Polaroid's embattled chairman and chief executive, Gary T. DiCamillo, resigned yesterday after a troubled 6 1/2-year run in which the faded company faltered and ultimately was forced to file for bankruptcy.

Before Polaroid sought protection from creditors Oct. 12, DiCamillo was criticized for failing to move the instant photography company in a new strategic direction. The company produced a few moderately successful products, but could never figure out how to wean itself off its declining sales of instant film.

During Polaroid's bankruptcy, DiCamillo was accused by former employees and company insiders of favoring top management and directors with preferential pension treatment and generous payments and bonuses while systematically dismantling benefits for retirees and employees. DiCamillo sought and won bankruptcy court approval to give himself and the top 40 managers at the company bonuses even as health insurance, severance payments, and some pensions were discontinued or drastically reduced.

DiCamillo was further criticized when employees' shares in a company stock plan were sold off without their permission after the firm declared bankruptcy. Workers had been forced to buy and hold the shares while their value declined from $60 in 1997 to pennies. The company said the decision to sell the shares was made by the stock plan trustee.

DiCamillo will join TAC Worldwide Cos. of Dedham on July 1, according to Polaroid and TAC. The 32-year-old provider of contract labor and temporary workers has annual revenues of about $850 million, according to its chairman, Salvatore Balsamo.

DiCamillo's departure comes as Polaroid's efforts to emerge from bankruptcy faced new challenges. In bankruptcy court Tuesday, Polaroid admitted that its proposed sale to a group of Chicago venture capitalists would include $135 million the company is expected to have in the bank, according to the company and people at the hearing. As a result, OEP Imaging Inc., a buyout group formed by Bank One of Chicago, would only have to put up $130 million in cash to buy the company. Polaroid said last month that it accepted a bid of $265 million from OEP. That OEP's bid will yield only $130 million in new funds could leave the offer open to challenge by other potential buyers.

Adding to the company's woes, a Polaroid shareholder who represents the owners of 30 percent of the firm's shares said that Polaroid understated or misrepresented millions of dollars in assets in filings to the US Bankruptcy Court in Wilmington, Del. Had those assets been properly accounted for, the shareholder said, Polaroid's assets would have greatly exceeded its liabilities at the time of the bankruptcy - raising doubt as to whether Polaroid was truly insolvent when it sought protection from creditors.

The departure of DiCamillo was unexpected, coming amid rumors that the Polaroid CEO would play a part in the company's buyout and retain a management role.

Reached last night at his Wellesley home, DiCamillo said: "The release speaks for itself," and referred questions to a company spokesman.

Balsamo, the founder and chairman of TAC, said he had great faith in DiCamillo despite his record at Polaroid. "He brings a lot of leadership qualities and a history of successes," said Balsamo. "We looked at the whole career of Gary. His career is a great career. He had a bad experience at Polaroid. I'm not sure it was all his fault."

Balsamo said he has been looking for a chief executive for about six months and was introduced to DiCamillo recently through an executive search firm. Yet in recent days, DiCamillo has continued to exhort Polaroid's dwindling employees to keep working hard to keep the company going until the bankruptcy auction could be completed.

"Next week we will again be visiting Massachusetts sites to present business updates and answer questions for employees," DiCamillo wrote in a memo to employees Monday. "Meeting our sales, cost and expense targets continues to be imperative. We must continue to bring the highest quality products to market as efficiently as possible."

DiCamillo was hired in late 1995 from Black &Decker Corp., where he was vice president and chief of the power tools division. Going outside Polaroid for new leadership for the first time since the company was founded in 1937 was intended to reinvigorate what had been one of the word's great brands and inject new marketing savvy into what had always been an engineering-driven company.

Yet DiCamillo's tenure at Polaroid was marked by continual upheaval. Almost immediately upon arriving in late 1995, DiCamillo began the first of a series of re structurings, which included big layoffs and tinkering with Polaroid's organizational structure.

The restructurings continued, and Polaroid shed thousands of employees, shrinking from more than 11,000 employees when DiCamillo joined the firm, to about 6,800 prior to last fall's bankruptcy filing.

DiCamillo focused Polaroid on its "core" business of selling instant cameras and film. He sold off numerous business lines, including the sheet polarizer that Edwin H. Land invented in 1928 and that became the company's namesake. But despite some successful cameras, such as the I-Zone which was a hit with teenagers, the core business continued to shrink.

DiCamillo would pronounce new "digital strategies" for the company to participate in the growing market for digital photography. But the strategies never yielded a concrete product, let alone a business plan around which the company could grow.

Through it all, DiCamillo's compensation continued to grow. In 2000, DiCamillo earned a salary of $838,950, a bonus of $107,232, and a stock award which at the time was worth more than $4 million. In January, DiCamillo was awarded a $65,000 bonus as part of a plan approved by Bankruptcy Judge Peter Walsh to provide "retention" bonuses to top level management. The plan was intended to keep top management, including DiCamillo, in place through the company's restructuring and ultimate sale.

Bowing to mounting pressure over executive bonuses, DiCamillo chose not to participate in a second round of payments approved by the bankruptcy court.

The sale to the Bank One group now appears to be in question. Walsh this week approved a plan under which Bank One's bid of $265 million would serve as the "stalking horse," or opening bid, in a court-overseen auction. The venture group will be compensated even if it doesn't win the auction: Walsh approved a $5 million "breakup fee" for the group if another bidder wins the auction.

That seems more likely after the disclosure by Polaroid that the potential suitors would only have to bid more than $130 million in cash to top the current high offer. A Polaroid spokesman declined to say whether other bidders have come forward to challenge Bank One. If other bidders appear, the auction would be held June 26, and the winning bid would be considered by the bankruptcy court June 28. A deal is expected to close by July 31, according to the court schedule.

If it prevails, the Bank One group would receive a number of assets at a fraction of their actual cash value. Polaroid's collection of fine art photographs by Ansel Adams and other reknowned photographers alone is estimated to be worth millions.

Moreover, Polaroid misstated the value of many of the assets it listed in a schedule with the bankruptcy court, according to Stephen J. Morgan, who claims to represent shareholders who own 30 percent of the company's stock.

Morgan said he has independently investigated the company's assets and found many that were missing or undervalued in the bankruptcy filing. For instance, he found four pieces of real estate with a total assessed value of more than $700,000. The company also left out the value of more than $155 million in assets it owns in foreign countries, he said.

Other assets, such as the value of stock in publicly traded companies like Federated Department Stores and Duckwall-Alco Stores Inc., were listed as "undetermined," according to court documents. Federated shares yesterday closed at $39.59, and Duckwall shares at $15.40.

Also troubling, said Morgan, is that Polaroid listed assets at their net book value, the value that a company carries assets on its balance sheet after depreciation, which often bears little resemblance to their actual market value. For instance, Morgan claims Polaroid listed the value of its Norwood facility at $1.1 million, when it has an assessed value of $33.5 million and an internal Polaroid document from last April pegs its value at more than $35 million.

One prominent bankrupcty attorney, Bill Kannel of Mintz Levin Cohn Ferris Glovsky and Popeo PC, said Polaroid appeared to have underreported its assets.

"The official bankruptcy forms call for current market value," said Kannel. "If they reported net book value instead of fair market value, they are not reporting what would be available to creditors if there's a going-concern sale of the assets. In a bankruptcy, people are concerned with what assets sell for in the real world, which may not correspond to what they're carried on the books."

Skip Colcord, a Polaroid spokesman, said, "We have fulfilled the requirement of the bank court with all of our filings."

Morgan's effort to have his group given official standing in the bankruptcy proceeding was denied this week by Judge Walsh. But the judge ordered Polaroid to turn over numerous documents that Morgan has requested. Those documents could further substantiate his allegation that the company sought to understate the value of its assets.

Jeffrey Krasner can be reached at krasner@globe.com.

Caption: Gary T. DiCamillo will join TAC Worldwide Cos. in July. / FILE PHOTO

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