The Going-Out-Of- Business Business Some Local Oriental- Rug Dealers Turn a Profit by Going Bust

By now you'd think that Abe Farshneshani would have given up on the oriental-rug business. A few years back, he owned a rug store on Connecticut Avenue in the District. It went belly up. So he opened a new shop in Springfield, Va. Same result. Ditto for a store in Rockville. Now he's trying again in Bethesda.

But for some oriental-rug dealers, going out of business is the business. Mattress retailers may offer President's Day promotions, and fast-food chains may slash burger prices for a few weeks. Rug dealers, however, have turned sales—specifically “going-out-of-business” sales—into high art.

Just take a peek at any Saturday edition of the Washington Post, the Bible of local rug merchants. Ads for close-out sales—sometimes as many as a half-dozen—appear every weekend, bombarding Washingtonians with exclamation points: Total Liquidation! 50-70 Percent Off! Pennies on the Dollar! Final Reductions! Sold Regardless of Value! Last Chance!

Could it be that the bottom has fallen out of the oriental-rug market? “Absolutely not,” scoffs Paul Manoukian, proprietor of Manoukian & Bros., a 70-year-old family business in Adams Morgan. “Nine times out of 10 these sales are contrived celebrations, just scams,” he says.

“If they have a rug that costs them $100, they'll mark it up to $1,000 or $1,300,” explains Emmert Elsea, owner of Xanadu Oriental Rugs in Leesburg, Va., and lead consumer fraud investigator for the Oriental Rug Retailers Association (ORRA), a national trade group. “Then they advertise 60 percent off, so the customer thinks he's getting a deal. That's the way it works.”

Close-out professionals plunder their way around the region, say Manoukian and other long-established local rug dealers. They offer a flashy going-out-of-business promotion at one store. Then they shut down, open a store on the other side of the Beltway, and do it again.

That's certainly the pattern established by Farshneshani, a name that inspires skepticism among other Washington rug dealers. The Farshneshani saga begins in fall 1992, when he advertised a close-out sale for Fars Persian Oriental Rugs, his store on upper Connecticut Avenue in Northwest D.C. Although Farshneshani actually staged the sale at a warehouse in Springfield, he failed to obtain a permit for the sale from either Fairfax County or District authorities.

The District and Fairfax County—like most local jurisdictions—protect consumers from close-out abuses by requiring permits to run going-out-of-business sales. Permit regulations generally forbid applicants to supplement their inventory during the sale. Some jurisdictions—though not D.C. or Fairfax—bar an applicant from receiving another permit for a specified time period. In Montgomery County, this restriction lasts for three years, though it applies only in the county and not in other jurisdictions.

Having completed his fall 1992 close-out sale, Farshneshani shut his D.C. store and moved his headquarters to the Springfield warehouse. He intended to pursue another of the industry's favorite quick-buck strategies: auction sales. When he learned that Fairfax County zoning regulations barred auctions at his warehouse, he tried and failed to break his three-year lease.

Saddled with the rent and enjoined from running auctions, Farshneshani returned to what he does best: going out of business. He opened the Alexandria Oriental Rugs Center at the Springfield warehouse in late 1992. Barely a year later, in early 1994, he ran a close-out sale there. Fairfax County's Department of Consumer Affairs licensed the sale.

At the same time as the Virginia close-out, Farshneshani began yet another going-out-of-business sale at his Rockville Oriental Rug Center. Ads in the Washington Post promoted the Springfield and Rockville close-out sales side by side. “Due to the soon-to-expire government permit 183 for the sale, these two reputable, longtime businesses must close their doors soon....Last 3 days, so hurry in!” pleads an ad in the March 19, 1994, Post.

A week later, Farshneshani placed a similar ad for the same sales. This ad read, “Last 2 days.”

After the Springfield and Rockville sales finally ended, Farshneshani shuttered the two stores. Now his itinerant business has bivouacked to Bethesda, where he has opened Bethesda Oriental Rug Supreme. He has yet to run a going-out-of-business sale at this shop, but he came close in February 1995, when he placed an ad in the Post that set a new standard for shamelessness. Small print at the top of the ad read: “There are a lot of places running...”—the sentence continued in huge, all-caps print—“GOING OUT OF BUSINESS SALES.”

Montgomery County fined Farshneshani $500 for the pitch. Any ad using the words “going out of business,” “liquidation,” or “close-out” triggers a licensing requirement under the county's consumer protection regulations, says consumer fraud agent Nellie Miller.

But that slap on the wrist didn't deter Farsh neshani, who has become expert at tiptoeing around the edges of business regulations. In April 1995, the Bethesda store launched another not-quite-going-out-of-business sale, a so-called “Bankruptcy Prevention Sale.” An April 1 ad in the Post claimed that “After many years in business severe competition and economic conditions drive us to go bankrupt unless we sell as many rugs as we can regardless of costs!”

When confronted with his history in the going-out-of-business business, Farshneshani issued a spirited denial. “It's not true at all, not true at all,” he exclaimed. “I am still in the business.” But he refused to answer specific questions about his rug stores and requested that the questions be submitted in writing. Farshneshani did not respond to the written questions.

But Farshneshani is not the only local closing-out virtuoso. The Parvizian clan, whose flagship store is Bethesda's Parvizian Masterpieces, is also practiced in the art of the fire sale. Abdul “Abdi” Parvizian owns Parvizian Masterpieces; his brother, Manoucher Parvizian, helps him manage the store. According to a permit issued by Fairfax County, Manoucher ran a close-out sale for Gallery of Rugs at Tysons Corner in November 1993. TAJ Oriental Rug Outlet Center in Falls Church, Va., whose president is Abdul Parvizian, ran a going-out-of-business sale from February until June 1995. Furthermore, Montgomery County issued two citations to Parvizian Masterpieces this year: one for a four-month pre-remodeling sale; the other for a “temporary location sale” held during the remodeling, according to consumer fraud agent Miller. A Maryland state judge threw out the first citation. Court arguments on the second citation will be heard on Oct. 3.

Abdul Parvizian insists that “no Parvizian has ever run a going-out-of-business sale.” He claims that another rug dealer—Taghi Parvizian, a cousin—actually ran the Virginia sales.

Also on the court's Oct. 3 calendar will be the appeal of a fine issued to the Maison du Tapis D'Orient, a Kensington-based rug dealer. The Maison's close-out sale dragged on for an entire year—six times the 60-day limit on close-out sales stipulated in state and county consumer statutes. The sale also featured all the telltale signs of a close-out: no refunds or returns; outrageous discounts—the store advertised savings up to 78 percent plus an additional 10 percent with a coupon clipped from the newspaper—and high-pressure sales tactics. (The head salesman foisted this line on me as I examined a $2,000 Persian rug: “If you find something you're comfortable with, just buy it,” he urged. “Don't get caught looking at too many rugs, because you'll just get confused.”)

Complaints from Kensington residents and businesses have put an end to the Maison's sale, but not to the activities of its owners, Amir Movaghar and Homayoun Pishevar. The two have opened a new outlet, theHakimian Rug Co. on Connecticut Avenue in Woodley Park. The city approved the store's certificate of incorporation on May 2, 1995. Movaghar and Pishevar are already running a “closing retail/total liquidation” sale.

And these constitute just a fraction of the region's going-out-of-business sales. “The Washington metro area is infested with them,” says ORRA fraud investigator Elsea. “And it gets very tough to track all the activity.” (Shady practices are so common in the rug trade that ORRA has issued an inch-thick “Combat Manual” to help members spot and eliminate fraud.)

According to traditional dealers, local close-out sales are backed by rug wholesalers and liquidators operating out of New York, California, and Florida. The out-of-townliquidators offer to run sales for local dealers. “What they try to do is take advantage of your reputation in the community,” says Manoukian. “I spoke with one who said, "Hey, we'll take care of everything—advertising, stock, and sales—and you just sit back and take a cut of the proceeds.' The sad thing is that I may actually want to go out of business some day, and I'll end up looking like these guys.”

As part of their pitch, the liquidators assure local dealers that close-out sales will not close out their business careers: “Following a GOB [going-out-of-business] sale you have the option of changing the ownership of the gallery, or the name of the company you are operating under in the same location, or elsewhere in the same town,” reads a promotional flyer for MS&A, a rug liquidator based in Laguna Hills, Calif.

Consumers must protect themselves from unscrupulous dealers. Business regulators in D.C. and the suburbs readily concede that their laws are often no match for aggressive rug dealers. “The problem here is that a company can run a closing sale and start one a little later at a different store,” says Paula Meas of Fairfax County's consumer affairs department. Similarly, Janet McCormick, a spokeswoman for the District's Department of Consumer and Regulatory Affairs, blames budget cuts for preventing the city's consumer-fraud agents from tracking the endless stream of ads that appear in local newspapers. Only Montgomery County has been relatively active: Miller issued 13 citations against rug dealers in a four-month period this year.

While consumer police have had varying degrees of success in curbing the sales, they are powerless to undo the condition that allows them to thrive—namely, vast public ignorance about oriental rugs. Distinguishing rip-offs from real deals on rugs requires schooling in the fine points of design, fiber quality, knot density, country of origin, and age. Occasionally, even connoisseurs admit to being fooled by deftly woven impostor rugs.

“There's an old saw in the oriental-rug trade that says there's nothing quite as stupid as the American rug customer,” says Ray Albed, a three-time president of ORRA. “I've had these guys tell me straight to my face that they won't stop the sales as long as customers believe them.”

Our Readers Say

we have more problems than this.
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the most crimes committed in the US are corporate crimes FYI.
I think you're mad that these immigrants come to America and do 20x better than white america.

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