that Errett had "grossly" mismanaged the company during her tenure from 2002 to 2007 and schemed to "wrest control" of the company from Dlugacz.

Since entering their legal battle last year, the two sides have used their legal filings in San Francisco superior court to shoot accusations of smear campaigns, backstabbing, and jealousy back and forth. The fallout has seen a startling and public clash between two ambitious, successful women who approached the rise of Olivia from different sides of the business world.

In the 35 years since Dlugacz cofounded Olivia in 1973, she has produced more than 40 albums (which have collectively sold over a million copies); hundreds of entertainment events, including four sold-out concerts at Carnegie Hall; the PBS documentary The Changer: A Record of the Times; and an HBO comedy special with comedian Suzanne Westenhoefer. That success, compounded by the creation of Olivia's lesbian-focused travel business, has earned Dlugacz the iconic status of pioneer and visionary within the lesbian community.

Errett lays claim to different successes. After earning her MBA in finance from the University of Pennsylvania's respected Wharton School, Errett founded the international strategic consulting company the Spectrem Group, where she served as CEO and chairwoman. In 2000 she joined the senior management team at E*Trade, which is where she was working when Dlugacz talked her into joining Olivia two years later. Errett currently serves as "entrepreneur-in-residence" for the venture capital firm Trinity Ventures in Menlo Park, Calif.

Beyond the spectacle, the lawsuit has been a cause of concern for those who travel on Olivia's voyages. Numerous postings expressing worry about the future of the company and its financial health have appeared on Olivia.com message boards, particularly after the plaintiffs sought to force the company to dissolve in their initial filings. In a legal victory for Dlugacz, however, that request was dismissed by the San Francisco superior court in October and is no longer part of the suit, allowing the company to stay intact and operating.

According to Errett's lawyer Michael Rugen, the dissolution request was not an act of "ill will" but simply "a procedural method" to try to force Dlugacz to pay the former executives a "fair buyout for their shares." Errett, Riddle, Lande, and Dubois currently own some 30% of Olivia's shares, with Dlugacz controlling the remaining balance.

Rugen tells The Advocate that his clients "never had any desire" to stop the company from operating with their dissolution request. Any thought that they're "trying to destroy Olivia is so far from the truth. Our clients are very proud of the company that they helped to build," he says. "And they still think it is an important institution and certainly hope Olivia will continue to thrive." Rugen adds, however, that while the former employees would prefer to settle out of court, they "intend to pursue their case through to trial, if necessary."

Although Olivia's lawyer Brian Maschler declined to comment on specifics, he's "confident" that all will be resolved "favorably." Errett and Lande turned down our requests for interviews, and Dubois and Riddle did not reply.

Dlugacz, for her part, acknowledges some challenges, but she's still bullish about the company's future. "This is a time of transition and invention at Olivia," she said in a written statement to The Advocate. "We believe that the future lies in what we do best, providing travel and entertainment experiences for lesbians."

Because it is a privately held company, Olivia's financial statements are not a matter of public record. Dlugacz does offer that the new website, advertisements, and partnerships created under Errett's leadership "generated so little revenue" for Olivia "that combined they did not pay for even 10% of the cost of the website, much less the numerous other initiatives being pursued."

Consequently, she says it eventually became clear to her that the company was "overspending in areas where we had no expertise or revenue potential -- like a new website. In many ways we were off course pursuing a strategy that was 'old bubble burst.com' -- spend, build, spend some more, and hope someone will pay you for it," she explains. "Like many dot-com companies' experience, the promise of great revenues never materialized."

Olivia is now working "to redirect and course correct" the role of technology at the company. Dlugacz says, "We want it to be one of several ways lesbians can experience Olivia, and not an ongoing business sinkhole. One thing I know for certain is there will be always be an Olivia."

Olivia was founded in 1973 by Dlugacz and nine other women as an independent record label aimed at producing and promoting the work of female musicians like Cris Williamson, Meg Christian, Teresa Trull, and Linda Tillery. Dlugacz became the sole owner in 1984. Six years later, Olivia expanded its scope and began offering vacation cruises geared toward lesbians. Throughout the '90s, amid a sea of male-targeted brands, Olivia grew to become the largest promoter of lesbian travel and services in the world, chartering ships, resorts, and tours ranging from small vacation groups to vessels accommodating more than 2,000 women.

"Marketing to lesbians has been difficult," says Michael Lamb, editor of the LGBT business publication Echelon magazine, as they tend to be more financially conservative than gay men. "But [Olivia] stuck to their guns. They seemed to have struck gold."

Amid the success, Dlugacz recognized the need to have someone with a strong corporate background on board to manage the growth, so in November 2002 she hired Errett as Olivia's CEO. It was a new position within the company, and Errett quickly developed a top senior management team--Riddle, Lande, and Dubois--to help steer the company's growth.

Early on, it appeared Dlugacz and Errett were on the same page. In a 2002 press release announcing her hiring, Dlugacz said that Errett was "the natural choice to head Olivia and guide the company through its next phase of evolution," and that she amounted to the "ideal cultural and business fit" to manage the company's day-to-day business operations. The honeymoon continued for Dlugacz and Errett into 2006, when they accepted a regional Ernst & Young Entrepreneur of the Year award and the company announced record revenue of $20 million.

But somewhere along the way, the vision for Olivia's expansion split into two separate ideals: Errett aggressively sought to make the company a full-service lesbian lifestyle distributor--with a magazine, a website with online dating for lesbians, an Olivia credit card, and cross-promotion deals with other corporations. But Dlugacz balked at the financial investment that new direction was taking and pulled back the reins of control.

Dlugacz argues in her June 2007 countersuit that Errett's drive to reposition Olivia as a lifestyle services company led to "ill-conceived initiatives" that "lost money, put the company at risk, and squandered opportunities to earn money." She estimates that Errett's "gross mismanagement" led to losses totaling "in the millions of dollars."

The court filings also contend that Errett attempted to hide her management missteps by "mischaracterizing and misclassifying" financial reports "and falsely inflating the revenue figures presented to Dlugacz and others at the company." Errett, according to her own filings, maintains that Dlugacz participated in and approved the long-term planning for the company's expansion plans and "agreed to the financial expenditures"--including a 2007 plan to have the company go public or stage another "liquidity event."

"Several private investment firms had by then offered to invest in Olivia, placing values on the company as high as $30 million," the former executives maintain in their suit. "For reasons known only to Ms. Dlugacz, she repeatedly refused to entertain such investment offers."

All four former Olivia executives have strongly denied mismanaging the company and instead have attributed any financial problems to Dlugacz's use of company revenue for personal use.

In their suit, Errett, Lande, Dubois, and Riddle allege that Dlugacz insisted that Olivia pay her "excessive compensation each year, in the form of salaries, bonuses, and distributions of profits, which far exceeded the value of any contribution she made to the company." Some years, the plaintiffs contend, Dlugacz removed "amounts in excess of $1,000,000," which deprived "the company of needed working capital," while at the same time insisting the company "make large expenditures" to her partner, Rachel Wahba, and her daughter, Tiffany, who is employed by Olivia.

"Ms. Dlugacz also insisted that Olivia pay for many of her personal expenses, such as vacations and other personal travel," reads one court document, "for which the company received no benefit in return."

The cross complaint says that Errett increasingly sought to marginalize her employer's management role at Olivia and actively sought to "wrest control of the company by forced purchase of only a portion of Dlugacz's shares." Not so, counters Errett, who claims these allegations are nothing more than Dlugacz's "imagination." With the new management team at the helm, she says, Dlugacz began to devote less and less time to the business operations of her company.

At the heart of all the accusations may be just a classic clash of the strong wills and healthy egos of two successful businesswomen. Errett claims that jealousy of her team's success prompted Dlugacz to fire her and have a "change of heart regarding the strategies, plans, and future of Olivia." The former executives further say that resentment caused Dlugacz to treat "employees of Olivia in a harsh and unprofessional manner," creating a morale problem at the company.

Olivia's lawyers, however, point to a series of "disparaging" and "scurrilous" e-mails that Errett "wrote on company computers and company time," criticizing Dlugacz to other company executives. According to court files, Errett wrote in separate e-mails that Dlugacz "is a fucking idiot and megalomaniac" whose "D day is coming," adding "she will get hers."

While the legal battle's finger-pointing continues, Echelon editor Michael Lamb says that Olivia's place as the largest lesbian-owned business marketing to other lesbians should be secure--as long as the company "doesn't blink an eye" and "continues to identify the same way as it has." He adds that the company's success is important to LGBT people in a wider sense, because it demonstrates to mainstream America that "we are working and own businesses, and we contribute to the economy."

After Errett's departure in March 2007, Dlugacz hired Lisa Henderson as Olivia's general manager. In addition to having worked with companies such as Nestle and MSN, Henderson has cofounded several start-up technology companies. In a statement to The Advocate, Dlugacz wrote, "The new management team is seasoned veterans with both business growth and fiscal correction experience. They average over 20 years of experience each. They bring experience in all the critical areas of expertise from travel, customer services, start-ups/early-stage, entertainment, and technology."

And despite the distraction caused by the lawsuits, Dlugacz says Olivia is rebounding financially after "two years of losses." She says that the cost of Errett's initiatives and a lack of focus on Olivia's entertainment and travel divisions hurt the company. "We have taken action to eliminate these losses by focusing on our core competencies and moving toward new, fresh ideas that leverage those competencies," says Dlugacz. "More specifically, we have moved away from the lifestyle expansion plan which had us in everything from technology to publishing."

Furthermore, Dlugacz says Henderson's new management team recognizes that "the younger market wants a different type of experience from someone my age. You will begin to see a shift in our product portfolio that reflects the next generation of Olivia customers while creating new experiences for women who have traveled with us 15 or more times." As for the future, Dlugacz believes good things await Olivia, saying, "This company is more forward-thinking than it has been for years--we recognize that lesbians are changing, interests are changing, and we are listening."

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