GRAND FORKS - An Arizona telemarketing firm that took over a defunct call center operation in Minot is considering doing the same in this city.

The deal hinges on whether the city will release the owners of WebSmart Interactive from their personal guarantees and drop its lawsuit against them. That could allow WebSmart to turn its equipment over to Scottsdale, Ariz.-based Phase 2 Solutions.

"We are trying to negotiate through all the issues right now," said Larry Willett, president and founder of Phase 2.

WebSmart shut down in April, leaving more than 600 people jobless in Minot, Grand Forks, and Saskatoon, Saskatchewan. The company is facing several lawsuits, including one initiated by the Labor Department to collect paychecks for the employees.

WebSmart's owners said the company closed because a major customer, Global Financial of Georgia, could not pay its own bills.

WebSmart owes the city of Grand Forks more than $400,000, and the city is holding WebSmart's equipment in the Grand Cities Mall as security.

Mall Manager Larry Stammen said when he approached city officials about the proposed deal with Phase 2, everyone seemed on the same page.

"Everybody agreed that if they sue WebSmart and pursue the personal guarantees and these guys file bankruptcy, they won't get a dime," he said. "And even if you could get all $450,000 from these guys, would you rather have the money or would you rather have the jobs?"

About 160 workers in Grand Forks lost their jobs when WebSmart closed.

John Skowronek, of Minot, former president and chief executive of WebSmart, said he would like to see those former employees back at work.

"I'm involved because I'm the one who first contacted Phase 2 when we had to shut our doors," he said. "I wanted to find a company to take over these centers and hire some of those poor people that we had to lay off."

Skowronek said he has no money to sue for.

"Everybody thinks that I have this hoard of money that I'm hiding," he said. "All they're going to do is force us into bankruptcy."

Jim Melland, vice president of the Grand Forks Region Economic Development Corp., said the group is working with Phase 2 but he could not disclose details.

Phase 2 Solutions employs about 1,300 people and has five call centers: two in Scottsdale, two in Minot and one in Vermillion, S.D. The company pays its employees $8 to $10 per hour, Willett said.