March 20, 2003
Governor Jennifer M. Granholm today asked Attorney General Michael Cox to investigate and take the appropriate legal action against a commercial subscription company accused of defrauding Michigan’s libraries. Granholm asked Cox to review actions by the company, RoweCom, in a letter sent to his office today.
“This is a situation that seriously threatens the Michigan library community,” Granholm said. “In tough budget times like these when money is already scarce, it is imperative that the libraries’ loss of public funds be recovered, if possible. Libraries are windows of opportunity for young minds. We all share in the benefits they give us, so we must share in protecting them and our investment in them.”
Dr. William Anderson, Director of the Department of History, Arts and Libraries, informed Granholm that the company has defaulted on its commitments to numerous libraries across the country, including many in Michigan. RoweCom has collected as much as $50 million from libraries nationally to purchase periodical subscriptions but has failed to pay the publishers who, in turn, have terminated their subscriptions to the libraries.
According to statements from corporate officers from RoweCom, much of the money received by the company was used to fund other operations of its parent company, Chicago-based Divine, Inc. In December, RoweCom publicly stated it was unable to place 2003 orders for the substantial majority of its customers and that Divine had recently decided that it would no longer support the subscription aggregation business.
“Our funds are already critically impaired because of the budget situation here in Michigan, and this can only add more grief,” Anderson said. “I appreciate the Governor’s support on this issue and hope the Attorney General will do the same. It is important to the affected libraries here and all across the country that this issue be resolved in a timely manner.”
The Michigan libraries that have been directly affected include the Escanaba Public Library, Oakland University, the University of Michigan Dearborn, the University of Michigan’s Kresge Business Administration Library, and 40 additional libraries that are part of The Library Network, a library cooperative in southeastern Michigan.
Libraries around the country are beginning to take legal action. It appears that RoweCom has not filed for bankruptcy, and its uncertain future has prompted over 400 libraries and publishers to join a creditors group and to retain legal counsel. New York Attorney General Eliot Spitzer has filed a breach of contract suit against Divine and RoweCom on behalf of the university libraries at SUNY Buffalo.
Granholm hopes that in light of the information that she provided to the Attorney General, he will act immediately and investigate and explore available legal options to address the situation.
