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Yeshiva Internet Business “Best of the Worst”

Katherine Meyer of the Wall Street Journal discusses the worst business ideas of the dot-com era.

Take, which thought it could make money by giving stuff away for free. The online retailer, founded in 1998, sold an assortment of goods at heavily marked up prices (some items going for up to 10 times their retail values), but promised customers a hefty rebate that often amounted to 100% of the purchase price.
For example, CyberRebate charged about $1,100 for a 13-inch RCA television that normally retailed for a few hundred dollars. Buyers could get a full refund of the purchase price as long as they jumped through some hoops — rebate forms had to be submitted by a deadline, and checks came 10 to 14 weeks later. CyberRebate banked on the idea that some percentage of buyers would forget to fill out the rebate form, or fail to do so in time, leaving the company to pocket the money.
But selling items at such wildly inflated prices just about guaranteed customers would go out of their way to get their rebates, quickly sinking CyberRebate into heavy debt. The company, founded by law school student Joel Granik, filed for Chapter 11 bankruptcy protection in May 2001, listing liabilities of $83.4 million. Much of that debt was owed to consumers who were promised rebates but hadn’t received them.
Both Mr. Granik and his business partner, Joseph Lichter, settled with the Federal Trade Commission for $40,000 in August 2004 and were barred from running a rebate-based business. Some rebate claimants eventually received partial reimbursement of about nine cents for every dollar, according to a statement on CyberRebate’s Web site.

Not discussed by Meyer — and after some searching around, seemingly never discussed on the Web — is that this business was run by a bunch of Orthodox Jewish guys, mainly from one yeshiva: Yeshiva B’nei Torah of Far Rockaway, New York. The yeshiva is often described as distinctive because of its high-strung, but not too-high-strung, nature. In the world of differentiated dress codes meaning everything for each group of 20 Jews, I often heard the yeshiva characterized by the dress of its rabbi, Pesach Israel Chait, who — adherents noted with glee — wore a blue blazer and khaki pants.
There’s almost no discussion — or evidence, really — on the Internet of the Orthodox Jewish nature of those running the company (just a couple [1, 2] comments from screwed customers and the resume of Shlomo Troodler), and absolutely no resultant conversation of whether their beliefs or the attitudes at their yeshiva helped foster such a horrific business plan (maybe they just felt they were so much smarter than everyone else?), how the business plan cohered with any basic notions of broader or Jewish morality, or how the ethics in play there allowed them to keep taking in millions of dollars in revenue after it was clear that things just weren’t working out.

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