APOLLO
ADVISORS

When the gilded idols begin to tarnish…


 

Sightings from The Catbird Seat

~ o ~

May 7, 2004

Vail Investor Unhappy
Over Board Makeup

By Paula Moore, The Denver Business Journal

One of Vail Resorts Inc.’s biggest investors has a problem with the Colorado company’s board, in the wake of earnings restatements and a Securities and Exchange Commission investigation into Vail’s finances….

The SEC probe come on the heels of Vail’s October 2002 announcement that it would restate earnings for fiscal 1999 through 2001….

Late last year, analysts at San Francisco-based proxy consulting firm Glass, Lewis & Co. urged Vail stockholders to withhold their votes on six of seven board members up for re-election, including Stritz and Micheletto. In a December proxy analysis, Glass, Lewis found Vail and its auditors have discovered accounting errors affecting multiple years of financial reports.

James Donohue, Vail’s CFO since 1996, was reassigned last November, a week after Vail announced the restatements cut profits by more than $3 million….

Glas, Lewis analysts also gave Vail’s executive compensation program an “F” for paying top managers more than the median pay at peer companies. Though Vail execs made more money than top management at comparable companies, the resort owner fared worse financially, according to Bebel.

Vail CEO Adam Aron, for example, took home $6.7 million last year, including his $704,615 salary and perks such as $5.6 million in real estate and club memberships worth more than $400,000.

In fiscal 2003, Vail reported an $8.5 million loss on revenue of $710.4 million.

All 11 of Vail’s executive officers, from Aron to Vail Resorts Development President James Thompson, sit on the company’s 17-person board.

The board also includes Robert Katz and Marc Rowan, both of whom are affiliated with Vail founder and majority owner Apollo Partners LP of Purchase, N.Y. Katz and Rowan formerly were at defunct Wall Street leveraged-buyout giant Drexel Burhnam Lambert with Apollo founder Leon Black….

… Continued at Vail Resorts

$ $ $

May 21, 2004

Blackstone, Apollo and Goldman Sachs prepare $4.7 billion IPO for Ondeo Nalco

www.altassets.com/news/arc/lists/d47.php

The private equity consortium, which acquired Ondeo Nalco from French conglomerate Suez for $4.2 billion, is planning to float the US water treatment business less than seven months after completing the deal….

For more on the other members in this consortium, GO TO > > > Blackstone Group; Dirty Gold in Goldman Sachs

< < < FLASHBACK < < <

January 30, 2002

Multibillion-Dollar Junk Bond Portfolio Undersold For Major Loss to State

Attorney General Lockyer Expands Lawsuit Alleging
Conspiracy to Raid Executive Life

Office of the Attorney General – State of California

FOR IMMEDIATE RELEASE

(SACRAMENTO) – Attorney General Bill Lockyer today added four associates from former junk bond purveyor Drexel Burnham Lambert to a lawsuit alleging an international conspiracy used to illegally acquire assets held by the state and reap billions of dollars from the State of California and policyholders in the wake of the failure of Executive Life Insurance Co.

The complaint filed earlier against more than a dozen companies and individuals, including Credit Lyonnais, a bank once owned by the French government, was amended Wednesday to include Leon Black, John Hannan, Craig Cogut, Eric B. Siegel and several companies they operated in the alleged scheme.

“The additional defendants result from our ongoing investigation in this case,” Lockyer said.

“We believe an illegal scheme of secret arrangements and hidden profits was used to essentially cheat the state and policyholders. Covert business arrangements that illegally included foreign investors were used to acquire the assets and bond portfolio of Executive Life at fire-sale prices.”

When seized by the California Insurance Commissioner in April 1991, Executive Life was one of the largest life insurance companies in the United States, and it owned one of the largest portfolios of junk bonds in the world, which was valued at more than $6 billion. The decline of the junk bond market earlier left the company financially impaired. The Commissioner’s restructuring plan called for a package deal in which both the bond portfolio and the insurance company had to be sold together.

The complaint alleges that a group of investors led by Altus Finance, an investment subsidiary of Credit Lyonnais, the giant French-owned bank, contracted secretly in August 1991 with a small, financially troubled French auto insurer, MAAF Assurances, and several other small companies to act as “fronts” to conceal the bank’s true involvement in the purchase of Executive Life assets.

The secret arrangements hiding the bank’s true involvement violated federal banking laws, as well as state insurance laws that prohibit foreign governments from owning California insurance companies. . . .

The complaint states that the deceit cost California an opportunity to reap substantial benefits from the sale of the insurance business and the junk bonds that would have ultimately benefitted Executive Life policyholders and retirees, as well as the state.

The complaint adds that the sale would have been rejected if the Insurance Commissioner had known of the true interests of Black and others with former ties to Drexel, which worked years earlier with Executive Life to amass the company’s huge junk bond portfolio.

Pending in federal court in Los Angeles, the complaint alleges violation of California’s False Claims Act and state unfair business practices laws.

Additionally, the complaint alleges that the conspiracy constituted a racketeering enterprise under federal civil RICO (Racketeer Influenced And Corrupt Organizations) law. . . .

The complaint stems from a two-year investigation by the Attorney General’s False Claims section.

* * *

From Den of Thieves, by James B. Stewart:

Above the Law

As Michael Milken’s business grew, so did Frederick Joseph’s, if not at so spectacular a rate. Joseph moved quickly to improve the quality of investment bankers at Drexel, hiring several people he had earlier recruited to Shearson, among them John Kissick, Herbert Bachelor, Fred McCarthy, John Sorte and David Kay, whom he put in charge of an infant mergers-and-acquisitions department.

And he hired an arrogant, chubby, headstrong young business school graduate, Leon Black. Black’s father, the head of United Brands, had been caught in a scandal while Leon was at Harvard Business School and had committed suicide by jumping from his office window. . . .


 

July 9, 2004

Outrigger selling 2 resorts

By Allison Schaefers, Honolulu Star-Bulletin

Outrigger Enterprises Inc. has agreed to sell its Waikoloa Beach Marriott and Wailea Marriott resorts to affiliates of Blackstone Real Estate Advisors of New York for an undisclosed price.

The Wailea Marriott is a 521-room hotel on 22 beachfront acres in the Wailea Resort on Maui. The Waikoloa Beach Marriott is a 545-room hotel that sits on 16 oceanfront acres on the shore of Anaehoomalu Bay on the Big Island’s Kohala Coast….

Both hotels, which have been operated by Outrigger through a franchise agreement with Marriott International, will continue to be affiliated with Marriott International after Blackstone’s acquisition. The sale is expected to close as early as July 30, said David Carey, chief executive of Outrigger Enterprises….

Under various management contracts and its two hotel brands, Outrigger Hotels & Resorts and Ohana Hotels & Resorts, the company operates or has under development 51 hotels and resorts throughout the Pacific region, Carey said.

Blackstone, a private investment firm, is most recently known in Hawaii for having sold the Hyatt Regency Maui for $321 million in cash last year to Host Marriott Corp.

The company owns the Marriott Grosvenor Square Hotel in London, the Westin St. Francis in San Francisco and the Hyatt Capitol Hill in Washington, D.C.

Outrigger could not comment on what will happen to employees at the two hotels.

For more, GO TO > > > Blackstone Group; Broken Trust; Buzzards of Paradise; The Carlyle Group; Claims By Harmon; A Connecticut Yankee in King Kamehameha’s Court; Dirty Gold in Goldman Sachs; Dirty Money, Dirty Politics & Bishop Estate; The Game Birds; The Harmon Arbitration; Homeland Security; Marsh & McLennan: The Marsh Birds; Marsh & McLennan’s Trident Funds; The Nests of CB Richard Ellis; Paradise Paved; Predators in Paradise; RICO in Paradise; The Washington Baseball Club; Yakuza Doodle Dandies


 

September 10, 2003

Blackstone, Apollo and Goldman Sachs to Acquire Ondeo Nalco from Suez for $4.2 Billion

A consortium of private equity firms comprised of The Blackstone Group, Apollo Management, L.P., and Goldman Sachs Capital Partners (collectively, the “Investor Group”) has signed a definitive agreement to acquire Ondeo Nalco from Suez S.A. in a transaction valued at $4.2 billion.

Nalco is the world leader in providing water treatment and process chemicals and services to companies in the general industrial, pulp and paper, and energy sectors. With over 10,000 employees and operations in 130 countries, the company provides innovative applications and solutions for the water and industrial process needs of over 60,000 customers. Nalco generated revenues of over $2.5 billion in 2002 and is based in Naperville, IL.

The transaction will be funded with approximately $3.2 billion of senior and subordinated debt financing and the remainder in equity provided by the Investor Group, and is expected to close in the fourth quarter of 2003, subject to customary regulatory approvals.

Following the transaction, Nalco will operate as an independent company.

Source: The Blackstone Group

For more, GO TO > > > Blackstone Group; Broken Trust; Buzzards of Paradise; The Carlyle Group; A Connecticut Yankee in King Kamehameha’s Court; Dirty Gold in Goldman Sachs; Dirty Money, Dirty Politics & Bishop Estate; The Game Birds; The Harmon Arbitration; Homeland Security; Marsh & McLennan: The Marsh Birds; The Nests of CB Richard Ellis; Paradise Paved; Predators of Paradise; RICO in Paradise; The Washington Baseball Club; Yakuza Doodle Dandies

~ ~ ~

NOW, HERE ARE A FEW OF THE BIRDS OF A FEATHER, AND THEIR NESTS…

 


 

Apollo Advisors – Financial investment managers. 13th largest campaign contributor to Senator Joseph Lieberman (D-CT), Al Gore’s vice presidential running mate, and a client of lobbying firm Akin, Gump, Strauss, Hauer & Feld.

Another of Akin, Gump’s clients is Miller & Chavalier, a Washington, D.C.-based law firm which, together with PricewaterhouseCoopers, drafted the multi-million dollar IRS settlement agreement for Hawaii’s Kamehameha Schools.

Apollo Advisors has another connection with Kamehameha Schools: Along with National Housing Corp (which was involved in an alleged kick-back scheme with ousted Bishop Estate trustees Henry Peters and Richard Wong), Apollo has financial interests in several estate owned properties involving two alleged Yakuza-connected companies: Azabu Building Company and Mitsui Trust.

* * *

From Hoovers On-Line:

Apollo Advisors earned its reputation as a vulture investor by specializing in distressed assets (junk bonds, troubled companies, real estate).

Leon Black, the former Drexel Burnham Lambert mergers and acquisitions chief, and a dozen other Drexel refugees founded the group, which invested in former Drexel clients after that firm’s collapse — notably the $3 billion dollar junk bond portfolio of failed California insurer Executive Life.

Apollo has invested billions from four funds and has launched a fifth fund aimed at raising some $4 billion.

Apollo is linked with the Artemis group of investment holdings controlled by French billionaire François Pinault; the relationship dates back to the downfall of Executive Life.

* * *

From Journal Inquirer, 5/11/99, by Don Michak:

Are Finder’s Fees Behind the Silvester Probe?

An FBI investigation of former state Treasurer Paul J. Silvester’s actions at the end of his term may force the disclosure of one of the best kept secrets in the public pension business.

Insiders say a far-reaching probe could throw a spotlight on the longstanding but little-known practice of paying “finder’s fees” to individuals who put together investment deals with public pension officials in Connecticut and other states.

The FBI last month began investigating Silvester’s authorization of $852.5 million in pension fund commitments in the final quarter of 1998….

Past and present treasury officials agree that the fees involved in such transactions can be remarkably lucrative for the “finder”– in some cases, a percentage of the overall deal and as much as 20% of certain profits produced over the term of an investment.. . . .

Payments Hard to Trace

State Treasurer Denise Nappier responded to a formal request filed under the state’s freedom-of -information act by providing a list of nine companies that were paid placement fees in connection with 15 pension fund deals since 1997.

The investments– including 13 “private investment fund” and two “real estate fund” deals– involved a total of $1.3 billion in pension plan assets

Several of the placement agents are associated with well-known securities firms, including Merrill Lynch & Co; DLJ Private Equity Placement Group, a unit of Donaldson, Lufkin & Jenrette; and Solomon Smith Barney.

Merrill Lynch led the pack, collection fees in connection with two deals: a $200 million investment in Triumph Capital Partners III and $75 million in Thayer Equity Investors IV, LP.

DLJ Group followed with fees from four deals worth $225 million: a $75 million investment in Apollo Real Estate Investment Fund III, LP; $75 million in the DLJ Merchant Banking Fund II; $50 million in Kelso Investment Associates VI; and $25 million in Greene Equity Investors III.

Beacon Hill Financial Group ranked third, with fees from $200 million worth of deals, including $130 million in Forstmann Little MBO VII and $70 million in Forstmann Little Equity Fund IV.

The remaining placement agents included Farrall Marsh, which did a $148.9 million deal with Hicks Muse Tate & Furst Equity Fund III; Potomac Investment Services, which marketed a $75 million deal with SCP Private Equity Partners and a $50 million deal with Wellspring Capital Partners II; and three others, Truro Associates, New York Capital Partners, and St. James Associates, which did $100 million deals for Crescendo World Fund; Crescendo III, LP; and Westport Senior Living Fund, LP, respectively. Salomon Smith Barney rounded out the roster, bringing the pension fund into a $50 million deal with Greenwich Street Capital Partners II, LP.

An FBI investigation of former state Treasurer Paul J. Silvester’s actions at the end of his term may force the disclosure of one of the best kept secrets in the public pension business.

The FBI last month began investigating Silvester’s authorization of $852.5 million in pension fund commitments in the final quarter of 1998….

Past and present treasury officials agree that the fees involved in such transactions can be remarkably lucrative for the “finder”– in some cases, a percentage of the overall deal and as much as 20% of certain profits produced over the term of an investment.. . . .

For more, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court

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From Hoovers Online:

NRT is Not a Realty Trust anymore.

The #1 residential real estate company in the US began life in 1996 as National Realty Trust, established by real estate franchisor HFS (now Cendant) to own the nearly 400 real estate offices that came with the purchase of Coldwell Banker.

Cendant and a subsidiary of Apollo Advisors restructured the trust into NRT to snap up successful independent realtors in hot metropolitan markets and rebrand them under Cendant’s franchise names (Century 21, Coldwell Banker, and ERA).

The realtor has more than 700 offices in about 25 markets. After a planned IPO was aborted due to a tumbling market, NRT remains controlled by Cendant and Apollo Advisors….

See also: Cendant

* * *

July 6, 2000

Allied Waste gains 2 board members

Allied Waste Industries, a Scottsdale-based waste services company, has two new directors on its board.

Robert Agate, was senior executive vice president and chief financial officer of Colgate-Palmolive Co., before retiring in 1996.

Leon Black is a founding principal of Apollo Advisors, which manages private securities investment funds.


 

Akin, Gump, Strauss, Hauer & Feld – One of the largest nests of Lobbyists in the world.

In 1998, this firm declared total lobbying income of $11,800,000. Among their clients are the likes of Alliance of American Insurers; America Online; American Express; American Financial Group; Apollo Advisors; AT&T; Biotechnology Industry Organization; Boeing Co.; Capital Gaming International; CBS Corp; Citigroup; Korean International Trade Assn; Miller & Chevalier; National Hockey League; Pfizer; PG&E Corp; Pharmaceutical Rsrch & Mfrs of America; Philip Morris; Pohang Iron & Steel; Samsung Electronics; Sri Lanka Apparel Exporters Assn; AOLTime Warner; and Warner-Lambert, just to mention a few.

* * *

December 11, 2001

The White House connection: Saudi ‘agents’ close Bush friends

by Maggie Mulvihill, Jonathan Wells and Jack Meyers, Boston Globe

A powerful Washington, D.C., law firm with unusually close ties to the White House has earned hefty fees representing controversial Saudi billionaires as well as a Texas-based Islamic charity fingered last week as a terrorist front.

The influential law firm of Akin, Gump, Strauss, Hauer & Feld has represented three wealthy Saudi businessmen – Khalid bin Mahfouz, Mohammed Hussein Al-Amoudi and Salah Idris – who have been scrutinized by U.S. authorities for possible involvement in financing Osama bin Laden and his terrorist network.

In addition, Akin, Gump currently represents the largest Islamic charity in the United States, Holy Land Foundation for Relief and Development in Richmond, Texas.

Holy Land’s assets were frozen by the Treasury Department last week as government investigators probe its ties to Hamas, the militant Palestinian group blamed for suicide attacks against Israelis.

Partners at Akin, Gump include one of President Bush’s closest Texas friends, James C. Langdon, and George R. Salem, a Bush fund-raiser who chaired his 2000 campaign’s outreach to Arab-Americans.

Another longtime partner is Barnett A. “Sandy” Kress, the former Dallas School Board president who Bush appointed in January to work for the White House as an “unpaid consultant” on education reform. . . .

For more, GO TO > > > Thorns in the Rose Garden


 

Allied Waste Industries – Scottsdale, Arizona-based waste management corporation.

April 13, 2000

Horizon Waste buys Hawaii units of BFI

The buyer says the 140 employees won’t be affected by the change

Honolulu Star-Bulletin staff

Horizon Waste Services Inc., a company formed a year ago by former executives of waste management company Browning-Ferris Industries Inc., has acquired the Hawaii operations of BFI.

The seller of Browning-Ferris Industries of Hawaii Inc. is BFI-parent Allied Waste Industries Inc.

Southern California-based Horizon also said today that the purchase includes BFI unit Maui Disposal Co.

Purchase prices for both deals were not disclosed.

Horizon said the 140 Hawaii employees — 88 on Oahu and 52 on Maui — will not be affected by the ownership change.

The name of the Oahu operations will change to Horizon Waste Services of Hawaii Inc., but Maui Disposal will keep its name.

Michael O’Brien, Northwest Florida division president of BFI subsidiary Waste Management Inc., was named to run the Oahu business as Horizon district vice president. Kika Bukoski, vice president of Maui Disposal, will run the Maui operations.

The Hawaii operations include the former BFI facility of 3.9 acres at Barbers Point and the 1.3-acre Maui Disposal site in Wailuku.

BFI became Oahu’s biggest commercial trash hauler with the February 1998 acquisition of the Hawaii operations of rival Waste Management.

Horizon Waste was started by Mike Koep, Gary Koontz and Gerry Perissi who left BFI after it was taken over by Scottsdale, Ariz.-based Allied Waste in March 1999.

Horizon also has operations in Arizona and California.

* * *

July 6, 2000

Allied Waste gains 2 board members

Allied Waste Industries, a Scottsdale-based waste services company, has two new directors on its board. Robert Agate, was senior executive vice president and chief financial officer of Colgate-Palmolive Co., before retiring in 1996.

Leon Black is a founding principal of Apollo Advisors, which manages private securities investment funds.

Copyright 2000 American City Business Journals Inc.

* * *

February 25, 1999

Allied Waste sells assets

The Business Journal – Phoenix

Allied Waste Industries Inc., Scottsdale, and Waste Connections Inc., Roseville, Calif., have plans to buy and sell simultaneously $7 million worth of certain solid-waste services assets.

Allied Waste has agreed to sell its waste assets in Nebraska, including its operations in Norfolk and Fremont, and its landfill operation in Columbus, Ohio.

In turn, Waste Connections will sell certain waste operations in the state of Washington.

* * *

February 23, 1999

Allied Waste inks deal with Houston firm

The Business Journal – Phoenix

Allied Waste Industries Inc., Scottsdale, and Browning Ferris Industries Inc., Houston, have agreed to purchase and sell to each other about $120 million worth of assets across the country.

The transactions include customer contracts, equipment and facilities and represent about $120 million in revenue for each party. The deal is subject to approval from the Department of Justice.

See also: Browning Ferris Industries; Laidlaw Environmental Services


 

Arthur Andersen LLC – One of the “Big Five” accounting firms.

January 20, 2002

Andersen ties to state run deep

Firms brace for fallout

By Dawn Gilbertson, The Arizona Republic

If Andersen’s deepening Enron troubles sink or shrink the Big 5 accounting firm, or force a merger, the repercussions will be deep in Arizona.

Although the former Arthur Andersen is the smallest of the big-name firms nationally, it’s No. 1 in Phoenix, with nearly 600 professional staffers, more than double the size of No. 2 PricewaterhouseCoopers.

The firm’s client roster is crowned with the state’s two largest public companies, Avnet Inc. and Allied Waste Industries, as well as several high-profile private firms, including Shamrock Foods and the Arizona Diamondbacks and Phoenix Suns.

It has a big outsourcing division, which takes over a client’s back-office functions, and is well-known for its annual ranking of the state’s largest private companies.

No one is predicting the giant firm’s imminent demise, of course, as much of Enron’s story, including Andersen’s role, is still unfolding.

And many of Andersen’s corporate clients here say they have a good relationship with the firm and plan to stick by it.

“The bottom line is: They perform as required for us. There are no issues,” said John Hovis, vice president of investor relations for Avnet, a Fortune 500 electronics distributor based in Phoenix.

But there is speculation of fallout, given Andersen’s links to other corporate financial meltdowns, including the failed Baptist Foundation of Arizona and others here.

“After a while people go, ‘We’ve got Sunbeam, Waste Management and the Baptist Foundation in Arizona,’ ” said Jonathan Hamilton, an editor with Public Accounting Report, an industry trade magazine in Atlanta.

“Maybe you’re not totally at fault in all those situations, but those situations are troubling in the fact that there begins to be a totality of them.”

Lynn Turner, former chief accountant at the Securities and Exchange Commission and now director of the Center for Quality Financial Reporting at Colorado State University, is more blunt.

“Their credibility is just totally out the door with everyone,” he said. “Quite frankly, I think a lot of people are going to be reluctant to go hire as their auditors a firm that is the subject of a criminal investigation.”

David Scullin, Andersen’s managing partner in Phoenix, declined repeated requests for an interview. He said in a statement that he’s been out talking to clients and they’ve been very supportive.

“We remain confident about our firm and its prospects for the future,” the statement said. “We are determined to face these issues, address them appropriately and emerge stronger as a result.”

A scarlet letter

The fallout may be more severe in Arizona, in terms of clients’ dismissing or shunning the firm, given Andersen’s history of problems in the state. The local cases have gotten more national publicity in the wake of the Enron troubles.

The local cases include the high-profile collapse of BFA, which cost 12,000 investors about $600 million.

Andersen, which audited the non-profit’s books, has been sued by the state Board of Accountancy, the Arizona Corporation Commission and investors for accounting fraud.

The state attorney general also is investigating. Andersen had denied any wrongdoing.

Andersen’s services also drew a state probe in the collapse of Charles Keating’s Lincoln Savings & Loan in 1990, which cost taxpayers more than $2 billion.

More recently, bondholders of a small Scottsdale beauty products company, Styling Technology Corp., which went bankrupt in 2000, have sued Andersen alleging “bogus sales and accounting gimmicks” that resulted in false and misleading financial statements approved by Andersen.

Richard Ross, who had left Andersen to become the company’s chief financial officer, also was named. Andersen in court filings called the allegations “irresponsible.”

The accounting firm has survived those incidents largely intact, though Jay Ozer, a partner who worked on the BFA and Lincoln accounts, and Jack Henry, the firm’s longtime managing partner, both retired in the summer of 2000.

Three Arizona companies, Rural/Metro, Main Street and Main, and Vodavi Technology, have dismissed Andersen in the past six months and switched to another Big 5 firm. But they say the change was done or started before the Enron collapse and bears no connection.

Steadfast clients

Many Arizona clients express support for the firm.

Avnet, which does about $12 billion in annual sales, paid Andersen $7.2 million in audit and consulting fees in its latest fiscal year. That’s second only to garbage hauler Allied Waste, which paid $7.9 million.

Michael Burnett, Allied’s vice president of investor relations, declined to comment about the company’s relationship with Andersen and whether the firm’s woes would have an impact on Allied. He was an audit manager with Andersen before joining Allied four years ago.

Hovis said Andersen officials have been “very proactive” since the Enron debacle broke, calling Avnet’s chief financial officer to keep him up to date….

For more, GO TO > > > P-s-s-t, wanna buy a good audit?


 

Arthur H. Bilger – Art Bilger is a private investor. For two years, ending in January 1997, he was president, chief operating officer, and a member of the board of directors of New World Communications Group Inc., an entity engaged in television broadcasting and production.

Mr. Bilger has also been active in the investment community as a financial advisor. From 1990 until joining New World, he was a founding principal of Apollo Advisors, L.P. and Lion Advisors, L.P., entities engaged in the investment of capital in acquisitions and corporate restructuring.

Prior to these activities, Mr. Bilger was executive vice president, co-head of corporate finance, and a director of Drexel Burnham Lambert Inc. He is also a director of The Mandalay Resort Group and 4style.com, Inc.

Mr. Bilger graduated from the University of Pennsylvania with a bachelor’s degree in economics, and he received an M.B.A. from the University of Chicago.

For more, GO TO > > > The Game Birds


 

Azabu Building CompanyAzabu Building purchased a number of major hotel properties in Hawaii during the 1980’s “big bubble” years, with Mitsui Trust providing much of the financing. Several of the properties were on land leased from Bishop Estate.

When the bubble burst, Azabu and Mitsui were forced to liquidate many of their properties at huge losses— some of which were purchased by entities in which Apollo Advisors, Goldman Sachs, National Housing Corporation, Kamehameha Schools/Bishop Estate, and Trinity Investment Trust were connected.

* * *

From U.S. News & World Report, 04/13/98, by David Kaplan:

YAKUZA, INC.

American investors are spending billions of dollars to snap up portfolios of bad loans from Japanese banks. That could put them on a collision course with notorious Japanese crime syndicates called “yakuza”.

The wiser U.S. firms … are hiring high-powered investigators and law firms in Tokyo to go through the portfolios loan by loan …”they all have the same questions … who are we dealing with? Who’s in the building?” One portfolio of 49 loans examined … found that 40% of the borrowers had ties to organized crime. Fully 25% of them had criminal records ranging from disrupting auctions to assault, extortion, and rape.

U.S. News obtained a similar portfolio of 108 properties offered to Western investors by Mitsui Trust & Banking Co., one of Japan’s largest banks. Thirteen of the properties — including condos, undeveloped land, and parking lots in Tokyo — are held by Azabu Building, a company that might not mean much to Americans but is quite familiar to Japanese police. In early March, Azabu’s president, Kitaro Watanabe, received two years in prison for hiding some $18 million in assets from creditors.

Azabu properties, moreover, are protected by groups tied to Tokyo’s largest crime syndicate, according to police. One investigator who ventured onto one of Watanabe’s properties was held hostage for an hour by its “tenants,” until the gang’s boss telephoned the hapless fellow, according to the man’s associates. “Next time you come out here, come with the proper introductions!” shouted the godfather.

“Go home, wash your face, and come visit us again.”

* * *

June 25, 1997

Top Azabu Executives
Arrested in Japan

The troubled real estate firm owns several major hotels in Hawaii.

Honolulu Star-Bulletin

The president and two other executives of Azabu Building Company were arrested today on suspicion of illegally concealing the firm’s assets to prevent creditors claiming them.

Arrested were Kitaro Watanabe, 63, the president, and Katsumi Naganuma, 62, and Shoichi Owaki, 60, board members of Azabu Building, one of the heaviest borrowers from failed housing loan companies.

In Hawaii, Watanabe was the early leader in Japanese “bubble” investing. In a buying spree that started in 1986, Azabu companies spent some $600 million on Hawaii hotels. They later shed two of them but they still own the Hyatt Regency Waikiki, the Ala Moana Hotel, the Maui Marriott and the Keauhou Beach Hotel. [Currently down to one – the Ala Moana Hotel.]

The three Azabu executives are suspected of having transferred some 1.3 billion yen ($11.3 million) in rents paid to the Azabu group to banks accounts of affiliated dummy companies, the Tokyo District Public Prosecutors Office said. Prosecutors said the transfer of rents earned by Azabu between Sept 1994 and Dec 1995 was intended to keep such assets away from creditors. If convicted the three could be jailed for up to two years.

At present, the group has some 600 billion yen ($5.2 billion) in outstanding debts, including more than 110 billion yen to four housing loan companies taken over by Housing Loan Administration Corp., a government-backed debt-recovering body . . .

The group also owes some 160 billion yen ($1.4 billion) to Mitsui Trust and Banking Co.

Most of the loans have become nonperforming…

* * *

July 31, 1997

Keauhou Beach Hotel being sold

Honolulu Star-Bulletin

A Chicago-based partnership is buying the 318-room Keauhou Beach Hotel on the Kona Coast…

Trinity Investment Trust LLC, which is also purchasing the mortgage to the Aloha Tower Marketplace, has signed a letter of agreement to acquire the beachfront hotel from Azabu USA. The hotel, built in 1970, sits on land leased from the Bishop Estate….

Azabu, headed by maverick deal maker Kitaro Watanabe, acquired the Keauhou Beach Hotel in 1987 for $13 million. During the 1980s, Azabu invested about $600 million in Hawaii, acquiring the Hyatt Regency Waikiki, the Ala Moana Hotel, the Maui Marriott and the Kona Lagoon [also on land leased from Bishop Estate].

Since then, Azabu has run into a string of financial difficulties. In 1993, lender Mitsui Trust & Banking Go. filed a foreclosure suit on the 1,200-room Hyatt Regency.

In 1994, Mitsui wrote off $1 billion in bad debts from loans to Azabu.

Last month, Tokyo officials arrested Watanabe and two other Azabu officials alleging that they illegally concealed company assets from creditors. Azabu’s Hawaii subsidiary said then that the arrests had no effect on the company’s local operations. [Yuk!…Yuk!]

Trinity, meanwhile, is part of a new wave of American buyers who are purchasing properties from financially troubled Japanese investors. . . .

The company — whose investors include former VMS Realty executives George Ruff, local attorney Jon Miho [of McCorriston Miho Miller & Mukai fame – the defense attorneys for the ousted trustees, and the Miyo who recently attempted to post bail for Sukamto Sia] and hotel developer Charles Sweeney — is trying to acquire the $60 million mortgage to the Aloha Tower Marketplace from Mitsui and take over the waterfront complex.

Last year, Trinity and Apollo Advisors L.P. bought the $130 million mortgage to the nearby Harbor Court luxury office and condominium complex for an undisclosed price from Mitsui.

Trinity has also joined up with Apollo, time-share operator Signature Resorts Inc. and Goldman Sachs’ Whitehall Fund [another Bishop Estate investment] to buy the 413-room Embassy Suites Resort on Maui for $78 million….

[Catbird Comment: Note that nowhere in the article is there any mention of Azabu’s connection with the Yakuza.]

* * *

February 18, 2002

BUSH CALLS FOR REFORMS IN JAPAN

Urges writing off over $100 billion in bad bank loans

By Bob Deans, Cox News Service

TOKYO – Paying tribute to Japan’s past while voicing concern for its future, President Bush visited a shrine to the 19th century Meiji emperor today and urged modern leader Junichiro Koizumi to take tough steps to get his country’s stagnant economy moving again….

Meeting later with Prime Minister Koizumi, Bush stressed the need for Japan to swallow a bitter pill and write off more than $100 billion in bad bank loans that have become a drag on the economy.

Japan’s economy, the world’s second largest, is idling through its third recession in a decade, threatening regional and U.S. growth. Bush’s own Economic Report, released earlier this month, labeled Japan’s economy “moribund” and said Koizumi’s government was not aggressive enough in dealing with the problem.

With a sluggish economy, Japanese spend less on U.S. and other imports and are also less likely to invest abroad. Experts worry that trend will threaten the U.S. recovery….

The Japan visit, Bush’s first as president, is the first stop in a tour that takes him to Seoul tomorrow and Beijing on Thursday….

For more, GO TO > > > Yakuza Doodle Dandies


 

Banyan Strategic Realty Trust – A Chicago-based real-estate investment firm.

February 23, 2002

Chicago group sells Riverport building

By Marcus Green, The Courier-Journal

A Chicago-area real-estate investment firm has agreed to sell a 322,000-square-foot warehouse at the Riverport Commerce Center in southwestern Jefferson County as part of its year-old liquidation plan.

Banyan Strategic Realty Trust of Oak Brook, Ill., will sell the property at 6901 Riverport Drive for $6.5 million to Daniel Smith of Charlotte, N.C. The company, which also owns property in Alabama and Georgia, has sold 85 percent of its portfolio.

Apparel Group Ltd. of New York employs about 120 workers in distribution operations in 180,000 sq ft of the warehouse….

Smith, who had previously managed Banyan properties in Florida, was traveling yesterday and could not be reached for comment.

Riverport President Larry McFall said 103 companies employ about 6,000 people in the sprawling industrial park between the Greenbelt Highway and the Ohio River….

The park is phase four of land development – preparing to sell 120 acres it acquired from Louisville Gas & Electric Co. in 1999….

Banyan intends to use proceeds from the sale to settle existing Riverport debt of $3.4 million, as well as to pay commissions and closing costs of about $500,000….

Banyan said it faces delisting of its stock from the Nasdaq Stock Market if its share price does not close higher than $1 for 10 straight trading days between now and May 15.

Shares of Banyan closed at 65 cents yesterday in Nasdaq trading….

See also: VMS Realty


 

Blackstone Group – A New York-based private investment bank.

July 9, 2004

Outrigger selling 2 resorts

By Allison Schaefers, Honolulu Star-Bulletin

Outrigger Enterprises Inc. has agreed to sell its Waikoloa Beach Marriott and Wailea Marriott resorts to affiliates of Blackstone Real Estate Advisors of New York for an undisclosed price.

The Wailea Marriott is a 521-room hotel on 22 beachfront acres in the Wailea Resort on Maui. The Waikoloa Beach Marriott is a 545-room hotel that sits on 16 oceanfront acres on the shore of Anaehoomalu Bay on the Big Island’s Kohala Coast….

Both hotels, which have been operated by Outrigger through a franchise agreement with Marriott International, will continue to be affiliated with Marriott International after Blackstone’s acquisition. The sale is expected to close as early as July 30, said David Carey, chief executive of Outrigger Enterprises….

Under various management contracts and its two hotel brands, Outrigger Hotels & Resorts and Ohana Hotels & Resorts, the company operates or has under development 51 hotels and resorts throughout the Pacific region, Carey said.

Blackstone, a private investment firm, is most recently known in Hawaii for having sold the Hyatt Regency Maui for $321 million in cash last year to Host Marriott Corp.

The company owns the Marriott Grosvenor Square Hotel in London, the Westin St. Francis in San Francisco and the Hyatt Capitol Hill in Washington, D.C.

Outrigger could not comment on what will happen to employees at the two hotels.

For more, GO TO > > > Apollo; Broken Trust; Buzzards of Paradise; The Carlyle Group; A Connecticut Yankee in King Kamehameha’s Court; Dirty Gold in Goldman Sachs; Dirty Money, Dirty Politics & Bishop Estate; The Harmon Arbitration; Homeland Security; Marsh & McLennan: The Marsh Birds; The Nests of CB Richard Ellis; Paradise Paved; Predators of Paradise; RICO in Paradise; The Washington Baseball Club; Yakuza Doodle Dandies

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From The Conspirators: Secrets of an Iran-Contra Insider, by Al Martin:

GOVERNMENT FRAUD, CORPORATE FRAUD, AND MORE FRAUD

People in the media often ask me to give them examples of frauds that began in Iran-Contra and continue to this day, albeit under different names.

It’s essentially the same fraud and the same cast of characters.

The examples I always give (about which I have substantive information, since I was involved in all three of the original frauds and also involved in marketing some of the partnerships for the secondary fraud) are the Ocean Reef Development Group, Ltd., the Omni Development Group, Ltd., and the Tri-Lateral Investment Group, Ltd.

Who are the common players who are links between all three deals during Iran-Contra?

They are Frank Carlucci and Richard Armitage.

When Frank Carlucci and Richard Armitage left government service immediately after Iran-Contra (they literally had to leave in order to avoid being subpoenaed as part of the overall coverup), they became principals with Pete Peterson, the infamous Republican player and GOPAC money launderer, in the Blackstone Investment Group, which is a big organization.

Then they simply continued the same real estate development frauds which were begun under Iran-Contra.

This time all the original deals went bankrupt. A certain set of banks got burned. The property reverted to them, and then they refinanced the property again through Blackstone.

Subsequently they entered into an arrangement with another similar sounding company (there’s always been some confusion) the Capstone Development Group, which was also a post-Iran-Contra creature.

They are two separate organizations.

Some people will try to claim that Capstone was simply a subsidiary of Blackstone.

It is not. It is a separate company. Look at the directors. They are none other than Larry Eagleburger and Bernie Aronson, former co-workers of Frank Carlucci and Assistant Secretary of State, Richard Armitage.

However, the real estate frauds continued essentially until the early 1990s. It’s interesting to note how former government officials who were in the Reagan-Bush Administration during Iran-Contra profit by subsequent frauds – post-Iran-Contra frauds, if you will.

For instance, in 1994-95, there was the great Mexican Diversion Fraud, when Blackstone immediately opened an office in Mexico City to take advantage of American taxpayers’ money being lent to Mexico vis-a-vis the OCED and OPEC and other United States lending and/or guaranteeing agencies.

The opportunity to commit fraud against the United States Treasury during that Mexican bailout was just like a walk in the park.

You buy a busted out Mexican company for pennies on the dollar, pump it up, make it look nice, make sure you’ve got your hands out for a twenty or thirty million dollar loan from somebody else, like the IMF, or a direct United States lending agency, and you would be given Brady Bonds which could then be rehypothecated.

And it was such a scam.

Dinnerstein alone documented $130 million of fraud committed by former officials of the Reagan-Bush Administration during the “Great Mexican Turkey Shoot” as it became known.

And then what happened?

The Russian bailout.

Blackstone suddenly opened an office in Moscow and promptly proceeded to do the same thing again. This time they were raping and pillaging the American taxpayer with the same corporate schemes to get money out of U.S. agencies and/or collateral guaranty or fidelity instruments that could be rehypothecated.

It’s exactly the same scheme.

It was another $38 million of fraud according to our estimates at the time.

To follow fraud from the Iran-Contra period and to continue to do it to this day – just look at where the Blackstone Investment Group is opening up offices in the world….

* * *

January 26, 2001

Maui Hyatt sold for $200 million

By Andrew Gomes, Advertiser Staff Writer

New York based private investment bank The Blackstone Group has contracted to buy the Hyatt Regency Maui Resort for an estimated $200 million from KM Hawaii Inc., an affiliate of Japan-based transportation company Kokusai Jidosha, according to people familiar with the deal….

Founded in 1985 in part by the former chief executive of Lehman Brothers, Blackstone has been looking for upscale hotel investments in Hawai`i for several years. In 1998, the company unsuccessfully pursued one of Waikiki’s finest, the Halekulani.

People with knowledge of the Maui Hyatt deal said a purchase agreement for the 806-room Ka’anapali hotel —— Maui’s largest —— has been reached, and said Hyatt, which manages the property with about 1,000 employees, may be taking a small ownership interest in the hotel in exchange for a long-term management contract with Blackstone….

If completed, the Hyatt sale would follow sales of four other major properties in 1998: the Maui Marriott Resort for $152.5 million; the Westin Maui for $132 million; the Grand Wailea for $263.5 million; and the Kea Lani for an undisclosed amount.

The Hyatt Regency Maui, trophy of the Ka‘anapali resort, also has been attractive to buyers. It was developed for $80 million in 1980 by luxury resort developer Christopher Hemmeter and sold to KM Hawai‘i by Chicago real estate firm VMS Realty for $325 million in 1987.

KM Hawai‘i spent about $30 million on renovations in 1990 and 1996. Last year, the hotel opened a $3.5 million spa….

See also: Chris Hemmeter; VMS Realty

For more, GO TO > > > Birds that Drink from Cesspools; Office of the U.S. Trustee vs. Harmon, Witness: Diane Plotts; Predators in Paradise


 

Browning-Ferris Industries (BFI) – Waste management company acquired by Allied Waste Industries in 1999.

Environmental Background Information Center

Empowering the grassroots environmental movement.

www.ebic.org

CorporateProfile: Browning-Ferris Industries (BFI)

BFI’s Origins and Expansion

Browning-Ferris Industries (BFI) has the distinction of being the first garbage company to expand across North America.

BFI was the vision of Tom Fatjo, a shrewd businessman who turned his small garbage business in Houston into the BFI of today. It all started in the 1960’s when Fatjo, unhappy with his local garbage hauler, started his own company, launching BFI into the garbage world and the New York Stock Exchange.

In order for BFI to grow and succeed, the plan was simple: achieve domination of a major portion of the national waste flow; the key to profits being control of disposal capacity through landfill banks.

City by city, hauler by hauler, BFI acquired companies. From Louisiana to Canada, BFI gave local haulers deals they could not pass up. They offered larger salaries, the option of staying on with the company, and BFI stock. The common method of acquisition consisted of independent haulers taking stock in BFI in exchange for control of their companies. The lure of riches was too good to pass up and company after company sold out to BFI.

From 1969 to 1970, the company grew rapidly, and overtook twenty different markets. In these acquisitions, there were five companies owned by Harry Phillips, a garbage hauler who had markets in Memphis, Houston, and Puerto Rico. Phillips was later hired as the expanding company’s Chief Executive Officer.

BFI entered markets throughout the 1970’s from San Francisco to Boston. In 1971, BFI combined with the National Disposal group of companies to gain access to the markets of Chicago. BFI also obtained a liquid waste facility, chemical plants, and Consolidated Fibers, Inc.(CFI), one of the three largest scrap paper dealers in the U.S.

In 1976, Fatjo left the company to form an investment consulting firm known as Criterion Capital Corporation. BFI’s sales went from $28 million in 1969 to $308 million in 1977. By 1980, BFI boasted operations and subsidiary companies in a majority of U.S. states, along with overseas operations in Canada, Australia, the U.K., Puerto Rico, Western Europe and the Middle East.

In 1983, BFI moved into the hazardous waste disposal industry with its acquisition of CECOS and NEWCO, companies with troubled pasts.

This time their acquisition strategy backfired as CECOS was plagued with numerous problems, foremost among them, their hazardous waste disposal sites in Niagara Falls, Williamsburg OH, and Baton Rouge, LA.

By the end of the 1980’s, CECOS had dragged BFI’s earnings down and Phillips offered his job to Bill Ruckelshaus, a BFI director and two time head of the Environmental Protection Agency.

This move was viewed by commentators as an attempt by BFI to boost declining stock value by currying favor with Wall Street and to reverse the company’s tarnished environmental image.

At the time of Ruckelshaus’ ascension, one news story asked, “Can Mr. Clean Clean Up Browning Ferris?”

Problems/Violations

BFI and its subsidiaries have a long checkered past when it comes to both polluting the environment and dealing fairly with competition.

BFI’s violations range from illegal disposal of hazardous wastes to price fixing/anti-trust violations; and, state officials have pled guilty to accepting bribes from BFI.

Recently, BFI compiled a ten-year history of their company and presented it to Pennsylvania’s DER in response to questions about the company’s integrity with regards to a proposed 154-acre landfill in Berks county.

They admitted to the following: 270 civil penalties, administrative orders, permit or license suspensions and revocations, as well as bond forfeiture actions, 10 misdemeanor or felony convictions and pleas; 24 court decrees or settlement orders and one pending court case.

(It must be noted that this is merely covers the period from 1981-1991.)

In addition, BFI and subsidiaries have disclosed more than $75.5 million in fines and settlements from 1972-1994.

This is by no means a comprehensive list. Complete data concerning fines on numerous violations are simply unavailable. This data serves to illustrate the scope BFI’s violations and its history of disregard for the law.

Anti-Trust/Miscellaneous Violations

BFI’s violations in this respect tend to center on illegal attempts to take over/monopolize individual markets by forcing out competitors.

In more than one instance, BFI and/or state officials involved with their permits or applications have plead guilty to, or paid penalties to settle charges of bribery.

1984:

$3 million settlement to avoid inclusion in list of defendants being sued by NJ for price fixing and bribery of state officials.

Approximately $6 million out of court settlement with Conservation Management concerning a lawsuit by Conservation which alleged that BFI had bribed a Texas state senator who was to help defeat Conservation’s landfill application.

1985:

$130,000 settlement with state of Georgia, concerning charges of price fixing, bid rigging and customer allocation designed to undercut competitors.

1987:

Guilty plea and $1 million fine to the Dept. of Justice for price fixing and customer allocation conspiracy with WMI in Ohio and Michigan.

1988:

$350,000 settlement with the state of Ohio, in Toledo to settle price fixing charges.

$6.5 million civil court judgement in Burlington Vt., for anti-trust activities including predatory pricing.

1989:

A New Jersey grand jury indicted John A. Pinto (BFI regional vice president,1975-1981) for customer allocation and coercion in price fixing scheme from 1970-1984. In 1989, Pinto plead guilty and paid a $50,000 fine. Pinto continued to receive $125,000/year until 1984 when he retired. “As set forth in testimony before the New York State Assembly Committee, Pinto clearly had ties to organized crime, and was appointed by and reported directly to, John Drury, BFI’s president.”

1990:

$30.5 million out of court settlement resulting from a class action lawsuit brought by customers against BFI and WMI alleging price fixing and customer allocation.

1994:

$4.2 million fine in Kane County. IL, for price fixing.

1995:

Texas state employee with The Natural Resource Conservation Commission pleads guilty to accepting a bribe from BFI in exchange for a favorable permit ruling.

1996:

Settlement reached by BFI and WMI with Justice Dept. in Memphis Tenn., Georgia, Iowa and Louisiana for illegal contracts and other anti-trust violations. BFI agreed to stop the practices and no penalties were assessed. Concerning BFI’s practices, the Justice Dept said, “BFI intentionally used restrictive contracts to inhibit competition and enhance its power over commercial customers”

1998:

BFI reached an agreement with the US Dept. of Labor. The company was cited for gender discrimination against 11 women who had applied for positions as truck drivers. The agreement included $213,754 in back wages and guaranteed employment for the women.

BFI reached a $682,000 settlement with the Solid Waste Authority in Contra Costa County Ca., considerably less than the fines of $1.5 million originally proposed by the Waste Authority

BFI was sued by the federal Equal Opportunity Employment Commission in Pittsburgh Pa. The suit alleges that BFI discriminated against a job applicant because of his age, and that the company hired a younger, less qualified applicant.

BFI was fined $331,000 for missed pickups in Jefferson Parish, La.

1999:

BFI paid Daughtery Township Pa, $800,000 to settle a lawsuit filed in federal court. The township had accused BFI of avoiding tax payments by illegally altering the manner in which it calculated gross receipts for a landfill.

Environmental Violations

The Clarion Ledger, (Jackson Miss.) had this to say about BFI after concluding a ten month investigative report into environmental problems resulting from the company’s waste disposal practices: “BFI’s purring Cadillac could be more hearse then limousine” and “BFI and its analogs offer essential services. BFI’s role is not at issue: its performance is.”

1976:

$200,000 statutory civil penalty in Texas for selling toxic waste sludge as oil to be applied to state roads.

1985:

$64,200 in fines paid to EPA for groundwater monitoring violations at Missoula, Montana hazardous waste landfill.

1987:

$23,000 in penalties for accepting inadequately protected radioactive waste at Beatty, Nev.

$25,000 fine for an illegal landfill expansion in Randolph, Mass.

$200,000 for various violations at solid and bio-medical waste facility in Crescent Acres, LA.

$104,000 in Hutchins Texas for failure to renew leachate discharge permit at solid waste landfill.

1988:

$41,870 in penalties paid to State of Illinois and EPA for contamination of groundwater.

$150,000 in Randolph Mass. for landfilling more waste than permitted.

$2.5 million in penalties paid to state and EPA for over 2,500 violations in Livingston, La., hazardous waste landfill.

1990:

$3.525 million in penalties paid in a plea bargain arrangement where BFI pleaded guilty to discharging hazardous waste into drinking water supplies in Williamsburg Ohio.

$1.55 million for over 1,400 violations at hazardous waste landfill in Calcasieu, La.

$659,000 in penalties to EPA for failure to obey post closure monitoring requirements of solid waste landfill in South Brunswick NJ.

1989:

$280,00 for non hygienic operating conditions at Crescent Acres, La., Solid/Medical Waste facility.

1993:

$1.1 million settlement with state of California for the bay area’s worst sediment spill ever, which resulted from a BFI landfill and severely damaged two streams.

1996:

Part of $11 million settlement in Johnson County KS., to clean up Doepke-Holliday landfill that had been used from 1950-1970 to store waste from homes, pesticides plants, oil refineries etc.

1997:

$5+million in fines and restitution in West Chester, PA for illegal disposal of wastewater treatment sludge from 1989-1992. Previously, BFI had pled guilty to a 23-count indictment charging them with conspiracy, mail fraud, and Clean Water Act charges involving the illegal disposal of the sludge at five plants in Pennsylvania and Delaware by BFI Services West Chester waste hauling operation. BFI was ordered not only to pay $3 million, but restitution of $6.4 million to four wastewater treatment plants, as well as $1.5 million to organizations that handle environmental concerns of the PA/DE region.

1998:

$1.5 million in penalties paid by BFI for violations of the Clean Water Act in Washington D.C. by its Maryland subsidiary. BFI admitted three criminal violations stemming from the release of wastewater contaminated with improperly treated medical waste. BFI corporate spokeswoman, Barbara Brescian said the company settled, “in the interest of putting this two year old situation behind us. BFI vigorously maintains our subsidiary committed no wrong.”

Merger Mania and Executive Bonanza

1999 was a dramatic year for the major waste traffickers. The fruit of the recurring failure of the waste=profit equation on which the industry is built was even larger mega-corporations and riches for senior executives.

As WMI succumbed to take over by USA Waste after repeated scrapes with the law and shareholder revolt, BFI also succumbed to its inability to live up to its own hype. In July, 1999, in a $9.4 billion sale, the Scottsdale, Arizona-based Allied Waste Industries swallowed giant BFI, ingesting enormous debt.

The scale of which locks this industry leader into the same old model of aggressively seeking to extract maximum profit in the shortest time from the environmentally most backward and socially oppressive means of managing wastes.

Little wonder Allied/BFI joined WMI in ganging up on Virginia whose General Assembly had passed “right to say no” laws limiting their import of out of state trash. In January, 2000, a federal judge ruled in the waste giants’ favor, continuing to uphold the dubious notion that trash is an article of commerce like any other and thus protected by the Interstate Commerce Clause of the U.S. Constitution.

Organizing Tips

Check out our Generic Strategy Guide

Determine if your state has a “bad boy” law which prevents companies with felony convictions from opening landfills or other waste disposal operations.

Share Allied-BFI’s background, (particularly its legal and environmental compliance history ) with media sources and encourage them to look into this. With regards to landfills, determine the approved capacity of the landfill and attempt to determine if BFI is exceeding landfill capacity. (This seems to happen at BFI landfills fairly often: keep dumping while waiting for a landfill expansion permission or just overfill approved capacity.)

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October 12, 1998

Problems at Florida Nursing Home reveal gaping holes in legal safety net

By Elliot Blair Smith, USA Today

TAMPA – “Suitcase City” is named for the transients who drift through north Tampa like the surf on a dirty beach. But it is the final destination for many elderly and disabled Americans who no longer can take care of themselves and come to live at the oak-shaded nursing home known as the Brian Center.

Flanked by pawnshops, a check-cashing store and an abandoned housing project, the 266-bed Brian Center Health and Rehabilitation had a prosperous history before it was sold to new owners in July. Most residents’ room and board was paid for by federal Medicare and state Medicaid insurance programs available to all Americans.

Behind warped doors that hung crookedly on loose hinges, however, some Brian Center residents were left bruised and bloodied and their gums black from neglect, according to state regulatory records and lawsuits filed by family members who seek more than $100 million from the nursing home’s owners.

For those residents – sometimes barefoot, dressed in threadbare gowns and unattended in urine-soaked hallways, according to state records – the home came to symbolize universal fears of growing old.

More broadly, Brian Center was emblematic of gaping holes in state and federal efforts to police the nursing home industry, notwithstanding repeated warnings and fines by Florida authorities.

Eventually, some Brian Center residents and their families turned for relief to contingency-fee lawyers, joining a litigious trend in the nursing home industry that can reward the victorious with tens of millions of dollars but also embodies excesses.

More than a dozen “residents’ rights” lawsuits, including a class-action claim, are pending against Brian Center of Tampa. These lawsuits accuse Brian Center and a succession of owners and management companies of systematic fraud, abuse and neglect orchestrated to inflate profits at the expense of people.

Defense lawyer Kirsten Ullman, who represents Brian Center and its owners, says: “We’ve done our investigation and we feel we have evidence that is strong to defend these cases.” She declines to discuss individual allegations.

Among the defendants is Unifour of Florida, 100% owned by millionaire Don Beaver, who founded and named a chain of nursing homes after his deceased son Brian.

Beaver, who declined to comment for this story, made his fortune operating 49 Brian Center homes and other nursing facilities throughout the Southeast. In 1995, he merged Unifour of Florida into the publicly held Living Centers of America nursing home chain – also a defendant in the lawsuits – receiving $187.5 million in stock and a board seat.

In July, a successor company controlled by money manager Apollo Advisors merged with Mariner Health Network to form Mariner Post-Acute Network. This organization sold Brian Center of Tampa to the unrelated and privately held Delta Health Group, which renamed it Delta Health Care Center of Tampa.

Florida regulators say they could not keep up with the Tampa retirement home’s frequent changes in owners and care standards, expressing a chronic complaint among state and federal authorities.

State nursing home chief Doug Cook, director of the Agency for Health Care Administration, says enforcement lawsuits against nursing home owners take up to four months to be heard in court and an additional month to be decided. Fines are limited to $5,000 per violation.

“There’s very little incentive to quickly correct problems that our surveyors discover,” Cook says. “They need only prove they’ve improved the conditions of the home by the time of the hearing.”

Federal regulators say they are even more constrained. The Justice Department’s Civil Rights Division prosecutes physical abuse cases at government-owned and operated nursing homes, which number fewer than 1,000 of the 17,168 nursing homes nationwide.

But federal prosecutors say they have no statute under which to litigate human-rights abuses at private nursing homes. Rather, they are limited to pursuing money fraud cases under the federal False Claims Act. The law recoups money lost to Medicare. It does not repair damaged lives.

That helps explain why Florida is lined with billboards paid for by private lawyers who specialize in suing nursing home operators.

“We found there was a complete government abdication of responsibility for nursing homes,” says Tampa lawyer James Wilkes, who has 10 lawsuits against Brian Center, including a class action, and settled six prior claims for undisclosed cash sums.

“Not only does the government not protect nursing home patients. It protects nursing home operators.”

‘Wandering around in the dimmed light’

Over a decade’s time, Florida nursing home regulators repeatedly deemed Brian Center’s care deficient but let the facility off with small fines and promises of corrective action, state records show.

Authorities rarely varied their annual inspections by more than a week. Even then, inspectors said they found Brian Center residents unbathed, inappropriately dressed, spotted with bed sores and housed in unsafe and unsanitary conditions.

Many Brian Center residents’ medical records were inaccurate, incomplete or missing altogether, and some patients were misdiagnosed, the state records say.

And though Florida law prohibits nursing homes from employing violent felons in jobs that involve contact with residents, state inspectors repeatedly found that Brian Center failed to screen employees for criminal backgrounds.

In a review of law-enforcement records, Wilkes’ law firm found that 46 Brian Center workers employed between 1989 and 1997 had been convicted of felonies. Some were convicted of such offenses as aggravated assault, battery, kidnapping and murder.

Alone in the twilight of their lives, Brian Center residents received “no stimulation or distraction” and sat “for long periods of time with no meaningful activity or interactions,” state inspectors reported.

Call lights were not answered in a timely manner, resulting in soiled linens, an inspector wrote in one report. For a time, overtly violent residents were placed in a locked unit with patients who had Alzheimer’s disease; one such person “had injured several staff (members) and several residents,” the records say.

“Quiet time,” an inspector said in another report, “consisted of gathering 20-25 residents in the dining room … and announcing in a loud voice, ‘It’s quiet time now.’ (The employee) then turned off the light and left the residents. During this quiet time, residents were yelling at each other and residents were wandering around in the dimmed light.”

Brian Center owners and managers dutifully corrected state-identified problems. And the nursing home remained eligible to collect Medicare and Medicaid payments despite state threats to cut off Medicaid in 1989, 1992 and 1997.

But the deficiencies recurred year after year.

“Brian is a classic yo-yo facility,” says Florida nursing home chief Cook. “In a typical yo-yo facility, the owner is starving the home or putting them on short rations.”

Brian Center was “up” for state inspections – fully staffed and stocked with fresh linens – and “down” much of the rest of the year, according to the testimony of nurse’s assistants in state regulatory reports and plaintiffs’ lawsuits.

Without meaningful intervention by state or federal authorities, private lawyers and civil lawsuits came to substitute for regulatory enforcement. Or, as Cook says: “We’re left with Mr. Wilkes’ actions.”

Lounge lizard or legal legend?

Wilkes’ pale blue eyes and tousled hair favor his first choice of profession as country balladeer. His monogrammed shirts and private jet bespeak the second as legal eagle. With 300 lawsuits pending against most of the USA’s major nursing home chains, Wilkes tugs at heartstrings. But for much larger stakes than he crooned for in cocktail lounges.

This year, the 18-lawyer Wilkes and McHugh law firm has won $35 million in nursing home legal settlements. Next year, Wilkes expects to bring home $100 million, 20% of the jury verdicts and legal settlements he predicts for the nursing home industry as a whole.

The firm keeps 40% of its winnings as a contingency fee and tacks on expenses. But Wilkes says the recoveries include more than $3 million that nursing home operators had to repay Medicare and Medicaid for improper billings.

“Nobody does it on the scale we do,” says Wilkes, 47. “It isn’t just the money. It’s personal on my part.” One of his grandmothers died in a nursing home.

Wilkes’ success has engendered a growth industry of private lawyers who take on big-chain nursing homes. And his promotional style has spawned a new performance art of lawyers employing billboards, direct mail, newspaper and television advertisements.

Detractors point out that Florida lawyers need win only $1 of damages to be entitled to recover their expenses. “There’s no incentive, really, to stop after a point,” says Mary Ellen Early, director of policy at the Florida Association of Homes for the Aging, a trade group that represents nonprofit nursing homes.

“It’s a no-lose deal for those guys, agrees Ed Towey, spokesman for the Florida Healthcare Association, the state’s largest nursing home trade group. Towey says lawsuits cost the Florida industry about $30 million a year, prompting nursing home insurers to increase premiums and deductibles and scale back coverage.

A decade ago, the specialty that vaulted Wilkes to prominence – and made the Brian Center lawsuits possible – hardly existed. Under Florida law, if a nursing home resident died of abuse, his or her legal rights also ceased. In 1986, the state nursing home residents’ Bill of Rights law was amended so heirs could bring action against an abusive home.

This March, in a tacit admission that private lawyers had been more successful than regulators at punishing rogue nursing home operators, the state attorney general appointed Wilkes as outside counsel.

Wilkes quit amid strong industry protest. “They said me with a badge would be the end of the industry,” he says.

Others picked up the torch.

At a White House briefing in July, the official who administers Medicare, Nancy-Ann DeParle, said the federal government will get tougher with nursing homes that repeatedly violate safety rules, in part by requiring states to more frequently inspect homes with serious or repeat violations.

The Health Care Financing Administration, which DeParle heads, endorses criminal background checks on nursing home employees – a measure already required in some states, including Florida – and a public database that will contain state regulatory records for nursing homes nationwide. The Internet-based resource will be introduced this month.

Private efforts also are under way. This month, the American Nurses Association plans to roll out a ratings system that will assess the quality of care at nursing homes that agree to be inspected.

Association President Beverly Malone says: We believe the public deserves to know which nursing homes are there to meet their expectations about quality of care.

Wilkes sees no barrier to expanding his brand of justice-for-hire, however. He holds law credentials in Florida, Alabama and Texas and recently passed the bar exam in Arkansas.

“I don’t think there’s anybody but me who knows how to do it. I eat it, I drink it, I live it every day,” Wilkes says. But having said that, I think I must exercise restraint. I have not wanted to destroy the industry and not leave an alternative to the elderly who need them.”

‘They’re not meat, they’re humans’

When Emma Louise Butler of Tampa grew too old to care for her adult son John – a retired barber and Army veteran disabled after a beating and robbery – he was institutionalized at Brian Center. It was August 1989. He was 60 years old. The Veterans Administration paid his bill.

Former Brian Center nurse’s assistants describe John Butler with fondness and dismay. He was talkative – always trying to borrow a cigarette and complaining about the food – but he also snuck into elderly female residents’ rooms, and Brian Center employees treated him roughly for misbehavior, former employees say in depositions.

By the time Butler was 65, an age when many Americans consider retirement, he was incontinent, had lost his ability to walk and developed infected bed sores. Butler’s mother, vigorous at age 84, said in a deposition in November that she often found her son in his nursing home bed “wet from head to foot” in urine.

In the last 15 months of his life, Butler lost 41 pounds. His death certificate, dated Nov. 23, 1994, cites emaciation. Wilkes seeks $30 million on behalf of Butler’s heirs.

Another of Wilkes’ lawsuits tracks the decline of Mamie Beasley, who entered Brian Center in June 1992 as a 97-year-old widow. Less than a year later, Beasley fell, fractured her hip and never walked again. According to court records, Beasley developed a sore on her big toe that turned to gangrene and resulted in the amputation of her leg above the knee. She died in December 1997.

In this lawsuit, filed on behalf of Beasley’s grandniece, Wilkes seeks $25 million, arguing that “numerous entries of fraudulent documentation were instrumental in the development of Mrs. Beasley’s pressure sores, which resulted in the amputation of her left leg.”

Defense lawyer Ullman – facing more than $100 million in such claims from Wilkes and others – says: “I think it’s fair to say we were open to discuss their position and our position. Then the demand(s) came in, which (were) unreasonable. That ended the negotiations at that point in time.”

In April 1997, management of Brian Center of Tampa was taken over by Delta Health Group. And in July, Delta exercised an option to acquire the home from its most recent owner, Mariner Post-Acute Network, which judged the center nonstrategic to its interests.

“It was a problem-plagued facility,” says Delta President Scott Bell, whose company invested more than $1 million to upgrade the renamed Delta Health Care Center of Tampa. Delta rid the home of pervasive urine odors with a new ventilation system. It also replaced rusted furniture and rotting doors and raised workers’ pay.

Delta administrator Kay Maley says: “We are not the Taj Mahal or a Pink Palace of nursing homes. But I will put my care that I give in this home up against any home in Tampa as outstanding.”

Even top nursing homes have trouble maintaining regulatory compliance, however. In December, state inspectors confronted Delta with allegations that ranged from inappropriate care of elderly residents to mishandling their funds. The family of an allegedly abused resident threatened to sue.

Delta fixed the regulatory deficiencies, some of which it ascribes to “holdovers” from former owners. And in February it was awarded the state nursing home regulator’s top rating of “superior.”

Nevertheless, Lillian DuBois, 64, says the health of her husband, John, 79, deteriorated dramatically after he was institutionalized at Delta Health Care Center in June 1997. Within five months, the strapping former builder lost 60 pounds – 30% of his body weight – and was heavily medicated, medical records show.

Lillian DuBois’ brother, Danny Eldridge, says that in his opinion, “They took him from a walking, functioning human being to a zombie. He didn’t know where he was, who he was or anything.”

In September 1997, DuBois says, she discovered her husband glassy-eyed and unattended in a nursing home hallway. After escorting him back to his bedroom, she says, “I picked up the sheet and there was blood all over the bed. And there were gashes down his arm. And his mouth was so black inside where they had not been brushing his teeth.”

Nearly two weeks later, a Delta Health Care nurse recorded for the first time a “skin tear to (John DuBois’) right upper arm.” By then, it had scabbed over. The nurse identified the elderly man as “lethargic, (his) face flushed,” and said officials dispatched him by ambulance to a local hospital for evaluation.

Nursing home administrator Maley says: “I personally believe we were giving good care to John DuBois at the time.”

While declining to elaborate on the complaint, Maley adds: “This is a tough business we’re in. We’re dealing with human lives that are frail, elderly. It’s always – a constant – vigilance, daily. I never find it easy to give excellent care. I find it rewarding.”

Lillian DuBois transferred her husband to another nursing home, where, she says, he is doing well. And she hired Wilkes to sue Delta.

“If they’re treating one other person like that, and I can get them to stop, that’s what I want them to do,” DuBois says.

“Because they’re not a piece of meat. They’re human beings. And they need help.”


 

Cendant Corporation – A marketing and franchising company whose holdings include Century 21, Ramada Hotels, Days Inn and Avis Car Rental.

CENDANT TO PAY $2.8 BILLION
FRAUD SETTLEMENT

Shareholder Suit Was One of Largest in U.S. History

NEW YORK (AP) Dec. 8, 1999 — Cendant Corp., the marketing and franchising company battered by accounting problems last year, has agreed to pay $2.8 billion to settle a shareholder lawsuit accusing it of fraud.

The settlement, announced Tuesday and subject to approval by a New Jersey federal judge, would end one of the largest shareholder suits in U.S. history….

Accounting irregularities

Cendant, whose brands include Days Inn and Ramada hotels, the Avis car rental agency and real-estate brokerage Century 21, saw its stock price plummet last year after announcing the accounting irregularities, which forced the company to restate earnings from 1995 to mid-1998.

Cendant said CUC International, which merged with HFS Inc. to create Cendant in 1997, had used irregular accounting practices to inflate earnings by as much as $500 million over the previous three years.

The scandal prompted several resignations, and Cendant’s market value dropped by $14 billion in a single session last April.

Pension funds sue

In June 1998, the accounting woes prompted a class-action suit filed by two major pension funds — the California Public Employees’ Retirement System and the New York State Common Retirement Fund — on behalf of all shareholders. The plaintiffs accused Cendant of issuing false and misleading statements and allowing former company directors and officers to sell Cendant shares prior to the disclosures of the accounting problems. . . .

Audit board established

It also requires Cendant to adopt a number of changes in the way it governs itself, including setting up an audit board comprised entirely of independent directors rather than company officials.

Meanwhile, Cendant is suing Ernst & Young LLP, the accounting firm that represented CUC. As part of Tuesday’s settlement, shareholders will be eligible to receive 50 percent of any judgment against Ernst & Young.

* * *

June 14, 2000

Ex-Cendant execs plead
guilty to accounting fraud

Associated Press

NEWARK, N.J. — Three former executives at franchising giant Cendant Corp. pleaded guilty today to inflating revenues in an accounting scandal that led to the largest-ever settlement in a shareholder class-action suit. The disclosure of those irregularities two years ago led to a one-day, $14 billion meltdown in Cendant’s market value, making it “the largest financial fraud case we’ve ever brought,” said Thomas C. Newkirk, associate director of the Securities & Exchange Commission.

All three held senior financial posts at CUC International of Stamford, Conn. The company merged with HFS Inc. of Parsippany, N.J., to create Cendant in December 1997. Cendant is now based in New York.

Under oath, they said their actions were done at the behest of their superiors at CUC and that they will cooperate in a continuing investigation that involves the FBI and the SEC.

“It was ingrained in us by our superiors,” said one of those pleading guilty, Cosmo Corigliano, CUC’s former chief financial officer.

The defendants said CUC’s quarterly earnings were inflated in the two years leading up to the merger through improper accounting methods, including underfunding a reserve on membership cancellations and drawing money from a merger account in efforts to boost revenues. “Don’t we call that ‘cooking the books?’” U.S. District Judge William H. Walls asked Casper Sabatino, a CUC accountant in charge of external reporting.

Also pleading guilty was Anne Pember, CUC’s former controller. The three admitted their actions led CUC to overstate operating income by $116 million in the two years before the merger, and Cendant to overstate its operating income by $170 million for 1997.

* * *

Bush joined board of company mired in trouble

By ALECIA SWASY and ROBERT TRIGAUX

© St. Petersburg Times, published September 20, 1998

Getting a director’s post at Ideon Corp. seemed a no-lose opportunity to Jeb Bush.

Ideon chief executive Paul Kahn was a Bush fan — Kahn held a $24,000 fund-raiser at his Ponte Vedra oceanfront home, “Casa de Amigos,” for Bush’s 1994 campaign for governor. As former chief of Jacksonville’s successful AT&T Universal Card Services, Kahn had won the prestigious Malcolm Baldrige award. Former President George Bush bestowed the prize for corporate excellence on Kahn in 1992.

Kahn in early 1995 even wrote the former president: “First let me tell you how happy we are to have your son, Jeb, on our board of directors…. He is a great asset to the team.”

Then there was the paycheck. Ideon paid directors a whopping $50,000 a year, plus $2,000 per meeting and $500 per telephone conference. That was the largest sum paid to directors of any major public company in Jacksonville, and possibly in all of Florida.

What’s not to like? Everything, it turns out. Ideon already was in trouble when Bush joined the board in January 1995.

By 1996, Kahn was out. Ideon was then sold to CUC International. Ideon’s directors faced lawsuits claiming stock manipulation.

Now, more than two years later, Cendantthe successor company to CUC — is struggling to recover after discovering years of accounting fraud attributed, in part, to CUC’s purchase of Ideon. . . .

Kahn at first had grandiose plans for a quirky array of new services — selling credit card perks for golfers, a “Family Protection Network” membership club to help find missing children and a line of Vatican-approved art objects. The services were never fully tested. They flopped and Ideon began gushing red ink.

Some of Kahn’s ideas were a stretch. He wanted the pope’s blessing to introduce a Catholic credit card. He also wasted a lot of company funds. Kahn once bought $10,000 place mats for the company jet. He hired consultants like convicted Wall Street felon Martin Siegel.

Bush said he was angry when he heard about Siegel. “I couldn’t believe it,” he said.

Despite a second-quarter 1995 loss of $46.7-million, Bush said Ideon’s board initially accepted Kahn’s free-spending ways. The directors counted on revenue growth. They did demand Siegel be fired. Bush said he pushed to dismiss Kahn and sell the company.

But lawsuits against Ideon directors, as well as the company’s own regulatory filings, paint a different picture. As directors, Bush and his Republican fund-raiser friend Thomas Petway sat on Ideon’s audit committee, the watchdog of financial and management integrity.

Many of Bush’s fellow outside directors — who were supposed to represent shareholder interests — had cut cozy business deals with Ideon. In some cases, they got six-figure consulting fees on top of their directors pay.

Bush joined Ideon because he trusted Petway, whom he describes as “one of my better friends.” Petway declined to comment.

Politically, Bush said, it would have been wise to quit the board. Instead, he felt obligated to stay and push for cutbacks, including reductions in directors’ fees.

Directors endorsed firing 75 employees in September 1995, but kept their $50,000 compensation. The directors did eventually vote to cut their fees in half.

On Feb. 6, 1996, Kahn was ousted with a $2.5-million severance package. In April 1996, Bush and the other directors voted to sell Ideon. Bush then resigned.

By August 1996, Ideon was sold for $375-million to CUC. The sale included indemnification for directors against lawsuits. Good news, considering the lawsuits charge Ideon and its directors with stock manipulation.

The cases were settled early this year for $15-million. Bush and the other directors paid nothing.

Kahn denied that board members were in the dark about company spending. “I was not alone,” he told Business Week magazine last year.

“The board knew about everything. . . . They set me up for being the fall guy, not that I’m without sin. I was hung out to dry.”

Ideon is gone. But its legacy is not. After buying Ideon, CUC merged in 1997 with HFS to form Cendant. Mired in a massive accounting fraud, Cendant says CUC cooked its books for years to inflate its income. The Securities and Exchange Commission is investigating.

As for Ideon shareholders, Bush said they had a chance to recoup their losses, just like he did. His Ideon shares were converted to CUC stock, which he sold at a modest profit in 1997.

“Had people done what I did — and I bought (Ideon) stock at the high — had people sold at a reasonable time after the transaction, they would have come out,” he said.

“They would have gotten their shareholder value back.”

* * *

August 22, 2000

Cendant Lawyers Get Record $262 Million in Securities Fraud Case

Daniel Wise, New York Law Journal

Record-breaking awards in the Cendant securities fraud case were approved by a federal judge yesterday in New Jersey: a $3.1 billion settlement amount and $262 million in fees to attorneys for the plaintiffs’ class.

Cendant, a conglomerate that includes Avis car rental agencies and Ramada Inn Hotels, had agreed to pay $2.8 billion in December to settle security fraud charges stemming from the collapse of its stock price after accounting irregularities were disclosed in April 1998.

Ernst & Young, the accounting firm that had certified Cendant’s financial statement, also agreed to contribute $335 million toward the settlement.

The most controversial component of yesterday’s ruling by U.S. District Judge William H. Walls of Newark, N.J., was his rejection of New York City’s contention that the fees of the injured investors’ lawyers should have been cut by $76 million, to $186 million. The two lead law firms for the plaintiffs were Bernstein Litowitz Berger & Grossman in Manhattan and Barrack, Rodos & Bacine in Philadelphia. The firms had been chosen by the three institutional plaintiffs selected by the judge to control the litigation as lead plaintiffs: the pension systems for California, New York State, and New York City. . . .

The $3.1 billion settlement was more than twice as large as the previous largest settlement in a securities fraud case: the $1.4 billion that Prudential Securities paid in 1994 to settle claims by its investors, many of them elderly, that they had lost money on high-risk investments they could ill afford.

The $262 million in attorneys’ fees set a record for an award in a securities fraud case.

FORTY-SIX PERCENT PLUNGE

Cendant’s stock plummeted by 46 percent on April 16, 1998, following the company’s disclosure of accounting irregularities affecting one of two companies that merged in 1997 to form Cendant.

The price of Cendant’s stock plunged from $34.62 a share to $19. In the aggregate, the paper value of the company declined by $14.4 billion that day.

In August 1998, Cendant announced that the pre-merger company, CUC International, had overstated its income by $640 million during the three years prior to the December 1997 merger.

* * *

From Hoovers Online: NRT is Not a Realty Trust anymore.

The #1 residential real estate company in the US began life in 1996 as National Realty Trust, established by real estate franchisor HFS (now Cendant) to own the nearly 400 real estate offices that came with the purchase of Coldwell Banker.

Cendant and a subsidiary of Apollo Advisors restructured the trust into NRT to snap up successful independent realtors in hot metropolitan markets and rebrand them under Cendant’s franchise names (Century 21, Coldwell Banker, and ERA).

The realtor has more than 700 offices in about 25 markets.

After a planned IPO was aborted due to a tumbling market, NRT remains controlled by Cendant and Apollo Advisors. . . .


 

Chris Hemmeter – From Honolulu Star-Bulletin, 11/1/99, by Richard Borreca:

Hawaii Land: The Source of Power, the
Pot of Gold at Rainbow’s End

At the time of statehood, ownership was concentrated, with fewer than 100 owners holding half of all the land. – Hawaii’s dream and nightmare dovetailed into one: develop the land, make every parcel as valuable as possible.

“Ten years from now I envision Honolulu to be largely concrete and steel, with some coconut trees sprinkled throughout,” boasted Lowell Dillingham, developer of the Ala Moana Center, in 1961….

While commercial real estate was valuable, it was the tourism boom that echoed through the new high-rise canyons of Waikiki. Jumbo hotels– built to match the lumbering jumbo jets which began coming regularly in 1970.

Between 1968 and 1971, 17,140 hotel rooms were created in Waikiki . . .

The Kalakaua Avenue view of Diamond Head was first blocked by the 1970 Holiday Inn, with its 650 rooms rising 25 stories high. Today, the hotel is called the Hawaiian Waikiki Beach Hotel.

But perhaps the building boom’s crescendo sounded in 1974, when young developer Chris Hemmeter blew up the Biltmore Hotel to build the first super-block, the Hemmeter Center and the adjacent King’s Alley.

The hotel was the Hyatt Regency….

* * *

October 9, 1999

Grand Developer Down But Not Out

By Peter Wagner, Honolulu Star-Bulletin

He blew into town, built an empire and lost it in New Orleans. Somewhere along the way, Chris Bagwell Hemmeter became an icon among Hawaii developers and set a new standard for lavish “fantasy” resorts.

His legacy in Hawaii, a mixed bag of opulence and elegance, includes the Hyatt Regency Waikiki, Hyatt Regency Waikoloa, Hyatt Regency Maui, Westin Maui, Westin Kauai, King’s Alley in Waikiki and Hemmeter Corporation Center in downtown Honolulu.

Hemmeter was 22 and just out of Cornell University when he arrived in Hawaii in 1962 to become assistant manager at the Royal Hawaiian Hotel (which sits on land leased from Bishop Estate). … He parlayed a $10,000 loan from his parents first into retail stores, then restaurants, before turning his energy to resort developments.

Hemmeter’s high-flying fortunes began to plunge in 1995 with two Chapter 11 bankruptcies and a Chapter 7 personal bankruptcy filed in 1997, brought on by the failure of Mississippi gambling boats and an $800 million casino in New Orleans.

The personal bankruptcy, a liquidation now being closed in Los Angeles, showed $847,000 in assets and $87 million in debts.

“We bet the whole company on our project in New Orleans, based on the advice and counsel of the investment community and everybody else involved, and it didn’t work out,” he said Thursday from his Los Angeles home. “I guess that’s what risk-takers do.”

But Hemmeter, who turns 60 Monday, is hard to keep down. He and his son, Mark Hemmeter, are developing a $225 million hotel, lodge and casino in Black Hawk, Colo.

“Jackpot Springs” is due to open in two years. . . .

For more, GO TO > > > The Game Birds; Office of the U.S. Trustee vs. Harmon, Witness Diane Plotts


 

Credit Lyonnais – In 1996, Credit Lyonnais was the world’s largest non-Japanese bank, ultimately owned by the French Government.

October 1, 1996

Credit Lyonnais & L.F. Rothchild
Ready to Topple

By J. Orlin Grabbe

What will happen when the world’s largest non-Japanese bank topples?

The repercussions will ripple throughout the world banking system. Get ready to see Citibank, Chase and the Chicago Mercantile hammered….

Credit Lyonnais has long relied on two simple mechanisms to ensure its bloated growth; a ready supply of money-laundering deposits from the Cali cartel and similar sources, and financial infusions from the French government (which owns most of the bank) when all else fails…

Meanwhile, the bank has frittered away its assets in an endless array of non-performing loans. Representative of this is Credit Lyonnais’ financing of Giancarlo Parretti’s purchase of Metro-Goldwyn-Mayer from Kirk Kerkorian in 1990 for $1.3 billion.

Later, in 1992, Credit Lyonnais acquired the assets of MGM, which it then sold to a Kirk Kerkorian-backed group for $1.3 billion earlier this year . . . after having pouring millions of dollars into the company.

The big private loser so far is L.F. Rothschild, much of whose fortune is tied up in Credit Lyonnais. . . . Meanwhile, the European Commission has launched a series of investigations into a number of suspicious transactions associated with Credit Lyonnaise…

Finally, there is the usual assortment of dead bodies that often appear in the banking world when millions of dollars are at stake.

One of these is Armschel Rothchild, who until his demise was the chairman of British mutual fund group, Rothschild Asset Management.

Amschel committed suicide by a very innovative method back in July. He took the belt from a hotel robe, tied one end to a towel rack, and the other end to his neck. He then hanged himself by, well, let’s see, “jerking back suddenly.”… Hmmmmm.

* * *

From Forbes Magazine, 12/13/99, by David McClintick:

The Dirtiest Bank in the World

THE FIRE BEGAN at 8:30 on a Sunday morning in 1996 … in the main trading room of Credit Lyonnais, one of France’s biggest banks. . . . Dozens of offices and thousands of documents, as well as the trading room, the largest in Continental Europe, built by Gustave Eiffel, were reduced to ashes and rubble.

French police suspect the fire was the work of arsonists.

It’s a striking and fitting image of what Credit Lyonnais has become. Once a force in global finance, the bank is little more than half its former size, having been looted by criminals, racked by scandal and decimated by the loss of at least $20 billion … in reckless and corrupt investments.

It is by far the biggest banking debacle in history. This institution, nationalized by the French government in 1945, is an object lesson in what can go wrong in a government-owned commercial enterprise without accountability….

A criminal inquiry, which began quietly five years ago as a narrow probe of an eccentric Italian tycoon, has grown dramatically into more than 100 separate cases of suspected fraud, embezzlement, bribery, perjury, forgery, money-laundering, and even blackmail and arson in France and several other nations, including the U.S. . . .

The Department of Justice, the FBI, the IRS and the Federal Reserve … are examining Credit Lyonnais’ far-flung activities. Rarely have U.S. authorities so deeply probed the operations of a foreign bank. It is now clear that Credit Lyonnais was an octopus of fraud. By comparison, the infamous BCCI, which collapsed with a $7 billion loss, was small change….

Unlike BCCI, Credit Lyonnais is still with us. Reorganized in a French taxpayer-funded bailout that segregated most of the bad loans into a separate entity, the bank was privatized earlier this year, with the government retaining 10% of the common shares. Credit Lyonnais is now a profitable business, with assets of $214 billion, new management and a market value of $9.6 billion. But the sordid past is not behind it. It will be years before the lawsuits and criminal investigations are resolved and the bad assets liquidated. . . .

Among possible crimes in the U.S. under investigation are securities fraud, mail fraud and lying to the Federal Reserve in connection with the purchase of the controversial California insurance company, Executive Life, and its junk bond portfolio.

If the Federal Reserve finds Credit Lyonnais culpable for serious misconduct, as it did Japan’s Daiwa Bank, it could fine it tens — even hundreds — of millions of dollars and even expel it from the country, where it is believed to earn more profit than in any nation outside France….

In France it is nothing less than a phenomenon of historic import, a jolting demonstration of the arrogance, insularity and lack of accountability of the state-dominated elite that has governed the country’s financial sector since World War II. The criminal investigation is the country’s largest ever. In a move virtually unprecedented in history, offices of the French Treasury, the core of the Ministry of Finance, have been searched for evidence of crime…

Investigators are probing a wide array of Credit Lyonnais’ clients and subsidiaries, some of which have bred sizable scandals of their own. These include the doings of such former clients as Robert Maxwell, the late British publisher who died under mysterious circumstances in 1991, and Bernard Tapie, who owned Adidas for a time with Credit Lyonnais’ help and later went to prison for bribery in a separate case…

Even a former governor of France’s central bank has been questioned. Investigators had discussed with other top officials whether their actions or inactions might have fostered Credit Lyonnais’ frauds and losses. Prominent financiers, well-known in global banking circles, face possible imprisonment, financial calamity and public disgrace…

* * *

From The Conspirators: Secrets of an Iran-Contra Insider, by Al Martin:

IRAN-CONTRA REAL ESTATE FRAUD

The final Iran-Contra note I wanted to make about Nevada was the egregious swindle that George Bush Sr. himself instituted in concert with Frankie Sue DelPapa on that Cosmos Development deal.

The scenario in question later became known as the Peruvian Gold Certificate Swindle, where DelPapa actually substituted corporate records.

Bush had formed a corporation with a very similar sounding name. This was commonly done – mimic corporations with similar sounding names.

You simply substitute the records and it was an out-and-out swindle of the Durham family. This is the scenario that the famous California conspiracy theorist, E.E. Eckert, got involved in….

What Eckert did was connect this fraud to ever larger frauds. He connected the gold certificate fraud into big money, tens and hundreds of millions of dollars in bank loans at Banque Paribas, Credit Lyonnais, Union Bank of Switzerland.

This is also part of the National Bank of Greece swindle that was instituted by Prime Minister Papandreou and George Bush together….

This wound up being an enormous swindle in the end and this is what is called the Grade One Swindles in Iran-Contra. These are the swindles that nobody is ever going to want to look at because it gets far too close to the way everything works and what it’s really all about.

For a long time Eckert tried to get the major media interested in it. And they would bite. ABC bit a couple of times on it. As long as the fraud could be contained, to say: “Well, it’s just a small $75 million fraud, and Bush was connected to it.”

But the minute Eckert was able to show that this was up in the clouds. . . .

This is one of the frauds in the clouds that makes the world go around, that ultimately was to involve Daiwa Bank and Sumitomo Bank.

It’s an interesting example. They had hired me at one time as a consultant to provide some further information for them, which I did. They needed some connecting pieces of the puzzle.

But this is a very interesting fraud about which an entire book could be written. It’s a fraud that starts out with a $50,000 investment by George Bush, and ultimately it grows into a $2 or $3 billion international bank fraud.

How? By simply rehypothecating loans and/or borrowing ever greater amounts of money, using proceeds to pay back the old loans, or in some cases to partially pay them back, which was more common.

Then the corporate entity would go bankrupt. Credit Lyonnais was one of the very few banks to ever admit that it lost money, that it had in fact lost about $68 million on this fraud. Of course, they would have no comment when they were asked about George Bush’s involvement with this fraud.

But Eckert knew, and the Financial Times of London knew, that Bush’s signature was on loan papers at Credit Lyonnais.

You may remember this famous scenario. FT London revealed that Credit Lyonnais had a fire in their reserve document storage facility in Paris and (wouldn’t you know it?) there were three or four file cabinets that got burned up, including all of the Bush documents….


 

Executive Life Insurance Company – from a California Department of Insurance Press Release, Feb 18, 1999:

COMMISSIONER QUACKENBUSH SEEKS RECOVERY
OF BILLIONS OF DOLLARS FOR FRAUD IN THE REHABILITATION OF EXECUTIVE LIFE INSURANCE COMPANY

LOS ANGELES — California Insurance Commissioner Chuck Quackenbush announced today that he has filed a lawsuit in Los Angeles County Superior Court seeking disgorgement of (return of) profits and other relief against six corporate and three individual defendants that were involved in the 1991 rehabilitation of Executive Life Insurance Company.

Commissioner Quackenbush’s lawsuit alleges that in an effort to obtain Executive Life’s multi-billion dollar portfolio of “junk bonds,” the defendants fraudulently concealed the involvement of a French Government-owned bank and its subsidiary in the ownership and management of a new insurance company. The concealment is believed to have been designed to skirt California insurance laws and regulations, and possibly federal law prohibiting bank ownership of insurance companies.

“These rogue individuals and their corporate partners came to California with a scheme shrouded in lawless deceit, so they could evade regulations intended to protect innocent policyholders and consumers,” said Commissioner Quackenbush. “Although the deeds were done on another Commissioner’s watch, I am going to ensure that the foreign financiers who perpetrated this scheme are made to pay, and that fast operators never again think they can manipulate and evade state authority.”

Specifically alleging fraud, deceit, misrepresentation and unfair competition (Section 17200 of the California Business and Professions Code), the Commissioner has sued Altus Finance S.A., CDR Enterprises, Credit Lyonnais, S.A., Mutuelle Assurance Artisanale de France, Mutuelle Assurance Artisanale de France Vie S.A., Omnium Geneve S.A., Jean-Claude Seys, Jean-Francois Henin and Jean Irigoin. The lawsuit seeks compensatory damages according to proof, punitive damages, and disgorgement of profits.

In 1991, Insurance Commissioner John Garamendi was appointed as conservator of the insolvent Executive Life Insurance Company. Thereafter, Commissioner Garamendi solicited bids for the rehabilitation of the company’s business, including the assumption of its life insurance policies and annuities. Among competing bids was a proposal by Altus Finance S.A. and a number of French investors which provided that Altus would purchase Executive Life’s “junk bonds” and the investors would set up an insurance company that would take over Executive Life’s policies. Altus was owned by Credit Lyonnais, a French bank that is, in turn, owned by the French Government.

Unknown to the Commissioner, Altus secretly entered into agreements with some of the French investors which provided that Altus, not the investors, would own the new company. Further, Altus and some of the French investors secretly agreed that management of the new insurance company would be controlled by Altus. Altus and the French investors then filed false and misleading documents with Commissioner Garamendi, which purported that the new company was owned by the French investors.

Commissioner Quackenbush believes that California law would have barred Altus from being approved as the owner of the new insurance company, and further, ownership of an insurance company by Altus might have violated the federal Glass-Steagal Act. The Glass-Steagal Act generally prohibited banks from owning insurance companies.

Through its deception, Altus acquired the junk bonds, which are believed to have generated billions in profits.

Last Revised – February 18, 1999
Copyright © California Department of Insurance


 

Laidlaw Environmental Services

Environmental Background Information Center

Providing the practical tools and strategies people need to confront corporate power.

(http://www.ebic.org/)

Corporate Profile: Laidlaw Environmental Services

by Christopher M. Sevanick and Brian Lipsett

Introduction

Historically Laidlaw Waste and Laidlaw Environmental Services have been subsidiaries of Laidlaw, Inc., which in turn is a 47.5% owned subsidiary of Canadian Pacific.

In 1997, Laidlaw sold both their hazardous waste and solid waste divisions. Rollins Environmental Services reportedly bought Laidlaw’s hazardous waste business. The new company has retained the name Laidlaw Environmental, and Laidlaw received a 66.66% controlling interest in Rollins.

This “reverse acquisition” is similar to how Laidlaw gained 40% of Allied Waste Industries’ stock when Allied “bought” Laidlaw’s solid waste business. Laidlaw then sold their 40% stake in Allied to a group of investors, one of them, Leon Black, a former ally and associate of convicted junk bond king, Mike Milken.

Black was a managing director at Drexel when the company plead guilty to 6 felony charges and paid a $650 million fine for securities fraud in 1988.

Laidlaw’s Beginnings and Expansion

In 1959, at the age of 37, Michael DeGroote paid $75,000 for a small trucking firm named Laidlaw in Hagersville, Ontario. DeGroote’s business grew the way many waste businesses do, by acquisition — one small company at a time. DeGroote eventually sold his stake to Canadian Pacific in March 1988 for cash and Canadian Pacific shares valued at $499 million. He resigned as a Laildlaw director in December of 1990.

Troubles at Laidlaw, however, continued to dog DeGroote even after he left. I n August 1992, Laidlaw denied all charges but agreed to pay US and Canadian shareholders $7.65 million in a class action settlement which claimed that the officers had “misrepresented the financial condition of Laidlaw.”

In 1993, DeGroote and associates paid $23 million to the Ontario Securities Commission in a settlement for insider trading involving Laidlaw stock.

In the meanwhile, Degroote busied himself building a new waste empire. In 1991, DeGroote took over Republic Waste from Browning Ferris Industries founder Tom Fatjo.

In 1995 DeGroote gave up control of Republic to Waste Management Inc. founder Wayne Huizenga. However, DeGroote is still one of Republic’s largest shareholders and is Vice-Chairman.

Dealings and More Expansion

Laidlaw played a major role in helping BFI launch their hostile takeover of Attwoods in 1994. Laidlaw sold BFI their 29% stake in Attwoods to for $132.5 million. Laidlaw used these funds to buy up US Pollution Control Inc. (USPCI), a deal which, according to some accounts, made Laidlaw the largest hazardous waste manager in North America.

Environmental Problems/Violations

While Laidlaw’s management has wheeled and dealed, their core business has been fouling the environment and getting into trouble. Below are just some of the various problems that Laidlaw has run into in recent years:

Nashville, TN

>> Fined $10,000 for lime blowing out of a storage vent in October 1995.

>> Paid a fine of $80,000 in November, 1993 and agreed to $3.5 million in improvements to abate odors emanating from “bio-sludge.”

Louisiana

>> Fined $60,000 for air quality violations involving petroleum liquids stored in tanks at its storage and treatment facility near Silverwood.

>> Fined $1 million for violations including illegal handling and disposal of hazardous wastes at its commercial hazardous waste fuel blending facility in Crowley.

Roebuck, SC

>> $500,000 civil penalty addressing hazardous waste burning violations.

>> Settled for a $100,000 fine for more than four years of mercury discharge violations.

>> Fined $22,500 for hazardous waste burning violations discovered during a 1990 inspection.

>> Proposed stipulated penalty of $61,500 for violations of specified operating requirements in their hazardous waste storage facility.

>> Fined $106,000 for discharging mercury at higher than legally allowed rates into the North Tyger river in 1992.

>> Penalized $30,000 for unauthorized emissions from their incinerator’s stacks.

Pinewood, SC

>> Penalized $1.825 million, the state’s largest penalty ever, for repeated violations including improper disposal of infectious waste and wastewater sludge (36 total).

>> Required to pay into a trust fund, to total $133 million cash in the year 2004, to cover any clean-up costs.

>> Fined $214,000 for four hazardous waste violations: improper disposal of infectious waste, inadequate treatment of sewer sludge, insufficient testing of debris and soil, and excessive contamination of waste at its landfill. As one top agency official put it, “Laidlaw must be more diligent in its operations.

>> Pushed for a bill that would make environmental audits priviledged information which is inadmissable as evidence.

Canada

>> Fined $80,000 for emitting odors and $14,000 for silt discharges in March 1993 in Storrington Township northeast of Kingston.

>> Became legally responsible for toxic emissions emanating from more than 800 barrels and PCB-contaminated electrical equipment illegally buried by the previous company, in Mercier. Laidlaw was fined only $10,000 due to the $9 million they had already spent cleaning up the site.

Columbus, Ohio

>> Forced to address complaints from the school next door of odors and noise In 1994, odors from Laidlaw’s industrial wastewater treatment facility were so strong, children reported burning eyes and throats.

>> Alleged in two lawsuits, one by city officials and another by two environmental groups, to have discharged illegal levels of heavy metals into the city sewer systems.

Cleveland, Ohio

>> Signed a consent decree with the state to close and clean GSX toxic waste site- five years later, the soil is still contaminated. The site had problems before Laidlaw purchased GSX, but Ohio EPA Director Richard Shank later called Laidlaw’s operation, “horrendous and shoddy…I never would have dreamed that (Laidlaw) would have gotten themselves into this kind of trouble…this is not some corner drug store, this is a hazardous waste facility.”

Elsewhere, USA

>> Named a potentially responsible party (prp) in at least 6 Superfund sites. And they are also listed in EPA court data as defendents at several other Superfund sites, according to EPA data. The company has also been subject to several antitrust actions.

Recent Developments

As described earlier, Laidlaw has “sold” both their solid waste and hazardous waste divisions. So now the history of Rollins and Allied come into play. Both have interesting track records.

Rollins Environmental Services

Business Week ranked Rollins Environmental’s board of directors as one of the worst. Business Week said of these companies. “The companies tended to fail the tests of independence or accountability.”

Rollins has been cited for more than 100 violations, both state and federal, but has not paid any penalties. And in 1989,”Rollins was fined $ 1.9 million for its involvement in illegal shipments of hazardous ash; this year, after running eighteen years on various temporary permits, it received a final operating license.”

Allied Waste Systems

Allied’s Chief Executive Officer, Roger Ramsey, was the Vice President and Chief Financial Officer for BFI from 1968 to 1976.

In 1983, BFI pleaded no contest to charges of price-fixing and conspiracy in Atlanta from 1974 to 1979.

Allied Waste Industry, Inc.’s Fort Mill transfer station was issued a consent order in response to charges of leakage and operational problems that affected the environment.

Container Corp., a South Carolina subsidiary of Allied that was responsible for the Fort Mill transfer station, paid a $55,000 fine and the station was closed.

Organizing TipFor all intents and purposes, Laidlaw’s track record is still relevant since the same management will be probably be operating the facilities. Ask them, in public, for the background and experience of the management for your local facility.


 

Mitsui Trust and Banking Company – From Pacific Business News, 06/24/96: Landmark back on market. . . . The architecturally distinctive 35-story Waikiki Landmark has languished since its completion in 1993, a victim of the evaporation of interest in expensive Hawaii real estate …

In June 1995, Los Angeles-based Oaktree Capital Management bought the $155 million mortgage on the 196-unit building for an estimated $50 million from Mitsui Trust & Banking Co. Ltd. And in January, Oaktree filed a foreclosure suit against owner Waikiki Landmark Partners, headed by controversial Indonesian developer Sukamto Sia, also known as Sukarman Sukamto….

* * *

U.S. News & World Report, 04/13/98, by David Kaplan: Yakuza, Inc. . . . U.S. News obtained a … portfolio of 108 properties offered to Western investors by Mitsui Trust & Banking Co., one of Japan’s largest banks. . . . Thirteen of the properties … are held by Azabu Building, a company that might not mean much to Americans but is quite familiar to Japanese police….

For more, GO TO > > > The Indonesian Connection; Yakuza Doodle Dandies


 

Pacifica Holding Company – From The Denver Business Journal:

March 6, 1998

PACIFICA CASHES OUT

Pacifica Holding Co. of Englewood has finished cashing out of its Denver-area holdings, recently selling its 1.4 million-square-foot office portfolio to Mack-Cali Realty Corp. for $188 million. The company previously disposed of its industrial and retail holdings.

Apollo Investment Fund II LP, part of New York financier Leon Black’s Apollo vulture empire, was a partner in eight of the 19 Pacifica office buildings New Jersey-based Mack-Cali acquired.

William Mack — a founder of the Mack Co., which merged last year with Cali Realty Corp. to create the Mack-Cali real estate investment trust – was on both sides of the deal as a director of the REIT and a managing partner in Apollo Investment Fund II…

See also: Vail Resorts


 

Trinity Holdings – From: Honolulu Star-Bulletin, 7/31/97: . . . A Chicago-based partnership is buying the 318-room Keauhou Beach Hotel on the Kona Coast.

Trinity Investment Trust LLC, which is also purchasing the mortgage to the Aloha Tower Marketplace, has signed a letter of agreement to acquire the beachfront hotel from Azabu USA.

The hotel, built in 1970, sits on land leased from the Bishop Estate. . . .

Azabu, headed by maverick deal maker Kitaro Watanabe, acquired the Keauhou Beach Hotel in 1987 for $13 million. During the 1980s, Azabu invested about $600 million in Hawaii, acquiring the Hyatt Regency Waikiki, the Ala Moana Hotel, the Maui Marriott and the Kona Lagoon [also on land leased from Bishop Estate].

Since then, Azabu has run into a string of financial difficulties. In 1993, lender Mitsui Trust & Banking filed a foreclosure suit on the 1,200-room Hyatt Regency.

In 1994, Mitsui wrote off $1 billion in bad debts from loans to Azabu.

Last month, Tokyo officials arrested Watanabe and two other Azabu officials alleging that they illegally concealed company assets from creditors. Azabu’s Hawaii subsidiary said then that the arrests had no effect on the company’s local operations.

Trinity, meanwhile, is part of a new wave of American buyers who are purchasing properties from financially troubled Japanese investors. . . .

The company — whose investors include former VMS Realty executives George Ruff, local attorney Jon Miho [of McCorriston Miho Miller & Mukai, defense attorneys for the Bishop Estate trustees] and hotel developer Charles Sweeney — is trying to acquire the $60 million mortgage to the Aloha Tower Marketplace from Mitsui and take over the waterfront complex.

Last year, Trinity and Apollo Advisors L.P. bought the $130 million mortgage to the nearby Harbor Court luxury office and condominium complex for an undisclosed price from Mitsui.

Trinity has also joined up with Apollo, time-share operator Signature Resorts Inc. and Goldman Sachs’ Whitehall Fund [another Bishop Estate investment] to buy the 413-room Embassy Suites Resort on Maui for $78 million. . . .

[A Catbird Comment: Note that nowhere in this news article is there the slightest tweet about Azabu’s connection with the Yakuza.]

* * *

Aloha Tower complex being sold

By Rick Daysog, Star-Bulletin

A Chicago-based investment group is buying the $60 million mortgage to the Aloha Tower Marketplace, a deal that could bring new money to the troubled waterfront retail complex.

Trinity Investment Trust L.L.C. signed a purchase agreement with Japan-based Mitsui Trust & Banking Co. last night to acquire the mortgage to the Honolulu Harbor project, according to sources familiar with the deal.

The price was not disclosed but many expect that it will be lower than the $60 million mortgage amount.

Chad Griffith, Mitsui’s attorney, this morning declined comment on the specifics of the deal, saying only that the sale of the mortgage was progressing well.

Jon Miho, attorney for Trinity, also declined comment.

Trinity’s investors include former VMS Realty and Resort Income Investors Inc. executive George Ruff and isle developer Charles Sweeney, who built the 413-room Embassy Suites Resort in Kaanapali and the 450-room Kea Lani Hotel in Wailea.

Completed in 1994, Aloha Tower Marketplace was built at a cost of $100 million. The complex covers 165,859 square feet of commercial space on land leased from the state. The project pays an annual lease rent of $1 million to the state.

Last year, Mitsui put the mortgage up for sale. The bank had filed a foreclosure suit in September against the project’s developer, Aloha Tower Associates, alleging that the developers didn’t make payments on the $60 million loan it issued in September 1993.

Aloha Tower Associates sued Mitsui in May, 1996, charging that the bank reneged on more than $600 million in financing.

The state Aloha Tower Development Corp., which oversees the project, said it was aware of the agreement but was not told the buyer’s name. Andy Beaman, ATDC attorney, said the state welcomed the deal, which is expected to close at the end of July.

“We view this as a positive development,” he said.

This is not the first deal between Mitsui and Trinity.

In September, AHI Harbor Limited Partnership, a joint venture between Trinity and New York-based Apollo Advisors L.P. bought the $130 million mortgage to the nearby Harbor Court luxury high-rise from Mitsui for an undisclosed, discounted price.

Apollo is headed by former Drexel Burnham Lambert Inc. merger-and-acquisitions specialist Leon Black.

Trinity and Apollo also have teamed up with local builder Mike McCormack to acquire a share of the Embassy Suites Resort.

That investor group is bidding with time-share operator Signature Resorts Inc. for the Maui hotel. Mitsui is one of several lenders at Embassy Suites….

See also: VMS Realty


 

Vail Resorts Inc. – The world’s largest ski-area owner.

March 7, 1997

Wall St. savvy fills Vail board

15 males count decades of deals

By Paula Moore, Denver Business Journal

Like Detroit with the Chevy Corvette, Vail Resorts Inc. has assembled a sleek board of directors built for power and speed.

The common denominator among most of Vail Resorts’ 15 directors is the ability not only to create a successful company, but to do it aggressively and quickly. The Colorado ski company has drafted a relatively young but financially sophisticated corps of corporate predators to help it grow.

With its recent $331 million acquisition of St. Louis-based Ralcorp Holdings Inc.’s Keystone and Breckenridge ski areas in Colorado, Vail Resorts now is the world’s largest ski-area owner. Other holdings include Vail and Beaver Creek, which includes the Arrowhead resort.

Vail Resorts and its parent, Purchase, N.Y.-based Apollo Advisors LP, apparently have made savvy director choices but also questionable ones.

Almost half the Vail board consists of insiders such as Apollo executives, perhaps making it a little too friendly. A couple other directors also have attachments to Apollo through its founder, Leon Black, in that they worked for his former company, deposed Wall Street junk-bond and leveraged buyout giant Drexel Burnham Lambert Inc.

So many directors with such close ties
to Black could prove problematic.

Cronyism — or the placement on boards of friends, relatives and close business associates — has come under fire lately, in light of Walt Disney Co. shareholders’ accusations of incestuous connections between the Disney board and its chairman, Michael Eisner.

For example, the Disney CEO’s lawyer and his children’s former elementary-school principal sit on Disney’s board. While pals provide comfort for corporate chieftains, they often lack the independence shareholders demand.

Another group of Vail directors is made up of outside corporate heavyweights whose expertise reveals the Colorado company’s priorities — entertainment, real estate development and acquisitions.

They include movie-industry guru Frank Biondi, chairman and CEO of Universal Studios Inc., and James Tisch of New York’s fabled Loews Corp. hotel, tobacco, oil and real estate dynasty. That contingent also includes real estate developer extraordinaire James Mack of The Mack Organization, LBO whiz Thomas Lee and Stephen Hilbert, crafter of the Conseco Inc. insurance conglomerate.

Experts in creating boards of directors agree most companies desire board members who have tasted success and can set a company on that path and keep it there. A board’s primary job is to protect shareholders’ interests.

“The most important thing we stress is what you are going through that’s new and who can help you with that,” said Kathy Evers, managing director of corporate finance at Denver-based investment banker Hanifen Imhoff Inc. “If they are acquisition prone, you look for financial types.”

“You look at people who can drive a company forward, who bring the best expertise,” said Madeleine Kondolet, Chicago-based vice president at Korn/Ferry International, a New York executive search firm that produces an annual board of directors study.

Summed up John M. Nash, president and CEO of the National Association of Corporate Directors in Washington: “In the main, you want highly successful business people. A star name such as an ex-politician may open some doors, but generally it doesn’t make a big contribution.”

Like many boards, Vail’s receives no cash compensation, but as a group, directors own 2.3 million shares of the company’s common stock. Apollo Advisors earns $500,000 a year in management fees from Vail Resorts.

Vail’s board, however, doesn’t track with most national averages, according to Korn/Ferry’s 1996 analysis of U.S. corporate boards. The board numbers 15 men, while most panels have about 11 people and many boards deliberately strive for more representation by women, minorities and outsiders.

It is heavy with insiders, including six Apollo executives, many of whom worked with Black at Drexel Burnham and who are involved with other companies affiliated with Apollo.

Apollo’s Marc Rowan, a former Drexel bond trader; Robert Katz, another ex-Drexelite; and Bruce Spector, one of the country’s foremost bankruptcy attorneys; handled the bulk of negotiations for Vail Resorts.

Vail’s former incarnation, Gillett Holdings Inc. of Colorado, issued millions of dollars in junk bonds underwritten by Drexel Burnham.

In 1992, George Gillett, having declared bankruptcy a year earlier, sold out to Black, Drexel’s former co-head of mergers and acquisitions and the brain behind Apollo.

Connecticut lawyer and avid skier Craig Cogut, who helped launch Apollo with Black in 1990 but since has bowed out of that company’s daily operations, was on Gillett Holdings’ creditors committee.

Geneva, Switzerland-based financial advisor John Ryan sits on the board to watch over client Artemis S.A.’s interests. Artemis is a major investor in Apollo Ski Partners, which oversees Vail Resorts’ properties.

Outside directors appear to have been recruited for very specific talents.

>> Frank Biondi — The same day in 1995 that grizzled Viacom Inc. chief Sumner Redstone fired Biondi, he got a call from Edgar Bronfman Jr., CEO of Canada’s liquor giant, Seagram Co. Bronfman, also majority owner of Universal Studios Inc. parent MCA Inc., wanted Biondi to run Universal as chairman and CEO.

Indeed, Biondi has gotten the boot from the best, previously being ousted as chairman of Home Box Office Inc. He also worked for Coca-Cola Co. when it owned Columbia Pictures.

A New Jersey native with degrees from Princeton and Harvard universities, sharing Ivy League status with Black, Biondi has a knack for turning around entertainment entities.

>> James Tisch — In the second generation of a family of vulture capitalists that built a multibillion-dollar empire, Tisch is president and CEO of Loews Corp. By buying cheap and installing disciplined management, a philosophy shared by Apollo Partners, Loews has made huge successes of Loews Hotels, cigarette-maker and creator of low-tar brands Lorillard Inc. (see The Biotech Birds), watch-maker Bulova Corp. and Diamond Offshore Drilling Inc.

>> Stephen Hilbert — The founder, president, chairman and CEO of Carmel, Ind.-based Conseco Inc. only recently has squelched his huge appetite for consolidation. Last year, Hilbert announced Conseco would make more cautious acquisitions that add to earnings, instead of aggressive ones involving huge debt.

One of the fastest-growing insurance companies in the country, Conseco over the years gobbled up Bankers Life and Casualty, American Life & Casualty Insurance and Great American Reserve. It bought and sold Lincoln Income Life and Western National Life.

Ironically, millionaire Hilbert’s mother-in-law was arrested last year for welfare fraud, having allegedly obtained $3,500 in food stamps illicitly.

> > Thomas Lee — The Boston investment banker is the founder and president of the Thomas H. Lee Co., a leveraged buyout specialist. Lee raked in $900 million when he sold the Snapple Beverage Corp. to the Quaker Oats Co. in 1995 and another $200 million from the 1996 sale of TRW Inc.’s credit operation to Great Universal Stores of Britain. The former First National Bank of Boston executive currently is pursuing battery giant Rayovac Corp.

Lee has been named in a class-action lawsuit by shareholders of General Nutrition Cos., on whose board he sits. He also paid more than $200,000 to a Philadelphia stockbroker who claimed he raped her; Lee denied wrongdoing.

>> William Mack — President of the New York-based Mack Organization, Mack drives one of the Big Apple’s dominant commercial real estate developers. The Mack firm has built, owned and invested in office high rises and industrial structures principally on the East Coast since the early 1960s. Mack is a founding principal of Apollo Real Estate Advisors.

> > > FAST FORWARD > > >

May 7, 2004

Vail Investor Unhappy
Over Board Makeup

By Paula Moore, The Denver Business Journal

One of Vail Resorts Inc.’s biggest investors has a problem with the Colorado company’s board, in the wake of earnings restatements and a Securities and Exchange Commission investigation into Vail’s finances.

Vail investor Ronald Baron of New York-based Baron Capital Inc. heeded analysts’ advice and withheld his support for the re-election of William Stiritz and Joe Micheletto of St. Louis-based Ralcorp Holdings Inc. Stritz, Ralcorp’s chairman, and Micheletto, vice chairman, plus five other Vail board members were re-elected in January anyway.

The Ralcorp execs joined the Vail board after the Missouri food giant sold its Keystone and Breckenridge resorts to Vail for $331 million in 1997. At the same time, Ralcorp sold its Arapahoe Basin resort to Dundee Realty USA Inc. of Avon, a subsidiary of Toronto-based Dundee Realty Corp.

In addition to those resorts, Vail Resorts owns Colorado’s Vail and Beaver Creek ski areas plus Heavenly near Lake Tahoe of the California-Nevada border. The Vail-based company has diversified into other resort business as well, including managing 10 U.S. resort hotels through its RockResorts arm….

The financier declined comment about why he objected to the Ralcorp exec’s staying on the board….

Baron’s own company, which manages $8.6 billion in funds, last year settled and SEC proceeding against it for illegal “marking the close” in trades executed at the New York Stock Exchange, according the NYSE. The unlawful practice involves trying to influence a stock’s closing price by executing orders at or near market closing.

Vail Resorts executives also declined comment about Baron, according to spokeswoman Kelly Ladyga.

But Baron’s actions may have to do with the SEC’s investigation into Vail’s finances, launched in February 2003, according to a recent story in the St. Louis Business Journal….

The SEC probe come on the heels of Vail’s October 2002 announcement that it would restate earnings for fiscal 1999 through 2001….

Late last year, analysts at San Francisco-based proxy consulting firm Glass, Lewis & Co. urged Vail stockholders to withhold their votes on six of seven board members up for re-election, including Stritz and Micheletto. In a December proxy analysis, Glass, Lewis found Vail and its auditors have discovered accounting errors affecting multiple years of financial reports.

James Donohue, Vail’s CFO since 1996, was reassigned last November, a week after Vail announced the restatements cut profits by more than $3 million….

Glas, Lewis analysts also gave Vail’s executive compensation program an “F” for paying top managers more than the median pay at peer companies. Though Vail execs made more money than top management at comparable companies, the resort owner fared worse financially, according to Bebel.

Vail CEO Adam Aron, for example, took home $6.7 million last year, including his $704,615 salary and perks such as $5.6 million in real estate and club memberships worth more than $400,000.

In fiscal 2003, Vail reported an $8.5 million loss on revenue of $710.4 million.

All 11 of Vail’s executive officers, from Aron to Vail Resorts Development President James Thompson, sit on the company’s 17-person board.

The board also includes Robert Katz and Marc Rowan, both of whom are affiliated with Vail founder and majority owner Apollo Partners LP of Purchase, N.Y. Katz and Rowan formerly were at defunct Wall Street leveraged-buyout giant Drexel Burhnam Lambert with Apollo founder Leon Black….

$ $ $

September 30, 2004

Vail Resorts Takes Several Steps
to Enhance Corporate Governance

News Release – PRNewswire

VAIL, Colo. – Vail Resorts, Inc. announced today several steps designed to improve its corporate governance. Most notable are the cessation of the dual class share structure of Common Stock and Class A Common Stock that has been in place since 1992 and changes in Vail Resorts’ Board of Directors and Board Committee Composition. These changes are the result of Apollo Ski Partners L.P., holders of approximately 17.8% of Vail Resorts total outstanding shares, having advised the Company that effective immediately it will voluntarily waive and permanently forgo many of its existing rights….

ELIMINATION OF MANAGEMENT FEE

For more than a decade, in connection with Apollo Ski Partners L.P.’s shareholdings in Vail Resorts, Apollo Advisors L.P., a New York-based private equity firm, has received an annual management fee for providing financial and strategic advisory services to the Company. Apollo and Vail Resorts have terminated this arrangement effective October 1, 2004.

CHANGES IN BOARD OF DIRECTOR AND COMMITTEE COMPOSITION

As part of the change in ownership structure represented by the conversion of the Class A shares into Common Shares, the Vail Resorts Board of Directors has decided to reduce the size of the existing board in the interest of improving the effectiveness and focus of the Directors. As such, of the 12 Directors who have previously served on the Vail Resorts Board of Directors, seven will remain in position and five have resigned as of September 27, 2004. Of the seven Directors who will continue, all six non-management directors will be “independent” under NYSE rules.

The Board of Directors of Vail Resorts will now include:

Adam M. Aron, Chairman of the Board and CEO of Vail Resorts

John Hannan, Founding Principal, Apollo Management L.P.

Roland A. Hernandez, CEO of Hernandez Media Ventures and former Chairman, President and CEO of Telemundo Group

Robert A. Katz, associated with Apollo Management, L.P.

Joe R. Micheletto, Vice Chairman of Ralcorp Holdings and former President and CEO of Ralcorp Holdings

John Sorte, President and CEO of Morgan Joseph & Co.

William P. Stiritz, Chairman of Ralcorp Holdings and Energizer Holdings, and former Chairman and CEO of the Ralston Purina Company….

The Directors leaving the Vail Resorts Board include Frank Biondi, John Hauge, Thomas Lee, William Mack, and James Tisch. The Company wished to emphasize that these departures were fully amicable….


 

VMS Realty – a Chicago-based real estate firm.

January 26, 2001

Maui Hyatt sold for $200 million

By Andrew Gomes, Advertiser Staff Writer

New York based private investment bank The Blackstone Group has contracted to buy the Hyatt Regency Maui Resort for an estimated $200 million from KM Hawaii Inc., an affiliate of Japan-based transportation company Kokusai Jidosha, according to people familiar with the deal….

Founded in 1985 in part by the former chief executive of Lehman Brothers, Blackstone has been looking for upscale hotel investments in Hawai`i for several years. In 1998, the company unsuccessfully pursued one of Waikiki’s finest, the Halekulani.

People with knowledge of the Maui Hyatt deal said a purchase agreement for the 806-room Ka’anapali hotel —— Maui’s largest —— has been reached, and said Hyatt, which manages the property with about 1,000 employees, may be taking a small ownership interest in the hotel in exchange for a long-term management contract with Blackstone….

If completed, the Hyatt sale would follow sales of four other major properties in 1998: the Maui Marriott Resort for $152.5 million; the Westin Maui for $132 million; the Grand Wailea for $263.5 million; and the Kea Lani for an undisclosed amount.

The Hyatt Regency Maui, trophy of the Ka‘anapali resort, also has been attractive to buyers. It was developed for $80 million in 1980 by luxury resort developer Christopher Hemmeter and sold to KM Hawai‘i by Chicago real estate firm VMS Realty for $325 million in 1987.

KM Hawai‘i spent about $30 million on renovations in 1990 and 1996. Last year, the hotel opened a $3.5 million spa. . . .

* * *

From Mills Law Firm http://www.millslawfirm.com

Couple’s class-action suit settled for $98.5 million

by Mary Fricker

A $98.5 million settlement reached in Chicago in a class-action suit begun by a Santa Rosa couple could be shared by 165,000 real estate investors.

The settlement reached Monday is one of the five largest securities class-action settlements in U.S. history, according to San Rafael attorney Robert Mills, who represented David and Ilene Albert….

“I’m so glad for the part that I played in this,” David Albert said Wednesday. “I’m glad for the rest of the investors. It’s not often that you can take an action like this and have it turn out so well. “

The defendants in the case were Chicago-based VMS Realty Partners, once a high-flying real estate syndicator, and more than 45 associates and affiliates involved in selling sophisticated real estate investments.

The case took two years and produced 20 million documents that a team of attorneys, including Mills, had to warehouse in Chicago, enter into computers and analyze.

Although the Albert’s started the case alone in 1989, a flood of other lawsuits soon followed. A judge eventually consolidated the suits into one case with about 30 plaintiffs, 50 defendants and 39 law firms.

“I hadn’t the slightest idea when I started how big this would be,” Albert said. “But slowly I began to see the enormity of the thing.”

The plaintiffs alleged in general that the VMS empire engaged in a pattern of deception to attract investors. The defendants, in agreeing to the settlement, did not admit wrongdoing.

The $98.5 million will be divided as follows:

As many as 165,000 shareholders will share $45 million in cash, which is already in escrow. The exact amount that each investor, including the Albert’s, will receive depends upon how many respond to notices of the settlement, Mills said.

Sources close to the case estimated that if most investors respond, they will get about 15 to 30 percent of their original investment.

Most of the shareholders own stock in eight troubled VMS investment funds. Those funds will receive money, notes, real estate and other benefits worth at least $48.5 million, in a complex workout of the labyrinthine VMS empire.

The shareholders hope that with the $28.5 million infusion, the funds will be able to survive and eventually return a profit. The funds severed their ties with VMS Realty Partners last year and changed their name to Banyan….

The funds’ share of the $98.5 million that must be paid in the settlement is $25 million to $30 million, so they will pay out in cash about what they will receive in assets from the settlement.

Plaintiffs’ attorneys will be paid $25 million, by court order.      

The Albert’s bought shares in VMS Mortgage Investors Fund in 1988, and by June 1989 they were concerned enough about the performance of their investment to contact Mills, who specializes in representing small investors in securities litigation.

Mills brought in the nation’s leading law firm in shareholder litigation, Milberg Weiss Bershad Specthrie & Lerach of New York and San Diego.

Among the defendants in the VMS case were numerous VMS entities – partnerships, trusts, mortgage companies and others; former VMS officers, directors and trustees; Prudential-Bache Securities Inc. (now Prudential Securities, Inc.); several Xerox subsidiaries; securities brokers; real estate appraisers; accountants; and other professionals associated with the VMS operation.

Prudential-Bache was the key brokerage house marketing the VMS investments, and Xerox Corp.’s credit subsidiary was a partner-investor.

The plaintiffs alleged VMS and its associates failed to disclose to investors the riskiness of the investment, issued deceptive prospectuses, hid financial problems and overvalued real estate.

They decided to settle, they said, because of the generous terms, the financial weakness of some of the defendants and the difficulty in proving fraud by the defendants in the complex transactions, among other reasons.

Defendant attorney Barry Gross in Chicago said the defendants settled because the funds’ stock was depressed by the litigation and they believed it was time to move forward.

Gross said the stock value of the funds has gone up more than $40 million in the two months since it was first announced in September that a settlement was in the works.

See also: Blackstone Group


 

 

For more sightings of these flocking birds, GO TO >>>

 

A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT

AIG: THE UN-AMERICAN INSURANCE GROUP

ALEXANDER & BALDWIN

ALLIED WORLD ASSURANCE

THE BLACKSTONE GROUP

BROKEN TRUST

THE CARLYLE GROUP

THE CHUBB GROUP

CLAIMS BY HARMON

CONFESSIONS OF A WHISTLEBLOWER

THE DEPARTMENT OF HOMELAND SECURITY

DIRTY GOLD IN GOLDMAN SACHS

DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE

Part IPart IIPart IIIPart IVPart VPart VI

INVESTIGATING INVESTCORP

MARSH & McLENNAN: THE MARSH BIRDS

MARSH AFFINITY GROUP SERVICES

MARSH & McLENNAN’S PUTNAM INVESTMENTS

MARSH & McLENNAN’S TRIDENT FUNDS

PARADISE PAVED

PREDATORS IN PARADISE

THE PRUDENTIAL: A NEST ON SHAKY GROUND

P-S-S-T, WANNA BUY A GOOD AUDIT?

THE RAND CORPORATION

RICO IN PARADISE

THE STEPHEN FRIEDMAN FLOCK

THE TORCH OF ERIC SHINE

VULTURES IN THE MEADOWS

YAKUZA DOODLE DANDIES

 


 

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Last update November 28, 2006 by The Catbird Seat

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