ConStellation Bankruptcy

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Constellation, aka Connie, the 1983 Worldcon in Baltimore, was an artistic success — it was one of the larger Worldcons ever held with an interesting and varied program in an attractive venue. Unfortunately, once the convention was over, the committee realized that its budget was something like $150,000 in the red (out of a budget around $500,000). This was a problem.

Part of the shortfall was dealt with by not providing membership reimbursements for staff and program participants. (At modern Worldcons, other than the GoHs, everyone right up to the chairman pays for their memberships. If cash remaining after the con permits, there are membership reimbursements for staff and program participants. This is a large chunk of money and is a Worldcon's largest financial cushion. While reimbursements are not a legal debt, they are a moral debt and Worldcons budget to be able to pay them.) This still left an unpayable legal debt in the neighborhood of $75,000. Constellation was not only merely bankrupt. It was really most sincerely bankrupt.

The problem came from a lack of controls on spending. There was effectively no budget (well, there was a budget, but it did not actually affect where or how much money was spent). Major expenses (such as the $40,000 rental of Diamondvision, a super-large-screen television system to provide in-the-hall closeups of the Masquerade) were not even in the budget. In other cases, more than one department spent the same budget.

Fandom's reaction was predictable, with much finger-shaking, alarm and despondency, and expressions of dismay. The Connie bankruptcy was the talk of fandom. The second-guessing got to the point where the following year at LAcon II there was a very funny masquerade entry skit of smofs (identified by their t-shirts which read "Blah, blah, blah, fiscal responsibility. Blah, blah, blah, Diamondvision") about it.

The reaction was sufficient that the 1984 Worldcon, L.A.con II, became fiscally ultra-cautious and consequently ran the largest profit in Worldcon history right up through 2010. (Sponsors SCIFI earned their own finger shaking by spending it on air conditioning the LASFS Clubhouse.)

As is the norm, Constellation was run by a separate corporation from any other Worldcon, so other Worldcons were unlikely to suffer any legal impact, but there was widespread concern that other Worldcons would be tarred with the same brush and would be unable to get credit from their hotels and other vendors. A Connie Bailout was needed.

The convention committee, particularly senior members, contributed by not collecting the reimbursements due for convention expenses that they had paid for out of their own pockets, but this was not nearly enough. In addition, to foregoing reimbursements, the committee and local clubs ran fundraisers (including resurrecting Backrubs for Baltimore) and paid off a significant amount of additional debt. Finally, MCFI, the group which had run Noreascon Two in 1980, set up a Connie Bailout Committee chaired by Mark Olson. In the end, the committee raised around $30,000 and was able to use the cash to purchase the entire remaining unpaid debt owed outside of fandom at about sixty cents on the dollar.

Long-term, the Connie bankruptcy raised awareness in fandom that Worldcons had gotten to the point where their budgets were large and where mismanagement could produce problems beyond an individual committee's ability to remedy. Worldcons were not really islands any more. The Constellation bankruptcy was one of the factors which motivated the creation of Pass-Along Funds a few years later.

(Note, by the way, that while it is called the "Constellation bankruptcy", the Constellation corporation never actually declared bankruptcy. Technically, it paid all of its assets to its creditors and the Connie Bailout Committee then used the funds it raised to purchase the remaining debt at about 60 cents on the dollar, leaving MCFI (the formal sponsor of the Connie Bailout Committee) technically the sole remaining creditor. MCFI then wrote off the debt and allowed the Constellation corporation to close.)

On a lighter note, years later when the trauma was history and people were breathing again, Connie chairman Mike Walsh noted that Connie was the only Worldcon that had given fans more than their money's worth....

Connie Bailout Committee[edit]

Once the size of the Constellation bankruptcy became clear (the news probably broke for most fans in File 770 44, p. 21) MCFI, the group which had run Noreascon Two in 1980 set up a Connie Bailout Committee which solicited contributions from fandom, including especially past Worldcons which had money left. The Committee chaired by Mark Olson with Jim Hudson as adviser. Rick Katze was legal counsel (and did the negotiations with the creditors) assisted by Gary Feldbaum.

The Connie committee and the Bailout Committee worked in parallel. The Connie committee raised funds and paid down a part of the debt while the Connie Bailout Committee raised funds and, after Connie had paid off as much of the debt as it could, negotiated with the remaining creditors to purchase the remaining debts at about 80 cents on the dollar. (I.e., it paid $8000 to purchase a $10,000 debt.)

Donations Source Notes
$10,000 MCFI Surplus from Noreascon Two
$10,000 SCIFI Surplus from L.A.con II. (Obviously this donation was not received until late 1984.) As a bow in the direction of an old (and very weak) jest, the contribution came in the form of one hundred individually hand delivered checks for $13.70 each plus a single check for the balance.
$5,000 Chicon IV
$1,250 Westercon 37 (Portland, OR)
$1,000 PSFS
$1,000 WSFA
$425 Fred Isaacs
$200 Ben Yalow
$150 Bill Perkins
$100 Harry F. Leonard
$33 Carl Lundgren and Michelle Lundgren In the form of prints for auction

By the time the Bailout Committee was set up, the remaining debt was about $38,600. (This was after the committee members contributed by forgiving substantial reimbursements owed them.) ConStellation's fund-raising efforts managed to raise about $2000, which was paid out in June, 1984 as a 5% payment to all creditors, leaving $36,670 owed. Early in the process, before most of the funds had been raised, the Bailout Committee contacted each of the creditors and offered them payment of about 29% of the money owed and a share of any future money raised. Several of the creditors agreed (sometimes after considerable persuasion).

As more money was raised, revised offers were made to the holdouts and, eventually, all of the creditors accepted the Bailout Committee's offer. In November, 1984 payments were made to all creditors (except Hour Printer, who did not finally agree until January, 1985) to bring them up to roughly the 50% level. Upon receipt of the last of the pledged money in February, 1985. final payments which brought the total payout to 80% of ConStellation's debt were made to each creditor.

Administrative costs of the effort were $184, almost entirely to pay for endless phone calls to the creditors. The balance remaining (about $19) was donated directly to ConStellation.

Summary of Creditors and Payments

Creditor Owed Payment [1]
Diamond Vision $12,500 $9,985
Exhibit Aids $11,332 $9,054
Hour Printer $9,300 $7,421
Larry Beck (Badges) $2,000 $1,598
Copy Cat $1,200 $959
Avcom $1,000 $799
Telesaver $725 $579
Gestetner[2] $514 $514
TOTAL $38,571 $30,909
  1. Payments include monies paid to creditors by both Connie and the Bailout Committee.
  2. At the request of PSFS, their contribution was used to pay Gestetner in entirety and the balance remaining was contributed to the general fund.

At the end of the process, legal ownership of the receivables against ConStellation was owned by the ConStellation Bailout Consortium (MCFI). While, technically, ConStellation still owes the Bailout Committee's members around $36,000, the committee agreed that any additional money which ConStellation might be able to raise will be distributed first to the original creditors in proportion to the amount they had not yet recovered. (In the event, nothing further was raised.)

In return for the 80% payment, the creditors gave up all rights to demand money from ConStellation, including any right to force bankruptcy.

The consortium did not participate in any way in the claim by the City of Baltimore for about $5500 in damages at the Convention Center. This claim may still be outstanding against ConStellation, though it is moot since the statute of limitation is long past...

Due to the generosity of fandom throughout the country, the Bailout Committee succeeded in what it set out to do.

For contemporary reactions, see:

Fanhistory 1983
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