Paying the Rwandan Weavers or the Bank

Today’s NY Times includes this story about Eziba, a failed dot com that used to sell African handicrafts until it went belly up last year.

“Since its debut in 1999, Eziba was never shy about publicizing the benefits it bestowed on vendors around the world. The company said it paid a total of $10 million to groups like Rwandan basket weavers, many of them widows of that country’s war, and South African papier mâché artists.

But when Eziba’s financial fortunes soured late last year, the company paid off a $500,000 bank loan instead of paying hundreds of artisans more than $100,000 it owed them.

Eziba said that paying off the loan was the best business practice – a contention disputed by some bankruptcy law specialists. Shortly after paying the loan, the company entered a voluntary liquidation process in hopes of paying off creditors like the New York public relations firm Ruder Finn, among others. (According to Emmanuel Tchividjian, a Ruder Finn senior vice president, his company, which was owed $11,000, was more concerned with protecting the interests of the Rwandan artisans, whose work Ruder Finn publicized, than recovering its money.) The bankruptcy proceedings are continuing., the publicly held online seller of discount merchandise, bought Eziba’s assets from the bankruptcy trustee for $500,000, a price unrelated to the bank loan, and announced that it would pay the artisans in full, even though it is not legally obliged to do so. Overstock further said that it would try to revive their businesses by selling their goods on, an Overstock division with a mission similar to Eziba’s.