You've been holding back on us..........I didn't realize Bill Simon was one of yours. Apparently, he's a friend of Mr. Bush and is running on the Rep. ticket for guv of CA. It seems he doesn't share your concept of conservative integrity.......probably from hanging around a lot of liberals, huh?
BTW you remember Mr. Eyeman, the lone Rep here in WA state......well he got fined 50k this week....and it wasn't for being honest and of the highest integrity as you are fond of saying. In fact, it appears Mr. Eyeman is unrepentant and angrily outspoken so I suspect we will be hearing from him again.....reeeaaaalll soon.
I really like how your honesty and conservatives walking hand and hand thesis doesn't hold water.......it renews my faith in humankind.
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Simon had larger role
Records show candidate had more say in failed phone company than he has admitted.
August 11, 2002
By CHRIS O'BRIEN
San Jose Mercury News
LOS ANGELES -- After a jury found his firm guilty of defrauding a former business partner, Republican gubernatorial candidate Bill Simon said he played no active role in the pay-phone company his firm invested in. However, documents in the Los Angeles civil suit he lost last week indicate that Simon personally intervened to try to salvage the telephone concern.
In addition, Los Angeles County Superior Court records show that a committee that included Simon approved the business plan and hefty management fees that a jury ruled fraudulent because they were not disclosed to the partner. Although Simon's campaign disputes the finding, the jury ordered Simon's investment company, William E. Simon & Sons, to pay $78 million.
The level of Simon's involvement is an issue because Simon has based much of his appeal to voters on his success running a business - which he contends is a more important skill than years of political horsetrading. In the case of Pacific Coin, however, Simon finds himself arguing that he never really ran the business while conceding that the decision to become involved at all in the firm was a huge mistake.
"When you're co-chair of an investment management firm, you are not actively involved with each and every investment," he said the day after the Aug. 1 verdict. "The overwhelming percentage of them I really did not have any active role whatsoever. That's why it's so important to hire good people."
However, when asked about court records that indicate Simon took an active role in Pacific Coin when it ran into trouble, a campaign spokesman took a different tack.
"Bill's responsibility is to the overall investment firm and its portfolio," said Jeff Flint, adviser to the Simon campaign. "It's also appropriate for the top person, when you have a particular investment that's having problems, to pay closer attention to that investment."
As chairman of William E. Simon & Sons, Simon ran a firm that managed more than $1 billion in investments in three categories: real estate, equity investments and distressed companies.
He maintains that he relied on his front-line employees to identify deals, research opportunities, map out business plans and handle negotiations. When everything was in place, the Investment Group, a committee of Simon & Sons executives, of which Simon was co-chairman, made the final determination.
Simon & Sons' investment in Pacific Coin followed that same course, court records show, but they also underscore that the role of the Investment Group - and Simon himself - was critical.
Pay-phone company begins to founder
Simon & Sons formed Pacific Coin in February 1998 after buying a pay-phone company from an executive named Ed Hindelang and combining it with two others. Hindelang was named chief executive officer, controlling 23 percent of Pacific Coin.
Simon & Sons was paid $450,000 a year to manage Pacific Coin and also received a one-time $900,000 fee for putting together the deal. A few months later, the firm collected $369,000 for engineering the acquisition of another pay-phone company, Golden Tel.
Ultimately, however, the company foundered, and Hindelang was forced out as CEO.
In a lawsuit that became the basis of the fraud ruling, Hindelang contended - and a jury agreed - that he was not properly informed of Simon & Sons' plans for Pacific Coin to take on so much debt, go public or charge such hefty management fees.
Simon's campaign continues to insist that the evidence shows that Hindelang was aware of the plans at every step.
Simon also appears to have been aware of each of those issues early on. Court records include a copy of the presentation materials provided to the Investment Group before the purchase. They outline the terms of the deal, including the management fees that would be paid to Simon & Sons.
The records also include a memo dated Jan. 28, 1998, and sent to several executives, including Simon, that sketch a plan to take the company public after purchasing another phone company.
The Simon family invested $13 million, although it's unclear how much Simon invested personally. But it was enough that when Pacific Coin later collapsed, he recorded a personal loss of $1.2 million on his tax records under Coinable Simon, the firm created to hold Simon &Sons' 40 percent stake in Pacific Coin.
Simon said earlier this year that investing in Pacific Coin was one of his biggest regrets. "I feel so stupid," he said.
Didn't see surge in cell-phone use coming
There has been some speculation that Simon & Sons might have run Pacific Coin into the ground so it could use the losses to reduce its taxes. However, the company documents filed in the case seem to show that the Pacific Coin investment was more a case of exceptionally bad business judgment.
The federal government had passed a massive bill deregulating telecommunications services in 1996. Simon & Sons thought that by consolidating several smaller pay-phone companies, cutting costs and offering some new services, the business could be a winner.
But things went wrong right from the start.
Simon & Sons had woefully underestimated the surging popularity of cell phones. In addition, an increase in the cost of local calls depressed call volume by 25 percent rather than the 10 percent the company had projected for 1998, a Pacific Coin financial statement showed.
Then the other shoe dropped. The Wall Street Journal reported in June 1998 that Pacific Coin CEO Hindelang had served two years in prison and forfeited about $50 million in assets on a drug conviction in the early 1980s.
The investors in Pacific Coin, including Simon & Sons, said Hindelang had hidden this from them.
They forced him out and began damage control, even circulating a memo to Pacific Coin managers on how to respond to questions from employees, such as, "How did these sophisticated investors get involved with Ed anyway?" Managers were told to say: "They were introduced to the company by an investment banker."
At this point, the records indicate, Simon again became actively involved.
Heading toward bankruptcy
On Dec. 20, 1998, an e-mail written by Bill Rogers, a major Pacific Coin investor, expressed hope that Simon and another colleague would be able to reassure a potential buyer for the company during a ski trip planned at an Idaho resort after Christmas.
But that deal collapsed, and by early 1999, the company turned to Simon to help secure a loan. A credit memorandum dated April 30, 1999, and filed in court documents says: "Bill Simon Jr. has assured the banks that William E. Simon & Sons will strongly support Pacific Coin and its management."
But nothing worked. In December 2000, Pacific Coin was seized by its creditors.
Last May, Simon - by then the Republican candidate for governor - sat down for a deposition in Hindelang's lawsuit, continuing to argue that he couldn't be held responsible for what happened with Pacific Coin.
Asked whether he was a hands-on manager, Simon replied:
"Well, you know, I guess we could talk about what you mean by 'hands-on.' But I would look at it as not particularly hands-on in terms of individual investments.
"I'd look at it as understanding how our professionals were performing that were employed by William E. Simon & Sons." |
