PART 3 and 4 RUNNING A TECHNOLOGY COMPANY IN THE OZARKS, OF ALL
PLACES
When I sold my company, Computer Utilities of the Ozarks,
Inc. to USCS International in 1994, they quickly changed the name to CUO, Inc.,
only. I had fun in management presentations asking if anyone in the crowd knew
what CUO stood for. Of course, there were a hand full that would say Computer
Utilities of the Ozarks or Cable Utilities, etc., and I would quickly correct
them that it stood for nothing, only CUO. Finally the CEO, Jim Castle, thought
I had made my point and discretely suggested that I might not ask that anymore.
But for the most part he enjoyed my “Arkansas” humor; he was involved in the
purchase of my company. Obviously that was a good decision. I thought he made a
major mistake by not coming to Harrison. If it was worth buying, he should have
made the trip. One other time in a management meeting the VP of Customer Care,
who is British, was making a presentation about revolutionizing customer care
and I was making a presentation about technology. During the question and
answer segment I made the comment about how strange it was for a Brit. to be
talking about revolutions and someone from the Ozarks talking about
technology. The executive management
roared about the absurdities. How fast things change with globalization and
Internet access and costs? I found humor to be the best way to deal with the
Ozark image issue. I think people living in the Ozarks or even Arkansas are too
self-conscious about their image. Utah has become “technology friendly” and I’m
sure they have had to deal with the “mountain man” image as well as the “Wild
West”.
Why did I return to the Ozarks to set up a technology company?
I was definitely making much more money at Ashland Oil. Part of the reasons was
from analyzing the economic opportunity. The IBM System 3 Model 10 was
available for use in small to medium businesses. The price of the system was
over $100,000. In a world of million dollar mainframes that computer was cheap. But the primary reason was personal. Our
second child, a daughter, was born with birth defects in Ashland, Kentucky. She
had a rare syndrome called Oral-Facial-Digital, which brought with it physical
and mental abnormalities. Returning home to be with family made the unknowns
much easier to face. You can never fail
by putting family first.
You can go home, but
don’t think it’s easy
WAL-MART & BRANSON – Their successes was bringing a
positive image to the Ozarks. Leveraging
their success to build credibility for my company and why it was located in
Harrison became very important.
The image of hayseed and hillbillies wasn’t easily dispelled
early on. I exhibited at cable shows
where the topic of discussion was more about where I was from then the software
we were selling. I generally would make some humorous comment about Sam Walton
running out of fingers and toes to count his money and now he had to get a
computer. There are ways to sell outside
your immediate location. You have to be willing to take the risk and you may
have to be creative to give your corporate office location a positive spin.
Harrison also is located close to Whitewater and the KKK. Thom Robb of Harrison,
the national chaplain of the Knights of the Ku Klux Klan grand dragon, neither,
of which I am proud of and I rarely mention them. When asked where Harrison is
located, either by customers or at management meetings, I would say it is about
30 miles from Branson and Whitewater. I never, ever mentioned the KKK.
Pay as you go –we initially operated as a service bureau –
computer time was bought at locations as far away as Springfield, Missouri. If
you are taking keypunched cards 75 miles, one way, you had to be accurate and
efficient. There was no way to survive if you were sloppy in any way. Within
six months there were IBM System 3’s going in at the Bank of Yellville, 25
miles away, and in Harrison, at Guaranty Savings and Loan. An S&L
relationship I will explain more in another chapter. Computer time was bought
and access was given much in the same order that Kevin Mulcahy had taught me at
the agency. My service bureau software was from Western Union Computer
Utilities. They had an idea of franchising software and a method of selling
accounting services in your local community. I was the exception, much like
Ashland Oil, in that I was located in a rural area and the others were located
in large metropolitan areas such as St. Louis, New Orleans, Tulsa, Atlanta,
etc. The company, WUCU, and concept soon
failed but in order to prevent lawsuits WUCU had to give the franchisees the
source code. Sometimes in order to
survive you may be given a lemon and you have to make lemonade. I have made my
quota of lemonade. We flourished with our business at the time other
franchisees were going out of business. We modified the code to handle input
and output for a variety of businesses while maintaining the core code.
Unusual bedfellows – Be
prepared to expect the unexpected. The business you assume you will get when
you return to your home area or go into business may not happen. Family or
friends may not want you to know about their business. My biggest business came
initially from a theme park; Dogpatch named after the fictitious location created
in the Al Capp comic strip of the same name. A concept that later failed for a
variety of reasons including the lackadaisical support of Al Capp. Other
service bureau accounts included medical billing, school accounting, college
accounting, manufacturing, water systems, mailing labels, oil jobber, and cable
TV. I was the technology “Jack of all trades and master of none”.
Many times the “Dogpatch” image of Arkansas is used by
educators to improve their budgets and by government officials to justify their
inefficiencies. I call it a “cop out”. Places such as Utah and Bangalore, India
have proven to be “technology friendly” even without a history of having world
class educational institutes or even the high tech educational factories to
turn out the workers. If the economic
situation is good and the quality of life is good, you can get the workers. I
found in my visit to New Delhi to be very informative. Highly educated people
who had studied in the US and even worked in the US, but preferred to live in their
homeland were returning to India. Why? India was making it more attractive than
staying in the US. Technology companies were given numerous tax incentives. Pay
was very good in comparison. They were close to family and they were able to do
things more culturally acceptable to them. Whether that included eating a
formal meal with their hands, marriages arranged by parents, or attending
cricket matches.
I wrote another letter to the editor about “Lone Eagles”.
One of the more unusual accounts was Kirk Saxon, a
nationally known survivalist. He published a newsletter that sent nationally to
all the James Bond wannabes called”The poor Man’s James Bond”. He gave
suggestions on how to prepare for an economic meltdown, build bombs, how to
counterfeit money (which my brother found good enough to try), and other acts
of terror. All we did was print the labels. We didn’t publish or mail out the
material, just maintained his mailing list. He was interviewed several times on
national TV programs. He enjoyed the publicity and attention. He never knew
that I once worked for the CIA. I’m sure he would have had heart failure if had
known. I did check his list after the Oklahoma City bombing but McVeigh or none
of the other names appeared. Although we were no longer printing labels at this
time, I still had a diskette copy of Kirk’s mailing list. I always felt he was
a person seeking publicity, and not really a subversive. He has lost fingers
experimenting with some explosive chemicals. He once came to my office and when
he was leaving his car wouldn’t start. Not only did he not have jumper cables;
we had to hook the cables up and even start his car. Didn’t seem like a real
survivalist, just an opportunist.
I found the following on the Internet. Would a “real”
survivalist let someone get under the hood of his car? You be the judge.
BLOWING UP A CAR
AN ARTICLE FROM THE BOOK:
THE POOR MAN'S JAMES BOND
BY KURT SAXON
THE BEST METHODS OF BLOWING UP A CAR REQUIRES
GETTING UNDER THE HOOD. EXPLOSIVES ARE PLACED AS NEAR THE OCCUPANTS AS
POSSIBLE. NOTE- THIS ARTICLE IS FOR THOSE OF YOU WHO ARE NOT CONTENT TO PSYCH
OUT THE DRIVER WITH SOME PRACTICAL JOKE. IF YOU HAVE HIS LAST RIDE IN MIND,
THEN READ ON:
THE FUSE, HOMEMADE,
COMMERCIAL OR SAFETEY IS WRAPPED A FEW TURNS AROUNDTHE EXHAUST MANIFOLD. AFTER
A FEW MINUTES ON THE ROAD THE EXHAUST MANIFOLD GETS ALMOST RED HOT AND IGNITES
THE FUSE.
THIS WAY IS MORE CERTAIN THAN WIRING THE CAR
BECAUSE SINCE IT BLOWS UP ON THE ROAD THE WRECK WILL DO THE VICTIM IN EVEN IF
THE BLAST DOESN'T. BESIDES, IF THE INTENDED VICTIM IS A PASSENGER INSTEAD OF
THE DRIVER, THE DRIVER MAY START THE ENGINE BEFORE THE PASSENGER GETS INTO THE
CAR... YOU CAN SEE HOW EMBARRASSING THAT WOULD BE TO THE BOMBER, CAN'T YOU?
OLD-FASHIONED TYPES, LIKE THE MAFIA, LOVE TO
WIRE CARS. THEY ARE TOO SET IN THIER WAYS TO CHANGE AND BESIDES, THEY GET A
CHARGE OUT OF SEEING A CAR BLOW UP BEFORE THIER EYES INSTEAD OF IMAGINING IT
GOING TO HELL ON THE ROAD.
THEY USUALLY USE ABOUT THREE STICKS OF
DYNAMITE, TWO LENGTHS OF ELECTRIC WIRE WITH TWO ALLIGATOR CLIPS FOR QUICK
ATTACHMENT, AND AN ELECTRIC BLASTING CAP. THE CAP IS STUCK INTO A DYNAMITE
STICK AND ITS TWO WIRES ARE CONNECTED TO THE TWO ELECTRIC WIRES. THEN ONE
ALLIGATOR CLIP IS
CLAMPED TO THE INPUT SIDE OF THE COIL AND THE OTHER IS
FASTENED TO ANY METAL
SURFACE IN THE CAR'S FRAME AS A GROUND.
THIS IS VERY SIMPLE AND YOU'D THINK ANYONE
COULD DO IT. BUT SURE ENOUGH,
THERE ARE ALWAYS
MORONS WHO WILL ATTACH ONE CLAMP TO A SPARK PLUG AND ONE TO A GROUND. THIS
USUALLY RESULTS IN MISFIRES AND NO END OF FRUSTRATIONS.
Choosing the right business to focus on-my reasons for
selecting the cable business was the timing of entrance into the in-house
billing solution. Early cable subscriber management and billing solutions from
1948 through 1973 were highly manual in nature, with all work orders
handwritten and payments posted over several days on ledger cards. Coupon books
were commonly used and monthly bills were less than $5 during cable’s first 25
years. Other than over-the-air broadcasters, there was no competition for
viewers. Having a computerized cable billing system was seen as an unnecessary
expense. Then the next 10 years, 1973-1983, some automation started creeping
into the subscriber management process, but it was nevertheless limited. The
$100,000 minimal cost of an in-house computer with fewer capabilities then
today’s $2,000 PC was far from practical. “Service bureaus” dominated,
processing batches of data and mailing bills from remote locations. Data was
keypunched and sent by couriers or over dialup modems. Outside competitors to
cable programming such as VCRs and satellite services were still in their
infancy, but beginning to grow in importance. Signal scrambling for new PAY-TV
services, provided via satellite in the mid and late seventies, created revenue
opportunities for operators. They needed
systems to handle the pay options including pay-per-view.
In-house solution for cables TV. A new system announced late
in the Seventies was the IBM Series/I minicomputer. This system allowed us to
go in-house with our solution. We had to change our skills from running jobs
in-house under our complete control to having our customers run our application
software with backup from our customer support. Communication, observation,
training, and problem solving skills were pushed to a higher level, since most
of the support was done verbally over a telephone. Modems and even fax machines
were still in limited use at this time. Management and developers due to
complexity and necessity to guarantee customer satisfaction and to ensure fast
collection of account receivables did installations. These skills, both in
management and development, proved instrumental in getting our international
business off the ground. We in effect totally changed our business. We went
from a service bureau to software developers. No one locally realized how
radical a change this was. We went from operational skills to development
skills, which required a substantial amount of creativity.
Changing the business model—advent of the PC caused
companies to rethink their in-house solutions. Particularly in the small to
medium size cable systems. Scaling the solution was obviously a difficult
transition. We went from selling a few large systems a year to many small
systems. Sales which had come from a small number of hundred thousand-dollar
deals to the expectation of having many deals running in the tens of thousand
dollars. At the same time, in the mid-eighties, we were entering into my
company’s biggest financial challenge.
Lack of Capital
Closing down your source of capital.
In late 1985, the FSLIC shutdown Guaranty Savings and Loan.
Arkansas has a usury law, which in effect prohibited long
term loans. The banks were willing to have balloon loans where payment and
interest were paid monthly and when the loan came due it was renewed. When
Guaranty S&L was closed down and notes came due then the FSLIC was calling
all the notes due. There was much pressure placed on those with loans. A
suicide along with divorces occurred as people lost property, homes, and
businesses. My brother went to an extreme and as I learned several years later
even counterfeited money that he planned to use to stave off foreclosure.
Most
of the general public’s remembrances of the Savings and Loan fiasco were the
deceit and fraud stories. The S&L crisis was depersonalized through the
media’s coverage. For that very reason the Clintons were never convicted of any
illegalities. The real victims were never properly identified and humanized.
The following article was typical:
Date: 02/04/87
DALLAS Harrison S and
L left impression in Dallas C. $22 million in financing arranged in 1983 by
Guaranty for the start of a 20-story downtown country club called Turtle Creek
Place. The project's developers needed at least $158 million more to build the
club, which was to include a luxury hotel, six restaurants, a preventive
medicine center, more than a dozen tennis courts, three swimming pools, a
jogging track and volleyball courts.
DALLAS _ Guaranty Savings and Loan Association at Harrison, Ark., is gone now, but it managed to leave a big impression in
Dallas.
It's a hole the size of a city block and 90 feet deep _ the result of $22
million in financing arranged in 1983 by Guaranty for the start of a 20-story
downtown country club called Turtle Creek Place.
The project's developers needed at least $158 million more to build the club,
which was to include a luxury hotel, six restaurants, a preventive medicine
center, more than a dozen tennis courts, three swimming pools, a jogging track
and volleyball courts. It was to cater to the elite, with memberships
reportedly costing upward of $11,000 each.
To sell it to the wealthy, the developers threw lavish parties at New York and
Dallas, and hired as many as 60 persons at one time in sales and promotions.
That helps explain why $22 million went into the hole.
But before Guaranty could provide the rest of the money, as it had planned, it
suffered financial problems and reportedly was under pressure from federal
regulators to make no more out-of-state loans. Whatever the reason, the funding
was cut off.
The Federal Home Loan Bank, the S and L regulatory agency, finally closed
Guaranty in December 1985. Just recently, Superior Federal Bank of Fort Smith
completed buying the S and L that regulators had set up to replace Guaranty.
While Guaranty is no more, the $22 million hole lingers on.
The hole's owner, Turtle Creek Place, Inc. is in bankruptcy proceedings. That
has put on hold foreclosure efforts by the Federal Savings and Loan Insurance
Corporation in an effort to collect something on the $22 million mortgage.
Meanwhile, the Dallas City Council fears the hole will grow as its sides weaken
and cause nearby streets to collapse. The Council voted early last year to fill
up the giant hole even if it cost $1 million. When the low bid came in at more
than $1.1 million, there was grumbling and more delay. Eventually a contract
was signed, but the work is going slowly.
When the job is completed, the site will be almost like it was more than $23
million and a few years ago.
Newspaper articles
less than two months prior to the shutdown of Guaranty failed to give even the
slightest warning.
Date: 10/08/85
THE ARKANSAS GAZETTE
BOB SHARPE
Copyright 1985 Little Rock Newspapers, Inc.:
Roy Green, president of the Federal Home Loan Bank of Dallas, said Monday that
many savings and loan institutions in the FHLB's Ninth District, which includes
Arkansas, suffered from a "follow-the-leader syndrome' that makes lenders
chase risky loans in order to match the high fees earned by their competitors.
" We at the bank would much rather see you out of step,' Green said Monday
in a speech to the Arkansas League of Savings Institutions, an organization of
37 Arkansas savings and loan institutions that concludes its 68th annual
convention today at the Excelsior Hotel.
Green said the profitable new ventures made available to savings institutions
through recent financial deregulation might be taken away if public confidence,
already shaken by the well-publicized closings of failed saving and loans,
eroded much more.
" To be free, we must be responsible,' he said, noting that partially
because of deregulation, 75 per cent of the loans being made by Arkansas
savings institutions were for purposes other than mortgages on dwellings for
one to four families, the traditional loan portfolio for savings and loans. He
said that easing of financial regulations had allowed lenders "a real
opportunity to manage your business your own way.'
Says state S&Ls less guilty
Arkansas savings institutions, compared with their counterparts in Texas and
Louisiana, are less guilty of making high-risk loans to earn lender's fees or
of paying excessive interest rates to attract deposits, which because of their
speculativeness are usually short term, Green said.
But in an interview after his speech, Green said that June's 5.5 per cent loan
delinquency rate at Arkansas's savings institutions, nearly twice the rate from
a year ago and a percentage point higher than the national average, was a
"red flag' and "probably a product of how they are loaning out their
money.'
Other than the state's loan delinquency
rate, which was "bothersome' to Green, Arkansas's savings and loans
performed well during the year ended in August, he said.
" Respectable rate of growth'
The amount of the state institutions' assets increased 8.2 per cent, while
mortgages rose 9.2 per cent and deposits increased 10.8 per cent, which Green
said was "a very respectable rate of growth.'
The net worth of Arkansas's savings institutions fell 5.2 per cent, but Green
said he was not concerned because this drop in value appeared to be a
short-term occurrence. “If it happened over a longer period of time it would
bother me,' he said.
The groups' profit margin, the difference between the average cost of their
borrowed money or deposits and the yield from all their loans, was 2.26 per cent,
less than the Ninth District average of 2.47 per cent. Nevertheless, Green
said, "that's a very favorable spread. ‘Arkansas savings and loans had $
2.7 million in net income in August.
Urges self-policing
The FHLB, which serves both as a regulatory agency and a credit source for
savings and loans, is encouraging the industry to police itself but is also
taking steps to improve its regulatory capabilities, Green said.
Green said the FHLB would seek congressional legislation that would allow it to
close institutions that were insolvent or whose management was suspected of
squandering funds.
“The legal framework is not out
there' to currently enable the FHLB to quickly react "once we decide an
institution is doing something to endanger the FSLIC and the industry
as a whole,' Green said. (The Federal Savings and Loan Insurance Corporation
insures deposits in federally chartered savings and loans.)
Green predicted that 1985
would be the thrift industry's most profitable year, because of savings and
loans becoming more efficient in the face of deregulation, the acceptance by
Americans of adjustable rate mortgages, which allow lenders to increase
interest rates along with the cost of their money, and the fact that most
savings institutions are no longer burdened by low-performing assets, mortgages
lent during years of moderate interest rates that have become poor investments
now that rates have doubled or tripled.
Either
the media or the Home Loan Bank Board did a lousy job keeping the public
informed. My speculation is that a local competitor put pressure on the Bank
Board to close Guaranty. Why didn’t the press go back to the comments that
Green made and find out what changed in less than two months.
The
following are excerpts from an article about the shutdown of Guaranty S & L
printed one year later, December 5, 1986 and found in the Arkansas Democrat
Gazette archives
Closed
December 1985
The Home Loan Bank Board closed the
insolvent Guaranty Savings and Loan Association December 6, 1985, with regulators
saying the institution's assets were substantially dissipated because of
violations of laws and regulations.
Regulators said the old Guaranty was insolvent not because of any embezzlement but
because of unsound banking practices over 30 months in which the institution
grew more than 700 per cent.
The Arthur Barrett family, which owned the old Guaranty, went to court in an
unsuccessful attempt to stop the closing.
342 loans overdue
Court records show that 342 Guaranty loans totaling $ 90 million were at least a month overdue. Some 22
of the loans totaled about $ 55 million and were among the big out-of-state
construction loans financed by brokered "jumbo" certificates of
deposit that regulators blamed for the insolvency, the Harrison
Daily Times reported.
The new Guaranty was to be managed for three months by Savers Federal Savings
and Loan of Little Rock until a buyer could be found. A year later, Savers is
still managing Guaranty. But Savers, which was originally considered a likely
candidate to buy Guaranty, has been hit hard by out-of-state loan losses
itself.
The new Guaranty Federal has suffered financial losses, the newspaper said.
Max Sherry of Savers said in June that Guaranty had a negative net worth of
almost $ 1 million dollars because it was paying out interest on the remaining
$ 50 million-plus in deposits without making many loans that would bring in
interest money. Other reports are that Guaranty had lost $ 1.5 million at the
end of the second quarter.
Rebecca Vail, vice president of the Home Loan Bank at Dallas, said Wednesday
that the losses were "not because of any actions we feel are occurring
because of the management or directors."
She said the figures were a "reflection of the reality of the situation
they inherited."THE ARKANSAS GAZETTE FORT SMITH ---
FSLIC Foreclosing on Area
Businesses—Front-page headlines in the Harrison Daily Times on July
7, 1986. Under the headline the writer reported in small print, “other large delinquent loans the FSLIC is
attempting to recover are:
Loans totaling $154,819 to Herbert and Sandra
Lair, doing business as Computer Utilities of the Ozarks.”
Most people read the article and assumed that we were being
foreclosed and our business was being shutdown. I got numerous calls from
friends as well as service bureau clients. I was distraught about how an
article could be written with no verification. The damages were substantial.
How do you get a correction without a lot more negative publicity? I’m sure I
could have forced a correction. The amount was incorrect and no formal legal
charges had been made and the delinquent part ($25,000) was far from
large. But the publisher has never said
that he is sorry about the article either privately or publicly. Something that
I’ll always remember. I will always be his nemesis. Totally against my
personality I began writing letters to the editor. I thought that was just for
kooks. On second thought maybe it is. But I got the results I wanted. Delays
from the FSLIC and positive press. The “squeaky wheel” does get the grease!
Recently, in June
1999, my cousin, Dwain Lair, wrote an article “We (Still) Don’t Make the News” where Lair sometime wondered “If we
covered a financial institution’s closing today, in that same depth, if
affected individuals would cry that we are creating a negative image”. He made
the comment “I don’t remember hearing any complaints about detailed news
coverage of the event or our continuing reports that still mark that date in
history for increased bankruptcies in Boone County”. My response to Dwain was
to remind him that the press has convenient memories. (Not that it mattered,
but Dwain was the son of Bill Lair, who had worked for years for my dad in our
service station. Lair TV & Appliances was also one of the Harrison Daily time’s
biggest advertisers. I always thought our family deserved some discretion. At
least holding the news until official charges were made or reports were
authenticated.)
Editor: Re: We (Still) Don’t Make the News--- June 2, 1999
Herb Lair
Will Rogers once remarked that “all I know is what I read in
the paper”. On the local front there is
still a lot of truth to Will’s saying. Nationally and internationally we see a
diversity of reporting, pro and con, from the Internet, cable TV, print media,
broadcast networks, and radio talk shows. Although I agree that the press
doesn’t make the news, there is a responsibility to report on “important”
issues with accuracy and with objectivity. When that process fails, then the
media does make news! It’s a given that
newspapers must be able to publish free of censorship from advertisers or
special interest groups. Nothing less than your best investigative reporting is
acceptable. Lives could be forever influenced for good or for bad - an awesome
responsibility – reporting information that may affect an “individual’s”
reputation and livelihood.
A complaint by an “individual” at any time, for any reason,
must be treated first as constructive criticism. Generally only in monopolistic
situations where the media, government organizations, or utility services
appear to be uncooperative and are not receptive, do “individuals” resort to making threats and
eventually taking group action. When
comparable competitive alternatives are not readily available, expect the
compliments to be rare and the complaints common, sometimes excessive,
sometimes even justified.
As far as the Guaranty Federal Savings & Loan situation
there were (and are) a lot of questions that were not answered. I only regret that there weren’t more “individual”
responses to the “negative” image created by the media’s coverage at that time.
It might have saved a life, avoided some divorces, eliminated some
bankruptcies, and prevented the senseless loss of money and properties. Most
people were left with the opinion that the FSLIC had a strong case to close
Guaranty due to substantial amount of highly speculative loans – must have been
true since they read it in the paper and the government wasn’t known to make
hasty mistakes.
Names and size of large “delinquent” loans were published
prior to any legal determination of accuracy. Inaccurate FSLIC information was
printed as gospel. Affected individuals and businesses were not contacted to
substantiate questionable information. Corrections only served to place more
emphasis on the negative news and create additional embarrassment.
Why weren’t the Guaranty officers prosecuted? In retrospect,
Guaranty management was probably much better than those in other parts of the
state as well as nationally. How many of the local loans were highly
speculative and weren’t collectible? Why was the Rose Law firm chosen to handle
the FSLIC litigation statewide? The Rose
litigators included Web Hubbell, Hillary Clinton, and Vince Foster at a time
when Hillary was involved with protecting Madison Guaranty from the FSLIC
(Background information from “Blood Sport” by James Stewart.). What was the
basis of their fee? Why wasn’t Madison Guaranty chosen before Guaranty? Or
FirstSouth in Pine Bluff where there was a Rose/Giroir connection? Was it in
the interest of the attorneys and FSLIC to have fair equitable settlements or
to have long drawn out legal battles? Only recourse most individuals had was to
spend a lot on legal defense or take his case to the media or Congressman. You
can’t outspend the government, but bureaucracy hates bad press.
Why was Savers S&L with as many problems as Guaranty
contracted to provide management until a new owner was determined? Fox guarding
the hen house syndrome became quite common. What companies were put out of
business or left to struggle to survive that could have had a major impact on
our community? What businesses would have been influenced to move to Harrison?
Or stay? Short-term balloon notes were common due to Arkansas usury interest
restrictions placed on lending institutions. Were the consequences of losing a
home connected to a small business balloon equity loan, adequately reported? Or
was it more newsworthy to highlight the exotic, but legal, loan failures in
faraway locations. People and the S&Ls were, for the most part, playing by
the rules. Why were the rules suddenly changed with minimal media
scrutiny? Fire sale mentality costs the
taxpayers and the community a lot more than was saved by the S&L’s
closure. No Harvard economist required
for that financial autopsy. As stated in the book about the S&L crisis
“Inside Job”: “It won’t be the bad people that destroy this country. It’ll be
The good people that rationalize the bad people’s
conduct.” Helping determine who the
bad people are, is where the media comes in. As far as the S&L situation or
crisis goes, the media was asleep at the wheel.
I’m only glad there are “individuals” who are concerned
about “negative” news. It shows the community still has a pulse.
Herb Lair
Harrison AR
June 2, 1999
I received a letter
dated July 10th, 1986 from the FSLIC stating,” Enclosed please find our check, payable to you, in the amount of
$1,137.00. This represents refusal of
the payment you made on your loans #4-1949 on June 25, 1986, since a demand for
full payment of your loans by the FSLIC and Meadows and Davis Law Firm.
We will not take any
payments on these loans, unless it is enough to get the loans in a current
status, or a payoff. “
The timing of the events appeared to be more than coincidental.
It was three days after the Harrison Daily Times article about large delinquent
loans.
My attorney, Jerry Pinson, was unable to represent me since
his brother; Bob Pinson was the President of Guaranty S & L. He recommended
the law firm of Doshier and Bowers. I found them to be more than adequate for
my defense. The only miscalculation was the speed in which the FSLIC was able
to get a judgment against my company. Again McCorkindale was the presiding
judge.
March, 2000 –Harrison Daily Times—on-line
News
Man Charged With
Raping Wife
By the Times Staff
A 26-year-old man was arrested for allegedly raping his wife
last week, a press release from Harrison Police Chief Jim Thomas said.
According to the release, the man allegedly forced his wife
to engage in sexual activity against her will.
Detective Sgt. Jason Jenkins said the man's bond was set at
$100,000 because Jenkins felt the man posed a danger to his wife.
He was still in custody Thursday morning in the Boone County
Jail.
The
Times chose to withhold the man's identity until he is formally arraigned.
Note the last sentence where there still isn’t even today a
standard policy about publicizing local news.
There was no discretionary action taken by the paper about my company's’
or my brother’s situation being plastered all over the front page, well in
advance of any official legal action. If
the individual in the rape case had been turned loose on bail and no one knew
who he was, it could be a far more threatening situation to the community than
90% of those people names whom they have no problem printing.
Nearly two years later on
May 3rd, 1988 I got a clarification from my Congressman John Paul
Hammerschmidt. The Federal Home Loan Bank Board wrote a letter stating that the
notes were as follows:
NOTE DATE
BALANCE DUE DATE
Jan 29 83 $50,000.00 Sep 29 86
Oct 06 83 29,819.43 Oct 06 86
Aug 08 84 24,600.00 Jan 25 86
Total $104,419.43
Only note due on July 7th,the day of the Times
article, was the $24,600, but due to the fact the FSLIC had shutdown Guaranty
Savings and Loan the whole $104,419.43 could be called. But not the $154,000
that had been reported. I contacted
around thirty financial institutions and was turned down by all. Obviously the
newspaper headlines were detrimental to my company.
Surviving foreclosure threat
– On dealing with the FSLIC, Rose Law Firm, and bureaucracy.
The FSLIC litigators involved included were none other
than Hillary Clinton, Vince Foster, and Web Hubbell. The book “Blood Sport” by
James B. Stewart does the best job of detailing their involvement;
“Suddenly the S&L
crisis seemed like a godsend. In 1985, the FSLIC approached the Rose firm about
representing the government agency in litigation involving one of the Arkansas S&Ls it had seized,
Guaranty Savings and Loan in Harrison, Arkansas. Depending on how the case
turned out, the agency might be interested in retaining the Rose litigators on
a regular basis in connection with lawsuits involving failed thrifts. “ “She
(Hillary) was an articulate, zealous proponent of taking on the FSLIC… After a
series of acrimonious firm meetings, Hillary’s view prevailed, at least
temporarily. The partnership agreed to let them take on the Harrison case. But
the experience left an uncomfortable rift in the firm, even as it strengthened
the alliance among Hillary, Vince, and Webb.” “So they decided to curtail their
work for S&L clients… Since 1985 retainer agreement negotiated by Hillary
with Madison Guaranty (Whitewater), the Rose firm had taken on sporadic
assignments (with S&Ls).”
How do you deal with government bureaucrats with unrealistic
expectations? I was definitely in a catch-22.
Taking the case to the media
1988 – Letter to the editor
CLINTON NEEDS TO
SPEND TIME AT HOME
Gov. Bill Clinton, the Don Quixote of Arkansas politics, continues to
interrupt family vacations to interrupt family vacations to fight the terrible
“symptoms” of a disease that plaques Americans with his attendance at the
Education Commission of States in Baltimore, speaking at the Chautaugua
Institution’s Conference on the American Family in Chautaugua, N.Y., and
appearing on the “Today” show to discuss the Delta region and the potential
resulting government giveaway programs.
Our governor needs to come home from his quixotic travels and bluntly
attack the disease of Arkansas, poor economics, and not the resulting symptoms:
financing of education, plight of the family, etc.
In the tone of John McEnroe questioning a bad call in tennis,(“you
can’t be serious!”), our governor can’t be serious in his idealistic but
impractical solutions to our economic conditions and appears to be doing only
what is politically expedient.
Education is vital to the future economics; however, with reported 95
percent of University of Arkansas engineering and science graduating seniors
leaving the state, the people of Arkansas are paying for the education of
employees in other states.
The necessary educational statistics to attract companies would be
greatly enhanced if we kept graduates by offering incentives for hiring
Arkansas graduates and by developing economic incentives for home-owned
businesses through entrepreneurial and incubator programs comparable to those
in other states.
We are exporting our youth and future at an alarming deficit and are
now the second oldest state. If we increase our budget on education alone, will
we only be exporting a better product while our deficits continue to rise?
These issues will not be determined by the heart at the ballot box, as
much as by the vote of the pocketbooks. Antiquated state banking laws, greed by
our financial institutions as well as lack of leadership from the governor’s
office have resulted in more confidence in junk bonds in New Jersey and real
estate in Texas than in economic development in Arkansas.
As Clinton uses his saxophone to fight windmills and pursues his
impossible dream, a nightmare exists for businesses in Arkansas are up to their
hips in alligators and while they aren’t expecting the governor to drain the
swamp, they just want him to stop his travels long enough to do more than
admire the teeth.
“I thank you, gentlemen,” replied Don Quixote, “but I cannot stop a
moment, for sorrowful thoughts and disastrous events force me to appear
discourteous and to travel in haste.”
Date: 01/09/87
Category:
Page:
HARRISON Payments for bank stock not made by Giroir, paper
says; FSLIC cited
Byline: AP The newspaper said Giroir blamed the Federal Savings and Loan
Insurance Corporation, which is acting as receiver for the closed First South
Savings and Loan Association of Pine Bluff. The newspaper quoted sources as
saying that under the terms of a promissory note, the stockholders were paid 25
per cent of the sale price at the time of the purchase.
HARRISON (AP) _ About three dozen people who sold their stock
in First National Bank of Harrison
to Joe Giroir of the Rose Law Firm in 1981 for about $6 million did not get
their yearly payments from Giroir December 24, the Harrison Daily Times reported
Thursday.
The newspaper said Giroir blamed the Federal Savings and Loan Insurance
Corporation, which is acting as receiver for the closed First South Savings and
Loan Association of Pine Bluff.
The newspaper quoted sources as saying that under the terms of a promissory
note, the stockholders were paid 25 per cent of the sale price at the time of
the purchase. During the next two years, Giroir paid interest on the purchase
price.
The stockholders were to be paid the remaining 75 per cent of the principal
with interest in 10 yearly payments. Two yearly principal and interest payments
have been made and the one due last month would have been the third, sources
said.
Giroir could not be reached for comment Thursday, but the newspaper acquired a
copy of Giroir's letters sent December 24 to the noteholders saying that they
should demand the rest of what they are owed from the FSLIC.
Giroir wrote that the FSLIC prevented him from making the annual payment.
The Federal Home Loan Bank Board closed First South December 4 and the FSLIC
took over the S and L's worst loans. The remainder of First South's portfolio
was given to a newly formed mutual association named Riverside Federal.
The newspaper quoted one noteholder as saying the FSLIC apparently had refused
to honor First South's commitment to lend Giroir the money for the December
payment, although First South was legally bound to make each yearly loan under
a letter of credit.
Giroir's letter said that as receiver for First South, the FSLIC was
contractually obligated under an irrevocable commercial letter of credit to pay
the noteholders the full balance immediately since the noteholders had not
gotten their December payment. He told the noteholders he would pursue the
matter.
The newspaper quoted banking sources as saying that if First South agreed to
guarantee Giroir's payments, it would normally be holding collateral from
Giroir equal to the full amount it had committed itself to cover.
Brooks Morris, president of First National Bank of Harrison, said that Giroir had
scheduled a meeting with the noteholders for Thursday.Morris said Giroir
postponed the meeting when the FSLIC called him to Dallas to discuss the letter
of credit.
" He said he hoped the meeting could be rescheduled in the next three or
four days," Morris said. " I am hopeful for the noteholders. There
are retired noteholders that I'm concerned about and I think Giroir is
also."
Giroir sold First National of Harrison
to Worthen Banking Corporation of Little Rock in 1984 and Morris said the Harrison bank would not be affected
by any problems Giroir is having with First South.
Along with the Harrison
bank, Giroir sold Worthen the National Bank of Commerce of Pine Bluff, First
State Bank and Trust Company of Conway and First National Bank of Fayetteville.
Giroir received 898,725 shares of Worthen stock in exchange for the four banks.
With the sales, Giroir became a Worthen board member, but he resigned early
last year, and Worthen has since sued him, contending that profit he made from
his sale of 414,000 of his Worthen shares should go to Worthen. Worthen said
securities law provides for profits to go to the company if they are earned by
a director on a quick resale.
Giroir's problems at Worthen began shortly after he sold the banks to the
corporation. Worthen lost $52 million when a New Jersey securities firm failed
and Worthen's stock value fell dramatically.
Giroir apparently did not suffer a similar fate when First South's stock became
worthless. He told the Gazette last week that he owned "very little"
First South stock. He said he had borrowed from the S and L, but he would not
say how much he had borrowed.
Date: 01/13/87
Category:
Page:
Bank buys S and L at Harrison
BOB STOVERCITY Guaranty Federal Savings and Loan Association of Harrison, which has been in the
Federal Savings and Loan Insurance Corporation consignment program for more
than a year, has been merged into Superior Federal Bank of Fort Smith, Superior
and the Federal Home Loan Bank Board announced Monday.
Guaranty Federal Savings and Loan Association of Harrison, which has been in the Federal
Savings and Loan Insurance Corporation consignment program for more than a
year, has been merged into Superior Federal Bank of Fort Smith, Superior and
the Federal Home Loan Bank Board announced Monday.
The merger did not come as a surprise. Bruce Mc Neill, Superior's president and
chairman, had said in early December that the FSLIC had accepted Superior's bid
for Guaranty, but the closing on the agreement had become bogged down in
details. Mc Neill said then that Superior had been notified in August that it
was the successful bidder for Guaranty.
The Federal Home Loan Bank Board closed Guaranty in December 1985 and reopened
it as a new institution. Savers Federal Savings and Loan at Little Rock has
been managing the institution since then under a management contract with the
FSLIC.
Regulators said when Guaranty was closed that it had become insolvent because
of unsound banking practices over a 30-month period during which the
institution grew more than700 per cent. The Arther Barrett family, which owned
Guaranty, went to court in an unsuccessful attempt to stop the closing.
Superior has $616 million in assets. Mc Neill said that Superior bought about
$40 million of Guaranty's deposits, in addition to the office buildings at
Marshall and Harrison.
" The FSLIC took all the bad loans," he said.
The amount of those loans was not available from the FSLIC, but Guaranty listed
$451 million in assets when it was closed, and the FSLIC listed only $300
million when it was reopened. Many of the assets were short-term deposits that
were not rolled over after they matured.
Doug Green, a spokesman for the Bank Board at Washington, said the FSLIC
furnished some cash to assist the merger, but he would not say how much was
paid. He said disclosing the figure would imperil the FSLIC's bidding
procedure.
The FSLIC also has agreed to indemnify Superior against any undisclosed
liabilities and litigation challenging the merger.
First such merger in 1987
Green said this was the first FSLIC-assisted merger in 1987. There were 22 last
year.
Mc Neill said that it was Superior's intent to "support and strengthen the
Harrison financial
community consistent with our reputation as a community-oriented, rock-solid
and secure financial institution for the past 50 years."
By adding Guaranty's two offices, Superior, which was founded in 1934, will
have a total of 27 offices.
ARKANSAS DEMOCRAT WEDNESDAY, JANUARY 10,1990
NEWSPAPER COVERAGE IGNORES CAUSE, CURE FOR S&L FAILURES
A voices letter from
HERB LAIR
Harrison
The investigation of the S&L and FSLIC mess by the press and
politicians is analogous to an attorney with Alzheimer’s disease defending the
honor of a known nymphomaniac by saying that all men are evil.
The newspapers print daily the pleasures and resulting bankruptcies
that have come about from the looting of the S&L’s but give very little
attention to the heartbreak and the cause of the problem as well as how the
problem can be prevented.
In Arkansas, because of usury restrictions, many loans are made for
short term with a balloon payment so that the financial institution can
renegotiate the interest rates during inflationary times. However, when a
financial institution is closed by the FSLIC, all loans can be called on the
due date even if only one loan is due, and the relocating of the loans can be
very difficult, since other regional institutions become saturated with loan
applicants.
Four years after the closing of Guaranty S&L in Harrison, there has
been very little information provided that places the blame on the S&L
board or the possible premature closing of the institution by the FSLIC. Not
only were millions of dollars lost, but severe stress was placed on families
that even resulted in loss of life. This is not a “never mind” situation.
Some of the questions that need to be answered are:
Why has the Texas economy and deregulation become the scapegoat for
greed and criminal action as well as total mismanagement by the government?
In 1980, before deregulation, the S&L industry had a combined
negative net worth of $17.5 billion and 85 percent of the industry were losing
money. The reason at that time was runaway inflation and high interest rates
caused by Texas fuels and resulting inflationary property. Does this sound
familiar?
It doesn’t take a Harvard economist to realize the obvious downside to
controlling interest and inflation! Were constraints and conservative
management virtually eliminated by deregulation or by greed during a vulnerable
time in the thrift industry?
Why was Guaranty shut down when other institutions with even higher
negative net worth’s were allowed to continue to operate? Savers S&L was
even given a reported million-dollar contract by the FSLIC to manage the “new”
Guaranty. (The fox guarding the hen-house syndrome became quite common). Was
this an attempt to serve as a warning to other S&L’s?
Was it a result of competitive concerns of other S&L’s? How was
Guaranty different from other institutions that were not closed? If adequate
warning was given by the Federal Home Loan Bank and there was a failure to take
corrective action by the S&L board, then why wasn’t the board prosecuted?
Did closing of Guaranty save millions or cost millions with the FSLIC fire-sale
mentality?
What is the recovery rate percentage and dollar amount for local loans
versus the loans that were made out of Guaranty’s normal market area? How did
FSLIC’s recovery rate on Guaranty’s loans compare to other financial
institutions that were closed? After four years this information should be
available.
According to the book “Inside Job,” virtually all failed thrifts had
clear evidence of criminal involvement.
What criminals were the Arkansas thrifts dealing with?
Allegedly one of the top law firms in Arkansas used by the FSLIC for
foreclosures had a major partner involved in insider loans in First South
S&L. On what basis were attorneys selected and how their fees arrived at?
Why was the FSLIC, better known as the Fire Sale and Liquidation
Insurance Co., allowed to become totally illogical, laden with bureaucracy and so
disorganized that they even made IRS representatives seem compassionate and
totally reasonable? Why was Edwin Gray given the responsibility of chairman of
the Federal Home Loan Bank at a critical time with very little qualifications
other than being Reagan’s press secretary during Reagan’s term as governor of
California?
A lot of attention is focused in the state on Nelson-Robinson and the
ARKLA deal or Beverly Enterprises while the cause of the loss of billions
dollars has been virtually ignored.
This indifference by the press even makes more apropos the concluding
quote of a Nevada judge in the book “Inside Job”: “It won’t be the bad people
that destroy this country. It’ll be the
good people that rationalize the bad people’s conduct.”
The editor strategically placed the following letter with
bold headlines in the paper the day before the election for governor in
November 1990. Clinton became very worried about the election. His opponent,
Sheffield Nelson had successfully run his race calling Clinton a tax and spend
politician. The report was that Clinton went to Stephens, Inc. Investment firm
President and got some financial help, due to the last minute gains by Nelson.
Arkansas Democrat Monday, November 5, 1990
EXCUSES TO VOTE
FOR BILL CLINTON
With apologies to David Letterman, the Top 10 excuses for voting for
Bill Clinton are:
10. Need more material for Don Quixote, Part II.
9. Still
hasn’t gotten rid of Eastern accent, can’t tell if he is saying high tech, Hi
Tex., or high tax.
8. Need opportunity to retest the teachers since they still are 50th
in pay and still endorse him.
7. Concern that Clinton might join homeless and have to play sax on the
street corner.
6. Need to keep low unemployment by retaining governor’s staff
5. Completion of annexation to Mexico for better manufacturing jobs.
4. So length of term will be as long as Atlanta nominating speech for
Dukakis.
3. So he can tell his grandchildren about his experience of being
governor while still in office.
2. Because there are still things that he hasn’t taxed.
1. So he can collect a dinner bet with Steve Clark.
The significance of the dinner bet with the Arkansas
Attorney General, Steve Clark, was that he had been indicted for padding his
expense report with false dinner meetings. Clark was removed from office. The
same fate that many other Clinton “cronies” met.
One of the more humorous incidence of the election happened
in Harrison when all the state and local candidates were involved in a debate.
The debate was held at the local fairgrounds. When Clinton arrived he was
already in a bad mood, since there were many more signs supporting his
opponent. Clinton had never run well in northwest Arkansas. In his first attempt for office, Harrison
native, John Paul Hammerschmidt beat him, for US Representative.
After all the other candidates had finished their debates,
Clinton and Nelson were given the floor. The Chamber of Commerce set up the
format of the debate where the order of the speaker was based on coin flips.
Sheffield won the coin toss and took the option to go last. Sheffield used the
opportunity to pound Clinton into the ground blasting him primarily on his tax
and spend policies. Clinton came unglued and went to the Chamber President,
Scot Tennyson, and told him because he was Governor he should be given the
opportunity to respond. When he saw he wasn’t getting his way he told Tennyson
that he didn’t have any guts. Clinton still didn’t get the rules changed.
Clinton totally lost his composure. I thought it was funny seeing him throw a
temper tantrum. It was more like a hotly contested sports contest than a
political debate. Later on Tennyson received a letter from Clinton apologizing
for his actions.
Arkansas
Gazette journalist John Brummett wrote an article:
POLITICAL RALLY TURNS
A BIT “TESTY”
From time to time in politics you get reports from the road
that a candidate lost his cool over a trivial matter…Harrison is not one of
Governor Bill’s best towns to begin with. It is a thriving mountain town
inhabited by a heavy concentration of white conservatives and garden variety
Republicans…..The governor rolled into town about 6p.m. to find more 4X8 signs
for Sheffield Nelson, his Republican opponent, than he had ever seen in his
life.
Then he had to submit to a coin flip with Nelson to
determine the order of speaking – the governor usually is sufficiently
connected with local officials to manage to speak last at joint appearances—and
the flip went Nelson’s way. …When Clinton got up to speak he made a sarcastic
reference about not being aware that he had been invited to a “sign war”. Then
he vented a bit of frustration on the man who flipped the coin, who happened to
be J. E. Dunlap, the publisher of the Harrison Daily Times and an old Faubusite.
Clinton told the crowd of a few hundred that his administration had been good
to Harrison—money for a radiation therapy institute, a tourist information
center – even though Dunlap had never supported him editorially…….I was told
the governor made a stinging parting aside to Jim Fram, an official of the
co-sponsoring Harrison Chamber of Commerce. The aside was that the political
rally had been “rinky-dink”…………….So that is my story. I tell it to share some
of the human side of bigtime politics---the frailty, the temper, the silliness,
the childish bickering.
But I will be the first to admit that as a matter of
consequence, I need to borrow a phrase that the governor either said or didn’t
say. It’s all pretty rinky-dink.
After
that rally, I had doubts he would be re-elected governor. I knew he couldn’t run my company. He would
have been consumed by minutia. I would
never have thought he would become the Commander in Chief of the world’s most
powerful country. What a country!
I wrote several satirical letters to the editors that were
printed in the state’s largest newspaper, Arkansas Democrat Gazette. The
state’s paper was different than the local paper in that it printed opposing
viewpoints with minimal censorship. Locally you got only the publisher’s
opinion. Not likely that opposing viewpoints were printed another one of those
power issues.
Date: 02/16/90
Category:
Page:
How to improve education without forced
consolidation
HERB LAIR Letters To
the Editor:
The A+ Arkansas draft of a proposed act for consolidation of
school districts has about as much substance as a dinner with Steve Clark and
makes Clark's dining expenses look like a bargain.
To the Editor:
The A+ Arkansas draft of a proposed act for consolidation of school districts
has about as much substance as a dinner with Steve Clark and makes Clark's
dining expenses look like a bargain.
The A+ reorganization plan based exclusively on school size and not on
performance is totally inconceivable. The desegregation, consolidation and
security costs associated with the larger Little Rock area schools are well
publicized. The creation of a model school program at Little Rock Central would
be an excellent start in convincing the rest of the state that bigger is
better.
If schools are to be evaluated on the bottom line, then graduation percentages
and percentage of students that attend vocational schools as well as college
must be considered in addition to sheer daily membership numbers. Also the
impact the graduates have on society: Do they become taxpayers or tax
receivers?
The A+ memo said that "education experts have said for many years that no
school district that graduates fewer than 100 students per year can deliver a
top-quality, college preparatory education." (A fast-food, volume-discount
mentality has no place in education! The individuality and creativity that
small schools encourage are more important in an information society than the
mass education of assembly workers that was important 20 years ago for an
industry society.
The job market in the information society has created a trend away from
centralization (consolidation) to one of being highly decentralized through use
of satellites, fax machines, computer modems, etc.
Our school systems are much more in tune with our current society than they
ever were with the industrial society.
Enforcing the current standards, easing the difficulty of non-athletic student
transfers and having merit evaluations of schools as well as teachers for the
purposes of funding and salary increases are just some of the ways that
education can be improved without (rh LRAG. BAK BASIS HF5 LRAG.;1z E| forced
consolidation.
The A+ committee deserves an F- on the draft of the act pertaining to school
consolidation. Herb Lair.
Harrison.
Resolving settlement through the press and Congressman. My legal fees were less than $300.
Government officials have a virtually unlimited access to legal resources.
There was no way I could outspend them so I used the press to put pressure on
them until I could get a satisfactory payment plan.
Getting going again
During the litigation proceedings I had landed my best
opportunities to date with a company called Essex. Essex was located in
Greenwich, Connecticut strictly for capitalization reasons. They were a MSO
(multiple system operators) with over 40 systems located all through the
Southeast. We were selected to provide subscriber management software for all
their systems.
I started looking more to the international market for
growth. A unique opportunity came about from the island of Saipan. The general
manager contacted me about our software. Their interest came from a return card
sent out through a general mailing to all cable systems. Those cards you
generally get packaged in cellophane. Those that you generally pitch in the
trash even before opening. Saipan located near Guam past the international
dateline gave us an opportunity to prove the ease of use and minimal support
required to operate our system. I personally made the trip and did the
installation. In order to get there you have to fly an additional 8 hours from
Hawaii to Guam and then a short flight, less than an hour, from Guam to Saipan.
The island is only 48 square miles with dimensions of approximately 4 by 12
miles. Probably has the biggest ego’s per square mile of any place in the
world. Holmes the owner of a TV station
in Honolulu also owned Saipan Cable. The population of the island was only
15,000. Most of the business came from Japanese tourist, who came to play golf
and enjoy a little of the US culture. There was a top 40 radio station playing
American music and the cable system showed tapes from Los Angeles television
stations that were delayed about two weeks. Satellites were too expensive at
this time and, so CNN and live programming came a few years later. Saipan was
also known for its strategic location during WWII. A fierce battle was fought
on the island with over 5,000 Americans killed and over 25,000 Japanese killed.
Memorials and even old military equipment are still reminders of the battle.
Tinian, an adjoining island, was the place that the Enola Gay embarked to bomb
Hiroshima.
In the early nineties we were contacted to provide billing
and subscriber management for Mariannas Cable whom was overbuilding Saipan Cable.
It turned out the primary owner of the new system was Larry Hillblom, the “H”
in DHL freight. Wall Street Journal reported that the co-founder of the
air-courier giant built a business empire valued at more than $600 million
before his death in 1995. In most cases when you have an overbuild there is a
financial reason, in this case it turned out to be a grudge match. Holmes and
Hillblom didn’t like each other. Very unusual that we were the billing vendor
of choice for both systems.
Article in the
statewide newspaper titled appeared August 23rd, 1992 in the
Business & Farm Section
Harrison software firm on
cable’s cutting edge
by Andrea Harter
Harrison- When Herb
Lair moved back home in 1973, employment opportunities for a math and science whiz
weren’t overflowing in the Boone County seat.
AN UNLIKELY PLAYER
by Tom Kerver appeared in Cablevision magazine
in the October 5, 1992 edition
Computer
Utilities of the Ozarks finds that proper attitudes and an open mind are the
best tools for success abroad
The closest airport
to Harrison, Ark., is Springfield, MO., about 80 miles to the north. And
Springfield hardly qualifies as an international embarkation point. From there
a traveler has to take a commuter flight to Dallas or St. Louis to make an
international connection.
TUCKER: NO INTEREST IN ASIAN CABLE DEAL
LITTLE ROCK (AP) September 30, 1993
When the head of an
Arkansas cable television company leaves to start Indonesia’s first cable
system, he won’t be taking any of the governor’s money with him.
A spokeswoman for
Gov. Jim Guy Tucker said Wednesday that Tucker had no financial interest in the
venture headed by Dwight Harlan.
Harlan said he plans
to quit Friday as general manager of Falcon Cable Media Inc. and head to
Jakarta, Indonesia, where he said he and three other main investors would
establish a cable system.
He also said he would
consider establishing cable systems elsewhere in Asia, including Jordan.
Harlan has been an
associate of Tucker in past cable ventures. Asked if the governor was an
investor in the Indonesia project, he said, “I’d rather not say.”
But Tucker
spokeswoman Max Parker said the governor was not involved.
“Neither the
governor, nor any member of his family nor any company he controls is an
investor with Mr. Harlan or anyone working with Mr. Harlan in Jordan, Asia,
Indonesia, or anywhere else,” Parker said.
Harlan has been in
the cable television business since 1980, when he began as an electronic
contractor who helped put new cable systems in place around the state. He later
built and managed systems in other states.
Harlan managed
Mid-Ark CableVision when Tucker bought the company in 1984, and went to work
for Tucker at what became County Cable TV.
Tucker sold the
company to Falcon in 1988. But he and Harlan kept in touch regarding other
cable properties, including a project in Argentina which the two, along with
Tucker supporter J. W. “Buddy” Benafield, considered last year.
The Associated Press news article caught my attention,
because less than a week prior to the article I had been at the Governor’s
Mansion doing a demonstration of our cable software. The experience was
interesting since the contact and arrangement for our meeting was made through
an assistant of Bettye Tucker. My Sales VP, Ed Alspaugh, and I arrived early
for our appointment. We went through minor security and were taken to the
kitchen table. We could see the grounds outside the kitchen window. There were
tents that were being used for a University of Arkansas reception prior to a
football game.
The demo was much like any other, since Mrs. Tucker was an
experienced cable operator and had functioned much like an office manager.
About midway through the demo, Dwight Harlan arrived. He was obviously looking
for a subscriber management system for Indonesia. I had the impression that
they were in a business relationship and I was very surprised when I read the
AP article. My impression was that due to the scrutiny Hillary Clinton was
receiving for her business interest while her husband was governor; Mrs. Tucker
did not want similar attention.
The following article gave some clarity to the players and
the situation. I don’t understand how the media fails to have any
accountability to get a story right or correct their mistakes. It happens time
after time, the media has a convenient memory. Only remembering what they want
to remember, and never going back to connect fact with the fiction they
reported. There is truly a lack of accountability and any self-policing. If
autopsy were performed on the media’s reporting, there would be a lot of
malpractice lawsuits and many publishers and producers out of business or in
jail.
Indonesian Family Forged
Tight Arkansas Links a Decade Ago
The Washington Post
10/20/96
By Susan Schmidt and Michael Weisskopf
The billionaire Riady family of Indonesia got its first
toehold in American industry through Bill Clinton's Arkansas more than a decade
ago, forging links into the state's insular business and legal circles that
still serve them today.
It was the strangest of beginnings in America, one that is
still spinning off odd and intriguing relationships. Some in the cast of
characters have been bit players before in controversies that have engulfed the
Clintons ever since they left Little Rock four years ago.
The Riadys were already owners of a vast Asian conglomerate
when they first started doing business in Arkansas in 1983. They got help from,
of all places, the U.S. government, which provided $2 million to the Riady's
company that would in turn be lent to minority businesses.
After that not-so-humble start more than a decade ago, the
Riady family's Lippo Group in Jakarta is engaged in dealings with Arkansas
industrial giants like Wal-Mart and Tyson Foods, and has multiple lines into
the Clinton administration, not the least of which is James Riady's personal
relationship to the president. A closer look into Riady's past, gleaned from
interviews, bank records, government documents and other sources shows how far
the tentacles of this Indonesian family reached and provides a window into how
his long relationship with Clinton took hold.
The Riadys were introduced to Arkansas through Little Rock
billionaire Jackson T. Stephens, whose investment banking firm is the largest
in the country outside New York. Stephens got to know Riady in 1977 when Lippo
was weighing whether to buy Bert Lance's financial interest in the National
Bank of Georgia. Lance at the time was budget director to President Jimmy
Carter, a Stephens official said, demonstrating an interest even then by the
Indonesians in political connections as well as financial. The company was then
looking for a U.S. bank to help finance its export deals.
Although the Georgia sale fell through, Stephens officials struck up a relationship with family patriarch
Mochtar Riady and invited his son James to Little Rock to learn about
international banking. Thus began Lippo's improbable immersion into the clubby,
virtually all-white world of Arkansas politics and finance that few outsiders,
much less foreign nationals, had learned to penetrate.
James Riady
assimilated into Little Rock society, buying a comfortable home in an area
called Pleasant Valley and joining a country club where he could socialize with
others in Little Rock's corporate gentry. Fluent in English and gregarious, he
and his wife, Ailyn, hosted frequent dinner parties. And like most of the
state's wealthiest business owners, they got to know Arkansas' young governor
and his wife, whose Rose law firm did legal work for the state's corporate
elite, including, now, the Riadys.
Their first Arkansas
venture was Mochtar Riady's creation of Lippo Finance & Investment Inc., a
lending company financed in part by the Small Business Administration and
formed to make loans to small, minority-owned businesses.
As a foreign
national, Mochtar Riady was unable to serve as chairman to a company whose very
existence was owed to the U.S. government's SBA program. So Riady hired
Carter's recently departed SBA administrator, Vernon Weaver, for the job instead.
Weaver listed then-governor Bill Clinton as a character reference in his
application to the SBA, according to government sources who have examined the
company records. Weaver is now Clinton's U.S. representative to the European
Union.
The company made
loans to Asian businesses located in Little Rock, Los Angeles and New York. In
1984, Lippo and Stephens joined forces to buy a 30 percent stake in Worthen
Bank Corp., Arkansas' largest financial institution with ambitions to develop
international business. Worthen took over the SBA company, but surrendered its
SBA license in 1987.
Republican sources
said committees in the House and Senate have asked the SBA to immediately turn
over all Lippo's company records, including details about the government-backed
loans it financed.
In the course of its
Arkansas dealings with Worthen, the Riadys ended up joint owners of the First
National Bank in Mena, a remote mountain hamlet known for nothing it not
international intrigue. An airstrip at Mena is at the center of long-standing
but unproven allegations that it was used for running guns to the Contras in
Nicaragua.
One of Worthen's
stockholders during this period was lawyer Joseph Giroir, who was then managing
partner at the Rose Law Firm with Hillary Clinton, Webster Hubbell and the late
Vincent Foster.
Giroir left Rose in
the late 1980s, but has maintained ties to the Riadys. Just a day after James
Riady visited Clinton in the White House in April 1993, Giroir set up a company
intended to create partnership ventures with Lippo. The following year, he was
able to capitalize on the U.S. decision to renew China's most-favored-nation
trading status.
Since then, Giroir
has publicly discussed his efforts to broker ventures between Lippo and Tyson
Foods, which has been trying to increase its chicken exports to the Far East. Tyson and Wal-Mart, which already
has a store in a Lippo-owned complex in Indonesia, have pressed for and won
Clinton administration backing for a controversial new airport near their
headquarters' in Northern Arkansas that they hope could become a cargo gateway
to Asia.
With
the help of White House advisor Mack McLarty, Tyson and Wal-Mart last year got
the Federal Aviation Administration to provide $21 million in initial funding
for the project whose price tag may ultimately run into the hundreds of
millions.
Giroir is also
involved in a cable television venture with Lippo. In January 1994, he and
Betty Tucker, wife of then Arkansas Governor Jim Guy Tucker, traveled to
Jakarta with Giroir to study the possibility investing in a cable franchise
with Lippo. The Tuckers formerly owned a cable television franchise that for
years turned handsome profits but that later came to haunt them. Jim Guy
Tucker, who resigned his office this summer after a conviction in a
Whitewater-related fraud case, faces a second trial arising from his cable
dealings.
Several players in
that drama turn up in the new controversy surrounding Lippo. Tucker's former
lawyer, John Haley, a co-defendant in the cable case, is divorced from Maria
Haley, a Clinton appointee to the Export-Import Bank. Haley's longtime law
partner, Mark Grobmyer, is a golfing buddy of President Clinton's who attended
an Oval Office meeting with Riady and passed out business cards presenting
himself as "White House liaison" to Riady executives in Jakarta.
But perhaps the most
interesting player is Webster Hubbell, the one-time associate attorney general
now in jail for defrauding the Rose Law Firm and its clients. He has refused to
tell Congress why Lippo paid him a large but undetermined amount of money after
he left the Justice Department. He flatly rejected the contention, posed
bluntly by Whitewater Republicans, that Lippo was in effect paying him to keep
quiet in the Whitewater investigation as a favor to Clinton.
© Copyright 1996 The
Washington Post Company
HARRISON
SOFTWARE HEADED TO TAIWAN ...
Date: 01/20/94
Category: BUSINESS
Page: 1D
D.R. STEWART, Democrat-Gazette
Business Writer
HARRISON SOFTWARE
HEADED TO TAIWAN
HARRISON -- Computer Utilities of the Ozarks Inc., the Harrison company that
has developed computer software billing packages for cable television, has
agreed to provide billing software for a Taiwanese business.
The contract could be worth $500,000 a year to Computer Utilities, officials
said. That would represent more than a third of the company's annual sales,
which last year reached $1.3 million, 30 percent more than in 1992.
Computer Utilities President Herb Lair
said his company and Prime Cable Management Systems of Taipei, Taiwan, have
entered into a renewable one-year contract to market and provide a Chinese
translation for CableWorks, Computer Utilities' software system. It will be
the first Chinese translation of cable television computer software, and it
opens a huge potential market, Lair
said.
"We will be translating our software into Mandarin, which is the
official language of Taiwan and the dialect spoken by the majority of
mainland Chinese," he said. "We are very excited about the
potential of the Taiwan market and the eventuality of our product entering
the China mainland with its population of 1.26 billion and 190 million TV
households."
Pin Hsu, vice president of Prime Cable Management System, said Computer
Utilities' software was selected because of the Harrison company's experience
in other non-English-speaking countries.
"CableWorks was chosen to be the first translated cable billing system
in Taiwan because of its cost-effective open system design, current U.S. and
international market share and ease of handling the requirement of two
computer bytes for each Chinese character," he said.
CableWorks has been translated into Spanish and Hungarian. It is being used
by cable systems in the United States, Bermuda, the Dominican Republic,
Trinidad, Slovakia and Guam by about 1.5 million subscribers.
The agreement requires the cable software to be installed and working four
months from the Jan. 10 signing of the contract. About 200 cable franchises
have been issued in Taiwan, and company officials estimate they could
penetrate half of that market.
|
Within a month of the announcement of our agreement with
Prime Cable Management System, CableData was in contact and had set up a
meeting. CableData was founded in 1969, and was the first supplier of customer
care and billing services to the U.S. cable television market. Cabledata
primarily functioned as a service bureau. CUO, Inc. functioned more as an
in-house solution where software and services were licensed. At that time, they
were billing 50% of the subscribers in the US. Our business model was more
suitable for the international market with all the mergers in the US.
Randy Lintecum, US Computer Services Vice President New
Business & Corporate Development, contacted me and suggested a meeting at
DFW Airport to discuss possibilities and to see if I would be receptive to
working with them. After Lintecum found out we were interested, he scheduled a
visit to Harrison to see our products and to meet our key people. At that time
we initiated strategic alliance negotiations. Generally there is a cover
developed to keep acquisitions confidential until all the key players are on
board.
Knowing when to fold
up- billion dollar cable businesses replace the mom and pop’s.
Selecting a legal firm to assist in sale of company
(choosing a Rose from a bunch of thorns) – My son, Craig was working as an
intern during the summer for the Rose Law Firm. I had never told him about my
past experiences with the firm. Most local people in Harrison weren’t aware of
it either due to the fact that Rose farmed it out to a local firm to do the
day-to-day business. Craig wasn’t a litigator and there had been a lot of
changes in the firm. Hillary Clinton, Web Hubbell, and Vince Foster were gone.
I discussed my past issues with a partner of the firm, since Craig was working
in his department. He said that my
FSLIC and Rose legal problems were a “dead”
issue, as far a he was concerned. The irony was that the manner in which he
said it. There was no doubt he was referring to Vince Foster and his suicide.
Although there was some irony since Hillary Clinton and Web Hubbell were no
longer associated with the firm. I’m not
sure how much my past bad experience with Rose or my son’s legal liaison
affected my legal charges, but my costs turned out to be nominal.
Hubbell Recalls Firm's Near Breakup in '80s
In his book "Friends in High Places," Webster
Hubbell described his take on the structure of the Rose Law Firm and the
departure of Joe Giroir.
"Our 'management structure' was largely
nonexistent," he wrote. "The day-to-day business was supposedly
handled by a seven-member 'Executive Committee,' which met to deal with such
administrative questions as which copy machine we would buy. Even that
committee had no real power, though, since the firm's deep-rooted sense of
democracy made each partner bristle at the thought of being told what to do.
Democracy was anarchy at Rose."
The restructuring of the firm today is one of the key issues
in the departure of at least seven lawyers, who opposed some of the changes.
It's not the first time Rose Law Firm partners have been
forced to choose sides on a major issue and face adversity within the
partnership.
Hubbell and Vince Foster were informed by the Federal
Savings and Loan Insurance Corp. in late 1986 that the firm had a conflict of
interest to resolve regarding its work for the agency because, unbeknownst to
them, Giroir had represented FirstSouth Savings & Loan on a major deal.
Giroir and his supporters wanted to fight the matter; others wanted to settle.
"As in a divorce, sides began forming," Hubbell
wrote, describing how the Rose firm became "a kind of hell" and
"a hissing place of whispers" that produced awkward situations in the
office.
To avoid a lawsuit by the FSLIC, Hubbell wrote, the firm
ultimately decided to settle the matter for $3 million without the blessing of
Giroir, who thought it made him look bad. Giroir was chairman of the firm at
the time, and Rose partners were being asked "how we could afford to keep
Joe in the firm."
As part of an agreement to step down, Giroir insisted that
William Kennedy be named managing partner. Hubbell wrote that Kennedy was able
to keep matters under control until March 1988, when Kennedy and Foster met
with a firm breakup specialist.
"We all went to work the next day not knowing whether
the firm would survive until quitting time," Hubbell wrote. "We had a
meeting, and Joe was told that either he had to leave or the firm was
dissolving. When he agreed, everyone was so relieved that we gave him what we
thought was a generous severance package.
"Joe's leaving did help bring at least a semblance of
peace within the office. Within a week, of course, we received letters from
some clients saying, 'Send all the files to Joe.'"
Giroir's key clients at the time were Stephens Inc. of
Little Rock, Tyson Foods Inc. of Springdale and Beverly Enterprises Inc. of
Fort Smith.
Arkansas Business and Arkansas Business Online
CALIFORNIA
COMPANY ACQUIRES HARRISON SOF ...
Date: 08/03/94
Category: BUSINESS
Page: 1D
D.R. STEWART, Democrat-Gazette
Business Writer
CALIFORNIA COMPANY ACQUIRES
HARRISON SOFTWARE CREATOR
HARRISON -- U.S. Computer Services of California has acquired Computer
Utilities of the Ozarks Inc., the Harrison-based developer of computer
software billing packages.
Terms of the sale were not announced by spokesmen for the firms, which are
both privately held.
U.S. Computer Services provides cable television billing systems serving more
than 33 million customers worldwide. Executives of the two firms said that
effective Aug. 1, 12 employees and executives of the Harrison-based company
became employees of a subsidiary of U.S. Computer Services, CUO Inc.
Herb Lair, owner and
president of the Harrison company, is now president of CUO.
"There are a number of advantages to teaming up with the industry's
worldwide leader in transaction management systems," Lair said in a written statement.
"All employees will be retained at our headquarters in Arkansas and will
be eligible for the excellent benefits that the larger company has to offer.
Further, they will have access to greater research and marketing resources
that will ensure the continued development and production of CableWorks, our
cable subscriber and billing system. This is a very exciting time for CUO,
and I look forward to the company's future development as part of USCS."
Computer Utilities of the Ozarks, which Lair started in 1973 as a recent mathematics graduate
of the University of Arkansas, developed CableWorks in 1991. It was the first
personal computer-based subscriber management information billing system for
the cable television industry. CableWorks currently has 2 million subscribers
in Arkansas, the United States, Saipan, Bermuda, the Dominican Republic,
Trinidad, Hungary, Romania, the Philippines, the Slovak Republic and China.
Jim Castle, chief executive officer of U.S. Computer Services, based in
Rancho Cordova near Sacramento, said the acquisition will give the company a
product to meet the needs of customers with lower-volume requirements.
"CUO's CableWorks complements the sophisticated and robust high-volume
transaction management systems which have earned us our leadership
position," Castle said.
Lair said CUO will
continue to produce and develop CableWorks, targeting the sale of the
management information and billing system to cable companies supplying
services to between 1,500 and 20,000 customers.
U.S. Computer Services, which last year had revenue of $160 million, is the
parent company of CableData, CableLease and International Billing Services,
all of which are involved in transaction management and billing systems for
the cable television industry.
International Billing Services produces billing statements and mailing
services to more than 50 million subscribers in the cable television,
telecommunications and other industries. The company is the largest
centralized first-class mailer in the United States.
Computer Utilities of the Ozarks in 1993 posted revenue of $1.3 million, 30
percent higher than the previous year.
In January, the company announced it had agreed to provide billing software
for a Taiwanese firm, Prime Cable Management Systems of Taipei. Company
officials estimated the contract could be worth $500,000 a year to the firm.
Translation of the company's software into Mandarin, which is the official
language of Taiwan and the dialect spoken by the majority of mainland
Chinese, was the first Chinese translation of cable television computer
software, and it opens a huge potential market, company officials said.
|
PART 4 WORKING FOR THE ACQUISITION COMPANY
Expectations—buyout generally includes upfront money and
incentives. Since control is lost very soon after the sale it is very important
to place a lot of weight on the upfront money. The negotiations were primarily
handled in a textbook manner since we were the first acquisition of USCS
International, Inc.
There are typically several opportunities to walk away.
Probably the most critical point in our negotiations came when there was a
change from a stock purchase to an asset purchase. The difference came down to
how much of my company’s liabilities would be assumed. I was ready to walk
until they agreed to pay most of the liabilities. Once we agreed on this the
job was easy for the attorneys.
CUO, Inc. Employment Agreement
This Employment Agreement (the “Agreement”) is entered into
as of this 1st day of August, 1994, by and between CUO, Inc., A
California corporation (the “Company”), and Herbert D. Lair (the”Employee”).
RECITALS
Metromedia –John Kluge, one of the top five billionaires at
that time, decides to enter the Eastern Europe and Soviet bloc countries.
Opportunities to travel—develop relationships and new
business development. Opportunity to make a presentation in Beijing and travel
extensively in Mainland China meeting potential clients in Shanghai, Hangzhou,
and Guangzhou. Other trips to New Delhi, India, Jakarta, Indonesia, Kuwait,
Manila,
Dealing with global cultures
Meeting Payne Stewart
Joe Namath
Big sale in Argentina to CableVision
Time to leave—
