20

Mr. Bassett Goes to Washington

By the time the judgment came down, there were lawyers on the other side coming over to thank him.

They’d been wanting to start their own practices, and they didn’t know how they were gonna do it—till this case came along.

—JOHN’S DAUGHTER, FRAN BASSETT POOLE

The building that houses the U.S. International Trade Commission is all marble and reflective glass. It juts out onto Washington’s E Street like the prow of a ship—rounded, confident, and impervious to the outside world.

ITC decisions hinge on six people, lawyers usually—three Democrats and three Republicans—whose job is to determine whether domestic industries are being unfairly harmed by imports that are dumped by foreign companies or by companies that are propped up by foreign government subsidies.

When President George Bush nominated West Virginia lawyer Charlotte R. Lane, a Republican and a former state delegate, to the commission in August 2003, it was unclear how much he knew about his new nominee. She was fifty-three, a former state utility commissioner, and, perhaps most important for the task at hand, the daughter of a factory worker.

Lane’s father had worked as a custodian for the American Cyanamid plant at Willow Island for years, and as a child, she attended annual picnics and played with the other factory workers’ kids. As she grew older and advanced up the tax-bracket ladder, it happened that she developed a passion for furniture, especially antiques and reproductions.

When Lane and some of her fellow commissioners ventured to Galax on a standard preliminary fact-finding tour, it wasn’t the look of the mid- to low-end furniture at Vaughan-Bassett that caught her eye; it was the manufacturing details. When JBIII showed the touring delegation his factory and explained that the finishing process was what separated a moderately priced piece from a high-end item, the furniture devotee in her got excited.

To Lane, furniture was a lot more charming than magnets, plastics, or swimming-pool chemicals—subjects of some of the other antidumping cases on the ITC docket.

Furniture, you could get your arms around. You could touch it, tell a story about where it came from. Furniture was a kind of status symbol, like the BlackBerry John Bassett used to call people at all hours of the day and night.

Furniture was a snapshot of who you were when you bought it, how much disposable income you had, how you felt about the person you were buying it with.

“The wood itself, before you put on the finish, it was very substantially made, and it was good wood and good craftsmanship,” Lane recalled of her Galax tour during a September 2012 interview in her Charleston, West Virginia, law office. (Like Joe Dorn, she gave me exactly one hour.)

JBIII showed off the equipment the company had bought as it embraced new “lean manufacturing” techniques. He had spent nearly $40 million in the past five years on high-tech German and Italian routers and state-of-the-art kilns—a capital investment rate that was double his competitors’. The equipment allowed him to make furniture with fewer people, but he didn’t immediately replace the people with the machines, he explained. He allowed attrition to do the work.

Before the tour, Lane said, she hadn’t understood the full extent of his family ties to the smokestacks; knew nothing about the cousin companies inside the coalition and out. He had the famous Bassett name, of course. But more critical, JBIII had what Congressman Boucher had already witnessed inside the Beltway: that rare ability to simplify something complicated so that you laugh or shake your head—like his notion of comparing cheap Chinese imports to moonshine. (“You got to give people somethin’ to re-mem-ba,” John told me once, winking.)

With the commissioners gathered literally in his sawdust, the master showman was in an even better position than when he’d hauled the furniture into the Greensboro courtroom to defend himself against the Lexington trade-dress lawsuit. He had them exactly where he wanted them.

It was mid-2003, the preliminary ITC hearing would soon be on the docket, and there were things JBIII wanted the commissioners to know. He knew he’d inspired a deep animosity, not just from some of his relatives but also from some longtime customers. Jake Jabs, an aptly named Colorado retailer who had once been among his largest dealers, had canceled all Vaughan-Bassett orders the moment the petition was filed. Jabs logged about 150,000 air miles annually on buying expeditions, and he loved to search out remote, unknown factories—especially in China. When John chided the suppliers at his Greensboro meeting and told them they should support the coalition “because you’re an American, that’s why!” Jabs read about it in the press and immediately griped, “Nice political speech, John.”

The gloves were off. Jabs told a Furniture/Today reporter that the coalition consisted of a “bunch of old North Carolina has-beens crying over spilt milk. It’s a backwards, antiquated, dark-ages type of mentality that would even think of this.”

The animosity troubled John Bassett, and when he shared that with Lane during the tour, it made a lasting impression. “The fact that he was so willing to go out there and fight for what was right in the face of so much opposition… it was so personal to him,” she explained.

His genius, of course, was that he also managed to make it personal to her. When he pointed out the vacant factories near his own, she recalled the plant closings she’d seen in her home state. She remembered newspaper articles about desperate people arrested for stealing copper out of abandoned plants, just like in Bassett. She felt for him when he described the sleepless nights he’d spent—staring at the ceiling, worrying whether he was going to have to lay off people whose fathers and grandfathers had worked for his family.

During Lane’s eight-year tenure, the ITC reviewed 192 claims of illegal foreign-trade practices, and domestic producers had prevailed sixty-nine times. When I asked why more domestic industries hadn’t brought cases before the ITC when so many companies were closing factories and rushing overseas, she blamed legal fees and lack of awareness. “Many people don’t even know the remedy is available. So by the time that people learn there’s a venue at the ITC to bring a case, a lot of the injury has already occurred. It’s very difficult for industries that are being injured by unfair competition to have the money for legal fees.”

When Lane wagered that legal fees for a typical antidumping case ran “somewhere between a half million or a million or more,” I almost did a spit-take with my coffee. Furniture analysts have suggested that the bedroom-furniture case has cost $5 million to $7 million, but several trade lawyers told me that $5 million was pocket change compared to the actual legal bills, which are still ongoing—though John and Wyatt refuse to divulge how much they’ve paid to Joe Dorn’s firm.

John would rather talk about how the government made him display EEOC posters notifying workers of their right not to be discriminated against because of gender, race, age, or disability. But the government did nothing to inform those same workers about illegal trade as outlined in the Tariff Act of 1930—something with potentially greater bearing on their jobs.

During a lobbying visit to the Small Business Administration in the fall of 2003, John chided the government for spending $33 million to advertise and market its newly redesigned twenty-dollar bill while doing virtually nothing to educate manufacturers about the recourse they might have against illegal trade.

“I can assure you, there’s no one in my family that doesn’t know how to spend twenty dollars!” he barked.

Powell Slaughter remembers the moment it hit him. He was sitting in the packed U.S. International Trade Commission hearing room, and he realized: all the good-old-boy backslapping that had been going on for generations in the industry, all the schmoozing dinners at Market, all that butter-squirting chicken Kiev—you could stick a fork in that now.

It was an exciting time to be a reporter for Furniture/Today, even though getting the players to reveal anything about their strategy had been “like pulling teeth,” he said. He’d had no idea John Bassett had sent a Taiwanese interpreter turned investigator to Dalian, for instance. No idea that John had allegedly strong-armed his own nephew, telling Rob Spilman, “I sure would hate to see people picketing your factories” if Bassett Furniture didn’t join the coalition, according to Rob.

Once Bassett was in the coalition, John reasoned, Stanley would have to join, or risk losing face in the community, since Stanleytown was literally next door to Bassett.

“You saw the two sides arrayed, literally on opposite sides of the courtroom… and you just kinda looked at people in that industry, so totally divided now, and you kinda went, Wow.”

The lawyers on both sides had never argued such a heated case, full of subterfuge and flamethrowing words like extortion and fraud. The fiery exchanges between Joe Dorn and his opponent at the November 2003 preliminary hearing featured surreptitiously recorded phone messages, the dramatic thud of a surprise-document throw-down, and the worst insult a fourth-generation American furniture maker like Rob Spilman could hear: that the Chinese made better furniture than Bassett Furniture Industries. (If Mr. J.D. had rolled over in his grave at that one, then Larry Moh was surely smiling in his. Deliver a donkey, my ass.)

The Chinese companies had cast their lot with another top-shelf Washington trade lawyer, John Greenwald, a Jim Belushi look-alike and a former Commerce Department official. Greenwald’s father had been a lawyer and economist who spent his career helping to guide international trade policy for the United States, serving as a representative to the General Agreement on Tariffs and Trade, the post–World War II treaty regulating international trade and a precursor to the WTO.

Greenwald had argued both sides of the trade-dispute aisle, but in this case it was crystal clear that he was his father’s son. Especially when the first thing he asserted during his opening remarks was that the petition was an out-and-out fraud.

It went downhill from there. Casting the petitioners as hypocrites who were themselves importing containers, Greenwald played a voicemail message left by a salesman at Lea Industries (a subsidiary of fellow petitioner La-Z-Boy), advising a Rooms To Go manager not to worry about the antidumping case. If duties were leveled against the Chinese manufacturers, he would make sure the retailer could still buy the same products from him—via a factory in Vietnam, where duties didn’t exist.

“We have been working on this backup… so the ugly stuff can’t happen once you buy this furniture from us,” the Lea salesman said on the recording.

“Now, I hope that Mr. Kincaid and the Bassett family and the Vaughan family have a sense of shame about the testimony they gave about third-country sourcing,” Greenwald said. “That tape recording says in a nutshell what I wanted to say about the affirmatively misleading nature of their testimony. It’s business fundamentals, it’s not dumping, that’s driving the increase of imports from China and elsewhere.”

The barbs about quality came next. Domestically produced Bassett Furniture was poorly made, the opposition argued, and its company executives were resistant to change. In the company’s defense, Bassett CEO Rob Spilman told the commission that J.C. Penney had dumped the company in favor of Chinese imports, even after Bassett reengineered its products and slashed its prices by a third.

After which J.C. Penney’s operations manager Jim McAlister leveled a torrent of grievances against its former vendor: Customer complaints had soared about Bassett Furniture defects. A quality audit of Bassett turned up a 50 percent defect rate—nicked finishes, for instance, and dresser drawers that didn’t open smoothly. The defect rate on imports was only 1.9 percent, he said.

J.C. Penney had asked Bassett and others to come up with a corrective action plan to prevent further defects. “To this day, we have not received a corrective action plan from any of the domestic producers,” McAlister said.

Rob Spilman all but called him a liar, reminding him that Bassett had won Penney’s 1999 Supplier of the Year award. “Penney has never told Bassett that it had any concerns about our quality or service.… The only reason we have lost this business to imports from China is price.”

Speaking for the newly formed Committee for Free Trade in Furniture, importer Bill Kemp showed two slides targeting what he called the “disingenuous stand by the petitioners because they are doing the same thing I am: importing furniture from other countries.”

The first slide was one of Vaughan-Bassett’s ads from Furniture/Today from the same series as the “Ohhh ship” caricature. This one had a man and a woman dressed in business suits, clutching briefcases and cell phones—and wearing gas masks. It had run in furniture-trade publications during the height of the SARS scare, with the kicker: “Is this how your buyers dress for work?”

“While I’m disturbed by the ad and it really bothered me, [along] with a lot of the people I work with in plants around the world, the point I would like to make about it is, in the left-hand corner there’s a sign that says, ‘Vaughan-Bassett Furniture, made in the USA,’ ” Kemp said.

Then came Kemp’s punch line. His next slide featured a furniture carton bearing Vaughan-Bassett’s logo and Made in China prominently written on its side. The photo had been taken years earlier, Wyatt said later, before the company slashed its imports to 1 to 2 percent. (In 2013, it did away with imports entirely.)

Kemp throttled the coalition’s biggest public companies—Stanley and Bassett—by quoting from their own Securities and Exchange Commission filings. Stanley “continues to implement a blended strategy of combining its domestic manufacturing capabilities with an expanding offshore sourcing program… [that] will lower costs, provide design flexibility, offer a better value to its customer.” Bassett Furniture reported to the SEC that it was embracing change in the industry “by reducing its domestic production of product that can be more efficiently sourced overseas.”

Jeffrey Seaman, the CEO of Rooms To Go, then the nation’s largest retail chain, said the petition was really about the loss of control—and profits—manufacturers felt when they realized “the retailers were smart enough to do it” themselves.

“So if you were Vaughan-Bassett, hypothetically, bringing in a bedroom [suite] for $1,000, reselling it to some of their customers… for $1,500 and that retailer sells it for $3,000, then you have another retailer who says, ‘We don’t need you, Mr. Vaughan-Bassett, to import for us. We’ll bring it in, we’ll pay $1,000 or $1,100 to import it and we’ll sell it for $2,000’—well, the retailers selling for $3,000 are going to try to import it themselves.”

In a follow-up hearing, Greenwald summarized his opposition by quoting from a 1960s British television program called Beyond the Fringe:

It’s a dark office in a war room. There is an elderly colonel who calls in an enthusiastic young lieutenant, Lieutenant Jenkins.… “Jenkins, we’re going to drop you 300 miles behind enemy lines and we want you to attack the Germans from the rear.” And Jenkins says, “Yes, sir. But why are we doing this, sir?”

The colonel replies, “These are dark times, Jenkins, and what Britain now needs is a futile gesture.”

Greenwald beseeched the commissioners not to interfere with globalization’s natural economic course. “I hope you are not in the business of making futile gestures,” he said.

Joe Dorn had spent too many Saturday mornings on the phone with John Bassett not to have his own gotcha moments carefully rehearsed and finely tuned. His first return volley was to point out that the Furniture Retailers of America, newly organized to oppose the petition, in no way represented all of the nation’s furniture stores—or even a majority. As proof, he ceremoniously dropped letters from seven hundred retailers on the ITC table. They landed with a thud.

John Bassett had spent the past year calling many of the seven hundred stores, mostly mom-and-pops, and beseeching his sales staff to gather letters in support of the petition. They were now the bulk of his own customers—and the core of his VBX sales—and they were already being priced out of the market by container loads of furniture they were not themselves large or rich enough to buy.

Stick to the statute, Dorn reminded the commissioners. The statute asks the commission to consider the impact of imports on domestic producers as well as on American factories and American workers.

The petitioners had lost more than half of their operating income from 2000 to 2002. In three short years, sixty-eight bedroom-furniture plants had closed.

“Furniture Brands has been more hurt by imports from China than any member of our coalition, but they won’t admit it,” Dorn said. “They’re afraid that those Chinese factories will cut them off if it does not oppose the petition,” and that major retailers will stop buying from it for the same reason.

“Most importantly, Furniture Brands is afraid because it has bet the future of its company on dumped imports from China,” Dorn said. “It cannot afford to tell Wall Street that its strategy is predicated on unfairly priced imports.”

Dorn punctuated the point by introducing as evidence paperwork for eight applications for Trade Adjustment Assistance, representing eight of Furniture Brands’ shuttered factories. “In each case, the Department of Labor certified the employees as eligible to receive adjustment benefits based upon a finding that increased imports contributed materially to their layoffs,” he said.

The ITC, in other words, need look no farther than another branch of the federal government for proof that Furniture Brands’ workers had been injured by Chinese imports.

After the first hearing, Dorn’s firm had limousines waiting for JBIII and his crew. After the second, the coalition was faced with raising more money for legal fees, and to get back to Dorn’s office, those same clients could either take a taxi or walk. On the way out of the ITC fortress, John Bassett smiled at Wyatt and asked what he thought of their top-shelf lawyer. Was he really worth all the money they were in the midst of trying to raise?

Father and son were strolling past the Smithsonian when Wyatt gave his answer. “If I were on trial for murder and I was innocent, I’d want Joe Dorn representing me.”

But if he was guilty, he’d want John Greenwald on his team. Greenwald reminded Wyatt of his mother, Pat. As a child, when the family arrived home on a Sunday night after a trip and found the pantry bare, Wyatt marveled at his mother’s ability to fashion a remarkable meal out of toast and bacon with a sauce conjured up from stale cheese and a can of beer.

Years later, Wyatt laughed as he recounted this exchange with his dad. He was sitting at his Vaughan-Bassett desk, which was littered with wood samples and drawer hinges, components of a new suite he was helping design. (He had just returned from a powwow upstairs with engineer Linda McMillian, and he reeked of her Marlboros.)

Greenwald didn’t have the Tariff Act on his side, Wyatt said, and yet he had still managed to fashion “forty-five minutes of very entertaining stuff.… It may not be legally sound, but has he whipped something out of nothing? You’re damn right he has.”

Within a month, the Department of Commerce initiated its investigation to determine whether the Chinese factories were truly dumping. In results released a month later, the ITC unanimously voted in the coalition’s favor, pronouncing that domestic workers and manufacturers had indeed been injured by illegally dumped imports—something the people in Bassett could have shown them if anyone had bothered to look.

With the Byrd Amendment still intact, the Chinese dumpers were going to have to pay. But the preliminary duties assigned in 2004 were disappointing to JBIII and his sons: 14 percent, compared to the 35 to 40 percent Dorn had estimated.

But Dorn had a plan B that he believed would net the coalition its rightful due. The coalition had the right to participate in annual Department of Commerce reviews of the dumping margins. The process was as complicated as it was controversial, but, if successful, it just might level the playing field for the coalition. And it would very definitely bury Wyatt Bassett in spreadsheets and legal bills for many years.