Dealer Services Corp. has rival Adesa taking notice

Dealer Services Corp. is an example of what happens when an entrepreneur sells his company to a bigger one and then comes
back to haunt it.

After selling, the entrepreneur is often brought aboard by Big Acquiring Company os a division president, then gets "retired"
after landing on the CEO's hit list.

In this case, the spurned entrepreneur, John Fuller, became a thorn to Adesa Inc. a few years after its CEO sent him packing
in late 2001.

In the 2-1/2 years since Fuller started Dealer Services Corp. in 2005, his Carmel firm has racked up loan receivables of
$550 million, compared with $776 million reported last year by Automotive Finance Corp., the company Fuller founded and sold
to auto auction chain Adesa in 1994.

Already, Adesa regards DSC as a competitor. It's listed in the same sentence as Manheim Automotive Financial Services,
the finance arm of the nation's largest vehicle auction company, in a 2006 Adesa filing with the Securities and Exchange
Commission.

AFC has 85 branches; DSC has 68 and counting.

DSC already claims the title of North America's largest provider of diversified inventory financing for independent dealers.

Like Adesa's vehicle finance firm, it focuses on loans to dealers to buy cars, trucks and motorcycles. But DSC is pushing
beyond those, to ATVs, buggies, dirt bikes, go-karts, scooters and boats.

It's also rolled out some unconventional financing packages, such as helping dealers buy vehicles so they can rent them
to credit-risky customers, who eventually buy them.

Some wonder if Fuller, 63, a white-haired veteran of the Marine Corps who identifies one of his conference rooms as THE WAR
ROOM, is out for Adesa's blood.

To this day, "everybody thinks I was angry and left there to start this company," Fuller says, denying that his
new company is about revenge.

Starting over

To hear Fuller tell it, the last thing he wanted to do after leaving Adesa was to get back into the business. He said he
was more concerned about his blood pressure than making money, and wanted to retire.

Not everyone's buying it.

"Don't let him fool you," said Michael Hockett, the CEO of Indianapolis-based vehicle auction chain Auction
Broadcasting Co. who founded Adesa. "He retired every other week when we worked together."

It was Hockett who goaded Fuller into launching DSC.

Hockett told him that dealers needed a financing company that was independent of car auction chains like Adesa.

Fuller resisted. "I said, [Michael], do you know how hard that is?"

It was shortly after the 2001 terrorist attacks. The industry was stuck in neutral. Wall Street "loved my white hair"
but wasn't funding startups, Fuller said.

But Hockett wouldn't relent, and off Fuller went looking for cash.

After several deals fell apart, Fuller found backers such as Atlanta-based venture capital firm Noro-Moseley Partners, which
had funded Hockett's launch of Adesa in the 1980s. Wielding even more bucks was New York-based Angelo Gordon & Co.,
which also contributed to the more than $725 million DSC lined up.

Finding personnel was not difficult, at least at first. Word quickly spread to Fuller's former company, Adesa's AFC
division, several blocks north on Meridian Street. Phone calls from prospective employees poured in.

Fuller snagged his six top lieutenants, who sat in the "war room'' and strategized over what they'd always
wanted to change while at AFC.

"It is so far ahead of what's down the street. It's unbelievable," Fuller said.

By the time DSC had lassoed somewhere around 75 employees from Adesa's AFC–that would be about 20 percent of its staff–Adesa
executives had summoned their lawyers.

Shots fired

In July 2005, Adesa filed a lawsuit in Hamilton Superior Court against DSC and several former employees who jumped shipped
to Fuller's fledgling firm.

Adesa alleged its former AFC workers took computer records and trade secrets to the new competitor. Many of the ex-employees
named were relatively low-level workers, and were now staring down the barrel of Adesa's top legal guns.

Fuller was furious. He insists those workers had never signed non-compete agreements, and neither had he, for that matter.
Before hiring them, he'd consulted with big-time Washington, D.C., law firm Aiken Gump Strauss Hauer & Feld, which
is perhaps better known locally for its work in the ATA Airlines Chapter 11 case.

Fuller found himself being asked by friends whether it was indeed true that his firm stole information from Adesa. "I
said, 'Heck no. I designed it. It's in my head.'"

"They were trying to ruin our name," Fuller said.

Ironically, he said, he had plenty of dirt on Adesa that could have embarrassed then-CEO David Gartzke.

Gartzke had hailed from Minnesota Power & Light–whose holding company owned Adesa, and he was the CEO who'd sent
Fuller packing in 2001.

Fuller said Gartzke didn't like his idea to grow AFC's business beyond Adesa's auctions. Not only that, but the
auto sector, after the 2001 terrorist attacks, scared some of Minnesota Power's shareholders.

At a board meeting, he and other division chiefs received an unusually terse questioning about their financial prospects.
Fuller was put off–having been $7 million ahead of budget. After the meeting, he said, he told Gartzke to tell the board
what it could do with itself if it wanted to grill him again like that.

So with all that baggage, and later an incendiary lawsuit by Adesa against his new company, the ex-Marine struggled to keep
his mouth shut.

When his lawyers weren't chasing him with a roll of duct tape, they were drawing up a countersuit, seeking $25 million
in damages from his former employer.

The two companies settled in late 2005. Among DSC's concessions, it would put 12 former Adesa/AFC employees on leave
for up to six months.

AFC agreed not to "unlawfully conspire with any third parties in restraint of trade or to suppress DSC's activity
or access to the marketplace."

AFC also agreed to discuss an agreement so dealers who finance through DSC can more easily make purchases at Adesa auctions.

"This is sick stuff," Fuller said of the legal battle, swearing he'll write a book about corporate idiocy after
he retires.

Looking down the road

With the legal battle in its rearview mirror, DSC is speeding ahead with growth plans. Before he retires, whenever that is,
Fuller wants DSC to have receivables of at least $1 billion, or almost double current level. Toward that end, last month the
company inked a three-year, $700 million financing agreement with Deutsche Bank, to boost lending capacity.

Fuller wants to expand the company's so-called power sports lending business-hitting niches such as inventory financing
for recreational vehicles.

One of the more innovative new products is an alternative to the traditional "buy here pay here" vehicle sales
model.

The latter sends dealers scrambling to jump through repossession hoops when customers don't pay or file bankruptcy. DSC's
"Ren'T'Own" gives dealers full ownership rights until the vehicle is paid for. They can separate a delinquent
"renter" from his beloved car in a New York minute–no sticky consumer-protection laws to slow things down.

Among those pitching the program is the Northland Independent Auto Dealers Association, representing stores in the Dakotas
and in Minnesota.

Besides any number of little fees dealers covet, the program being pitched by Northland boasts of a "chase rate"
of less than 5 percent versus more than 30 percent for buy-here-pay-here.

"If your payment is not in my office by the due date or the car back on my lot with the keys, I will report the vehicle
stolen and you will suffer the consequences," Northland touts in literature to dealers of a portion of the contract.

"These used car dealers–I love them," Fuller said. "They are the entrepreneurs of America."

As to whether DSC makes much of a ding in Adesa's AFC is yet to be seen. Hockett, however, is bullish.

"It's really exceeded everyone's expectations," Hockett said. "I don't think there's anybody
who has a better understanding of the business than John Fuller."