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(COMTEX) B: Boca Raton, Fla., Has Long (Bad?) Rap Sheet in Business
B: Boca Raton, Fla., Has Long (Bad?) Rap Sheet in Business
By Jeff Ostrowski
BOCA RATON, Fla., Jun 24, 2002 (The Palm Beach Post - Knight Ridder/Tribune
Business News via COMTEX) -- W.R. Grace & Co., Scott Paper Co., Sunbeam Corp.
and, now, Tyco International Ltd.
The huge conglomerate, which once fancied itself another General Electric Corp.,
is teetering on the brink of breakup. Its once high-flying stock has tanked. And
its former boss, Dennis Kozlowski, a resident of The Sanctuary, is under
indictment for tax evasion.
But given Tyco's sizable Boca Raton presence, perhaps it was only a matter of
time.
After all, Grace, Scott and Sunbeam, the other Boca companies that have made it
to business' version of the big leagues -- the Fortune 500 -- have had their
share of scandals, major and minor.
Grace, an icon of American business, became a pioneer in accounting fraud after
moving to Boca in 1991. It also had to endure allegations that J.P. Bolduc, the
first CEO in the company's history to come from outside the Grace family, stuck
his tongue in one female employee's ear and put his hand up another's skirt.
Grace, now based in Columbia, Md., last year filed for Chapter 11 bankruptcy.
Then came Scott Paper, which summered here in 1995. Under the leadership of CEO
Albert J. Dunlap, Scott grabbed a $156,000 county grant for creating jobs, then
was gobbled up by Kimberly Clark. Scott's accounting gave the Irving,
Texas-based paper giant indigestion for years.
Dunlap migrated to Sunbeam, where he persuaded retailers to buy huge quantities
of outdoor grills in the dead of winter. It helped that they didn't have to pay
for them, the Securities and Exchange Commission found.
Dunlap is still fighting the SEC on that one. Meanwhile, Sunbeam also is in
Chapter 11.
Boca's corporate calamities, of course, aren't limited to the top. Seems there's
no scheme too shameless, no accounting too creative for Boca's legion of boiler
rooms and penny stock companies.
All of which begs the question: Why does Boca Raton attract so many businessmen
with dubious ethical standards?
"I have no idea," says Mike Arts, head of the Greater Boca Raton Chamber of
Commerce. "What do you expect me to say -- that we look for those kind of
companies? That it's something in the water?"
Could be.
Mal Berko, a Boca Raton portfolio manager, frequently rails against Boca's
nouveau riche culture in his financial column and on his radio talk show on
WSBR-AM 740. Boca attracts conspicuous consumers who are willing to bend the
rules for financial gain, he says.
"In most cases, I wouldn't touch any public company based (in Boca)," says
Berko, senior vice president at Advest. "We just won't do it, because the
culture here is so antithetical to what makes a good public company."
But even the wary can get burned -- Berko owned Tyco on behalf of clients. He
declined to say how much his clients lost.
Nell Minow, a shareholder advocate at the Corporate Library in Washington, D.C.,
agrees that an address in Boca can be a bad sign.
"It's a signal to sell when (CEOs) move their headquarters to Boca," she says.
A culture of deceit can take root in a community or company and perpetuate
itself, says Jim Fisher, head of the Emerson Center for Business Ethics at St.
Louis University.
"A lot of mores are conditioned by the kind of interactions we have and the
behaviors we see around us," Fisher says. "Areas that are characterized by a
high degree of change and a lot of new population may lack some of the
traditions found in other areas."
But others insist Boca gets an unfair rap. Arts, for instance, says Boca Raton
lures questionable businessmen for the same reason honest people come here --
its warm weather, ritzy homes, clean beaches, golf courses and low state taxes.
If things go badly in the boardroom, there's always Florida's generous
bankruptcy law, which lets the well-to-do land gently on their feet.
"Any city in the country would have loved to have attracted the businesses we
have," Arts says. "You go to any down-and-out community, and they don't have
scammers."
There's no easy explanation for Boca's sleaze factor, and the city's respectable
businessmen are quick to point out that many of the scammers came here from
elsewhere.
Kozlowski was a relative newcomer to Boca, and he also owns homes in Manhattan,
Nantucket and New Hampshire, where Tyco is based. Dunlap ran companies
throughout the country before landing in Boca. Many of the smaller stock
swindlers relocated here from New York.
Boca Raton has its share of legitimate successes as well -- the city was the
birthplace of IBM's personal computer. And it gets its share of upbeat national
exposure. The Boca Raton Resort and Club for three years has hosted the Business
Council, a gathering of big-name executives that's covered extensively by CNBC
and CNN.
But Boca's dark side refuses to go away, thanks to an endless stream of scams.
Disease Sciences of suburban Boca discovered it could destroy anthrax spores
using something called "ultra high-pressure pulses" shortly after the disease
killed an employee at Boca-based American Media Inc., publishers of the National
Enquirer. Regulators had one problem with the claim: Disease Sciences had no
proof to back it up.
There was the more ambitious College Bound, which saw its stock rocket in the
early '90s -- until regulators found that the books were utter fiction. The
company's founder, Boca resident George Ronkin, pleaded guilty to criminal
fraud.
There was Cascade International, a retailer, which, when pressed on the subject,
claimed its store addresses were proprietary information. Its CEO is on the lam
in Europe.
Dozens of other stockbrokers, currency traders and penny stock firms based in
Boca have been slapped by regulators over the years.
Not even bankers are immune. Earlier this year, federal regulators closed Net
First National Bank of Boca, saying the institution had cooked its books. But
it's the big companies that are the real puzzle.
When Kozlowski came to Boca in the '90s, he was widely lauded for his attempts
to build a clone of the highly respected GE. But investors lost confidence in
the company this year as questions arose about -- what else? -- Tyco's
accounting.
On June 4, Kozlowski was indicted for sales tax evasion in New York. Since Tyco
stock peaked at $60 in December, its shares have lost about $90 billion in
market value -- more than Enron.
Boca's defenders point out that the pink city has no monopoly on scams or
unethical behavior. Enron, the poster child for corporate sleaze, has no Boca
offices. Adelphia, the cable company mired in its own debt scandal, is based in
Pennsylvania.
"I don't think there is more (fraud) in Boca than there is elsewhere," says Marc
Leder, an executive at Sun Capital Partners, a Boca firm that buys struggling
companies in hopes of saving them.
When Leder moved his company here in the early '90s, friends in New York warned
him that he might suffer the taint of the city's reputation.
"What we found is that's really not the case," Leder says. "Boca has become a
very viable and professional business community, and it has actually changed the
reputation it had 10 years ago." |
