Ginsu knives, psychic hotlines and a $90 tablet: the story behind the Matrix One (update: more details)

On December 5th, Direct Merchandise Marketing (DMM) released a long-awaited statement that was supposed to explain just what had gone wrong in shipping its Matrix One tablet, a device we thought we might never see. The company cited part delays and Google Wallet troubles that left it with no choice but to allow refunds. However, that's not even half of the story. As you'll see in our investigation after the break, the company itself hasn't been on the level with its customers, even as it became clear that operations were coming apart at the seams.

You may already know some of the situation, but we'll recap. After unveiling the Matrix One in June, DMM (which often goes by the Matrix One name) put the tablet on sale in the summer for just $90, and as low as $60 during a 72-hour sale. The company quoted early customers an arrival time of three to four weeks. Some shipped, as evidenced by unboxing videos on YouTube, but many missed the target entirely. DMM ultimately stated in early November that shipments had been held up in customs and that it would freeze new orders until the crisis was resolved. Some of its now-missing pages (such as the one below) still suggested for weeks that there was only a momentary setback, however. Likewise, the company's official explanation doesn't mention the customs issues at all despite the difficulties appearing two weeks after it placed production orders.

As we've since learned, there's been a lot more going on underneath the surface. In the days following the customs-related notice, the Matrix One support team stopped responding to email from our readers and others. There was a brief glimmer of hope when the company told us shipments started on November 19th -- the same day we reached out for an update -- but even that proved hollow. Some customers reported to us that they received a status update that day, but have yet to see a shipment. It's shortly after this that we learned Google had banned DMM from taking orders through its Google Wallet account. Google hasn't yet responded to questions about what happened, although DMM now says the ban was due to complaints about unfulfilled orders. At least some have received refunds, but the company said nothing directly to customers well past the moment the ban took effect -- it wasn't until the public statement in early December, weeks later, that it acknowledged something was wrong.

Moreover, the promises that shipments will resume contradict what we've learned about DMM's state of affairs. Customer phone calls (including those from readers) were either ignored or met with responses that DMM was closed, just a few days after orders were supposed to have shipped. We called the company ourselves, just before its entire site was replaced by the single-page statement, eliminating any reference to a phone number. We didn't get so much as a dial tone -- there was no longer a number to reach. For all intents and purposes, the company and its product are in limbo despite claims that all will be well once again.

How did this happen? To start, there have been irregularities in DMM's practices, some of which wouldn't have been apparent without a deliberate background check. An odd business model in the company's (now unavailable) mission statement is the first tip-off. Supposedly, DMM wants to take advantage of "existing manufacturer relationships" in China to offer tablets through the Buyers Club of another company, Direct Media Marketing -- which doesn't appear to exist on the internet, at least as it's described. DMM has predicted shipments of 50 million tablets over the space of five years, which is wildly optimistic when current estimates have the entire Android tablet ecosystem delivering 10 million a quarter. The designer would have to grow from a complete unknown to a major player in five years. That's no mean feat when DMM looks to have been founded in 2012 and filed for the Matrix One trademark on June 8th, two weeks before we saw the device ourselves.

You could call DMM the Janus of tablet builders, as it presents different faces to different audiences. While most of us have been focused on the Matrix One, DMM was, for a time, running another brand, Pacatek, which was also supposed to be making low-end Android tablets. The hardware had a different look, but it was otherwise a near-mirror image: similar parts, similar phone numbers and the same suite at nondescript offices on East Walnut Street in Pasadena, Calif. DMM presented a tablet to one trade show as the Plumm, and even the Matrix One has seen attention split between two pages. If you went to the (now defunct) mtxtablet.com site that was most often used to pitch the Matrix One, you saw a strictly buyer-focused page with one product and two variants. Going to mtxone.com before the December letter saw a recruiting drive for sales agents as well as two extra models, the One 7 and One 7S, which were minor reworkings of the basic Matrix One. While we're no stranger to companies having multiple brands to serve different markets, such as Acer's Gateway and Packard Bell divisions, they usually have the courtesy of acknowledging each other's existences and presenting a coherent strategy. One targets Europe while another focuses on the US; one is budget, the other luxury. None of DMM's pages have referenced each other, and the lineups clearly tread on each other's toes.

If there's a root cause for this at times self-contradictory and insincere approach, it might be the company's CEO and president, Robert A. Klayman. He's been involved in a series of businesses that have presented an inconsistent front to the public and have sometimes run into legal trouble. While he claims to have had deep involvement with infomercials, including marketing the controversial yet popular Ginsu knife, that's just one piece of the puzzle. Klayman is also involved in the call center business. He's the owner of both Secure Call Management and SCI At Home (now branded SCI Live), the latter of which is marketed as providing call center sales through home-based agents while it also focuses heavily on psychic hotlines. Klayman was one of the targets of cease-and-desist orders after selling securities in SCI that violated securities laws in California and Pennsylvania; SCI has also been accused of failing to pay at least one of its psychics. The US government accused Klayman of breach of contract around 2008, for reasons masked by incomplete records, and ultimately reached an out-of-court settlement with Klayman. That deal, in turn, only came after his failure to respond to the court led to a default judgment against him.

Robert Klayman on the left as part of a promo for a call center deal with Manny Pacquiao, center. [Image credit: Internet Media Direct]

We tried getting in touch with Klayman to set the record straight, but this just underscored what looks to be his (and DMM's) rapid retreat from public scrutiny. He never responded after we pinged three phone numbers and two email addresses. We went so far as to check on the state of another of Klayman's many companies, Internet Media Direct. Its website is down, and the last major reference to it was a roughly worded Examiner story from 2011 about a deal with Filipino congressman and boxer Manny Pacquiao, who hoped to bring Klayman's call center jobs to his home country. Our lone contact specific to the Matrix One brand, CTO "Allen K," exhibited his own questionable behavior beyond just an unwillingness to give a last name. He hasn't answered requests to either of his email addresses since November 19th, and trying to call his number today reaches someone who's unaware that Allen exists. Even a third-party trade show representative for the company hasn't replied. If anyone has a different version of events, they're making it difficult to hear the tale.

Withdrawals extend as far as the web. The mtxtablet.com domain is gone, and pacatek.com is a shell; only mtxone.com remains of the tablet sites as of this article, and the open letter has replaced all of its other content. Social networking pages beyond LinkedIn have either been pulled or were never used. It's hard to accept that the Matrix One is on the cusp of recovery when Klayman's online properties are scaling back.

With Klayman and DMM so far unable or unwilling to participate, it's difficult to piece together the complete story behind the Matrix One, even after all of our discoveries. We don't know for certain whether the company just mismanaged its crisis handling or forged ahead knowing that problems were coming. At a minimum, it's been dishonest in the wake of shipping troubles. For the number of customers who did get their orders, there are still many who were either left in the dark or were told shipping had started when it clearly hadn't. The December letter, which came as we stepped up attempts to get a statement, did little to reassure us. Whether or not there's consistent logic behind it, the shift in blame from customs to part suppliers only reinforces doubts about the company's prospects. Throughout all of this, Klayman has been silent and compounded the negative images both of his company and, as we've found out, of himself.

Much as we'd suspected, the Matrix One may just be too good to be true.

Update: We've spoken to a source close to the company. The source reinforced our suspicions that management was a significant issue, but otherwise reiterated the company's official position that customs delays triggered problems.

Christopher Trout and Michael Gorman contributed to this report.