NASHVILLE, Tenn. (WTVF) — A grassroots startup promised the state of Tennessee it would bring jobs and invest millions but that is not what happened.
SmileDirect Club offered orthodontic treatment from the comfort of your own home. The company promoted custom-made plastic aligners that it claimed would straighten your teeth without having to see an orthodontist.
The company promised it would invest millions of dollars into the state when it expanded into Nashville in 2016. But last fall, the company filed for Chapter 11 bankruptcy saying it was $900 million in debt. Without enough new customers or an infusion of new capital, SmileDirectClub closed its doors abruptly — leaving hundreds of employees in downtown Nashville and Antioch without jobs just before the holidays.
A NewsChannel 5 analysis of state reports and documents from the Tennessee Department of Economic and Community Development showed the company was supposed to invest $255.5 million into Tennessee. The state gave the company more than $6 million in grants when it announced expansion plans.
SmileDirectClub was supposed to bring more than 2,000 new jobs to the state. But those same documents show the company failed to do that. In fact, it appears the company only added 1,108 new jobs and then began cutting workers. When the company closed in December, it appeared it only had about 650 employees.
When did SmileDirectClub come to Tennessee?
The orthodontic line came to Tennessee during Gov. Bill Haslam's administration, and he welcomed the company's expansion into Nashville in 2016.
When the company announced its expansion plan, it opened offices in downtown Nashville and a distribution center in Antioch.
It initially hired around 1,100 new employees to add to its existing 1,500.
But grant reports provided to the state show the company soon began cutting jobs — eliminating 1,220 jobs in the next report. In the final report submitted to the state before the company declared bankruptcy, SmileDirectClub said it had whittled down to just 650 employees.
During the pandemic, the company wanted to expand into Maury County. But state documents show no employees were hired for the Maury County facility. It is also unclear whether the company ever retrofitted the Columbia facility to make orthodontic equipment.
"We are disappointed in the notice of the SmileDirectClub bankruptcy, which will negate what was a historic job announcement at the time for the City of Columbia," Columbia Mayor Chaz Molder said. "The silver lining is that SmileDirectClub had not yet fulfilled its job obligation as announced. Therefore, there will be limited, if any, negative effects on our current workforce. We remain committed to working with our state and local partners to find the very best economic development projects for our community going forward."
Rep. Scott Cepicky, R-Culloeka, was not available to speak on this situation and the impact to his district.
What happens to the money Tennessee gave to SmileDirectClub?
SmileDirectClub may have to pay back the millions through its bankruptcy proceedings.
"Smile Direct Club, LLC and Access Dental Lab TX, LLC defaulted on their agreements when they ceased operations prior to the end of the contract period, which requires a repayment of 100% of the grant funds received," said Jennifer McEachern, a spokesperson for the Tennessee Department of Economic and Community Development. "Until that time, TNECD was unaware of the company's intention to cease operations."
TNECD contracts require companies to create their required number of jobs by the end of the contract period. Failure to meet the job commitment during the contract's time frame would also require the company to refund the state's money.
The state confirmed SmileDirect and Access Dental Lab would be in an "accountability" agreement for seven years. McEachern said the state would measure its progress for job growth in years five, six, and seven for both. If they failed, there would be a clawback, meaning they had to pay the money back.
The Attorney General’s Office filed proofs of claim in the bankruptcy proceedings on Dec. 19, according to McEachern. The state is requesting repayment of 100% of the funds since both companies have ceased operation.
During the last decade, only two companies, Heritage Glass, LLC and Pure Foods, Inc. in Kingsport, declared bankruptcy and were liable for the money the state gave them.
Did the state know beforehand SmileDirect was closing?
The simple answer is no.
The Tennessee Department of Labor and Workforce Development typically receives what is called a WARN notice when a company plans to lay off employees.
That was not the case with SmileDirectClub.
"The point of a WARN is to provide impacted employees advanced notice so the state can provide services that can help them find new jobs," said Chris Cannon, spokesperson for Labor and Workforce.
That didn't happen until after the fact.
The Tennessee Department of Economic and Development was also unaware.
Rep. John Ray Clemmons, D-Nashville, said he wanted the process of economic deals to become transparent. SmileDirectClub was in his district, and he said he was never privy to any discussions around the expansion money given to the company.
He said throughout his tenure in the legislature he and others have tried to make the process more open but have been repeatedly shut down by their Republican colleagues.
"If you're going to throw serious money around, you have got to maintain your fiscal duty to taxpayers by tracking that money and ensuring you're getting the bang for your buck," Clemmons said. "It says a lot if a gubernatorial administration for the commissioner of ECD don't have people holding them accountable, and saying, 'Look you're behind.' I think that's pretty telling about the competency of an administration."
NewsChannel 5 reached out to Gov. Bill Lee's office about the closure of SmileDirectClub. His office never returned a request for comment.
What can customers do now?
SmileDirectClub no longer has any customer service.
Alignment treatment is no longer available.
For those in the program, SmileDirectClub announced on its website that customers should consult with a treating doctor or local dentist.
SmilePay customers are expected to continue to make all monthly payments until payment has been made in full per the terms of our SmilePay program, according to its website. For more questions, they contact HFD at 1-877-874-3877 or support@gohfd.com.
You can make a bankruptcy claim online so you could be eligible if there is money available.
