Tufts Libraries suffer from RoweCom bankruptcy

Tufts' Health Sciences library risks losing almost $700,000 after the company it relied on to provide journal subscriptions filed for bankruptcy last month without completely fulfilling the subscriptions.

The company, RoweCom, Inc., left over 1,000 research institutions and other creditors with combined losses of at least $73.7 million. The Health Sciences Library ranked 13th on RoweCom's list of creditors, and is owed an estimated $689,523. Tisch, Ginn and the Music libraries are also owed $1.75 million, although they paid the money into an escrow account and will be able to recover what they are owed.

For over 40 years, the libraries relied on Faxon, which was recently acquired by RoweCom, to handle their demands for printed journals and news. Faxon lessened the administrative burden of dealing with subscriptions by accepting Tufts' subscription dues in one lumps sum and then paying individual publishers, who sent subscriptions to Tufts.

But problems arose when RoweCom's parent company, Divine Inc. allegedly transferred $73.7 million from RoweCom to itself.

Tufts and others have pre-paid RoweCom for thousands of journal subscriptions, but Divine allegedly absorbed the money before it ever reached the publishers. As a result, publishers either have stopped or will stop the libraries' subscriptions.

According to lawyers, RoweCom is simultaneously filing for bankruptcy and suing its parent company to recover the money.

Anthony Kodzis, Tisch Library Acquisition Manager, said librarians everywhere are calling the situation the "Enron of the library world."

Eric Albright, Director of the Health Sciences Library, said the library started consulting with lawyers in December, when Divine announced its intent to divest RoweCom. "We've created some contingency plans," he said. But with the legal claims pending, the library could lose its $690,000. "[We] really don't know what's happening yet," he said.

All four libraries at Tufts that used RoweCom risk interrupted journal subscriptions. "It is not clear how many printed journal subscriptions will be affected or how long issues for specific titles may stop as a result of the Faxon bankruptcy," Director of Tisch Library Jo-Ann Michalak wrote in an e-mail memo on Feb. 3.

To overcome the lack of availability, Michalak urged library users to utilize the borrowing services offered through the library's website, assuring them that "Document Delivery staff will obtain the material for you."

Both Kodzis and Albright noted that the crisis highlights the benefits of Internet-accessible resources. If anything, Albright said, the crisis is "accelerating our shift to electronic access."

But some publishers appear to be taking advantage of the struggle between Divine and RoweCom by asking library administrators to commit to unusually long-term subscription agreements in order to maintain continuous service.

"It's not to our advantage to tie ourselves up like that," said Kodzis, in reference to an offer he had received that required a two-year commitment to both paper and online subscriptions of a journal. "Only the New England Journal of Medicine has offered us a year without payment that is not contingent on subscription renewal," he said.

The university libraries have begun to search for a company to replace the subscriptions services RoweCom once provided.

Three days before RoweCom filed for bankruptcy, Swets Blackwell, a Dutch company that had spent two months in negotiations with Divine representatives, withdrew its bid to buy the struggling subsidiary, citing "key conditions, including the resolution of at least $50 million in prepayments and the ability to offer customers uninterrupted service, would not be met by parent company Divine."

After the Swets Blackwell deal soured, Atlanta-based Ebsco Industries signed a non-binding letter of intent to purchase RoweCom. But Ebsco's proposed offer is pending a satisfactory solution to the crisis between RoweCom and Divine. However, officials from Divine told The Chicago Sun-Times that this scenario is unlikely, given RoweCom's bankruptcy.

Divine's stock, which traded at $18.75 a share last March, closed at 35 cents on Friday.