Albuquerque Journal from Albuquerque, New Mexico • Page 27

BUSINESS Page 9, Section Albuquerque Journal Wednesday, August 5, 1992 aloofs Bet On Phar-Mor Accuses 2 Of Swindle Company Says $350 Million Lost Through Embezzlement Colorado, Nevada Casino Ventures By Paul Logan JOURNAL STAFF WRITER THE ASSOCIATED PRESS YOUNGSTOWN, Ohio Phar-Mor a growing discount drug store chain, on Tuesday disclosed an "elaborate financial swindle" it says cost the company $350 million, orchestrated by two top executives ousted late last week. The disclosure immediately changed j-1 .1 I i what had been a case of financial irregularities into a full-blown criminal scandal involving fraud and embezzlement that plundered more than half the company's net worth. It also put a much bigger cloud over the dealings of Mickey Mnnnfl tho fnrmor Plisp. gaming for the historic mountain towns of Central City, Cripple Creek and Black Hawk. Gambling in the casinos is limited to slot machines, blackjack and poker games.

When fully operational, the Palace will have about 450 nickle, dime, quarter and dollar slots, Maloof said. The Colorado State Division of Gaming reported that through the first nine months of gaming, the average monthly revenue for all of Central City casinos, after prize, money payouts, was $4.6 million. Dan Johnson of the gaming division said the October through June figures were averaged using 12 casinos, while Central City now has 21 casinos. Johnson said the state does a background check on any person with a 5-percent or larger interest in a casino's ownership. He said he did not foresee any problems in granting a gaming license to the Maloofs.

The Maloof Companies in 1990 announced plans to build Fiesta, a casino hotel recreational vehicle park in North Las Vegas. The project is estimated to cost $20 million, Maloof said. The family owns the 18-acre site, he said, and is ready to develop it, but "we're trying to find the right financing." Maloof said construction on the Nevada casino would begin early next year and that it would take about 10 months to build. "When we get our Colorado license, it should give us a better opportunity in Vegas because we'll already have a privileged license," Maloof said. Earlier this week the Maloofs announced they had sold their majority ownership in the Birmingham Fire, a professional football team in the World League.

In addition to First National Bank, the Maloof Companies owns seven hotels in New Mexico and one in Arizona; the Coors Beer distributorship in New Mexico; and Quality Import, a wine, liquor, imported beer and non-alcoholic beverage operation. The Maloof Companies will open a casino outside Denver this fall and plan Jto begin construction of a hoteU casino in North Las Vegas, Nev.yearly next year. Known for its bank and hotel holdings, and its liquor and beer distributorships, the Maloof family will spend about $10 million to renovate and expand an 18th century building in historic Central City, George Maloof Jr. said Tuesday. The Central Palace Casino project is the largest undertaking since the family built the $14 million Ramada Hotel Classic in Albuquerque in 1980, Maloof said.

Maloof is president of the family's eight-hotel chain and is overseeing the casino projects. The three-story Palace, covering 25,000 square feet will be centered around a Victorian-style building constructed in the late 1800s, Maloof said. When the casino opens on Nov. 1, it will be among the five largest casinos in the former gold mining community 32 miles west of Denver. The Palace will have about 200 employees.

Central City's population' about 400, Maloof said. The, casino's top floor will house the-city's only entertainment lounge, with seating for up to 180 people. Besides live entertainers, plans call for big-name stars to perform every three months, Maloof said. The Palace also will have a stage with live entertainment in the gaming area along with a restaurant, buffet, delicatessen, ice cream shop and two bars. Maloof said owning First National Bank in Albuquerque and a casino is "probably unusual, but it's no problem at all.

Both are highly regulated businesses. "The casino business is more highly regulated than the banking business. It's squeeky clean," he said. The Colorado Legislature last October approved limited stakes -H 'Mi 'Wf ifjij it I i i 'l hut I ill i WD ft Mor president, well Monu8 known as a sports aficionado and leading investor in professional athletics. Monus and the company's chief financial officer, Patrick Finn, were fired on Friday.

The privately held Phar-Mor operates 300 discount drug stores in 33 states, including New Mexico, with 25,000 employees. It recorded sales of $3.1 billion in the fiscal year completed June 30. Chief Excecutive Officer David S. Sha-pira, who took over as president, said a financial review of the company turned up the fraud and embezzlement. The company has asked for a federal investigation of Monus.

Shapira also said the company immediately laid off 100 people at its Young-stown headquarters and will account for the $350 million loss through an accounting charge against earnings. Phar-Mor still has a net worth of $220 million, he said. "To say that the actions of two former officers of this company were outrageous and shocking does not convey my feelings," Shapira said. "I intend to return Phar-Mor to profitability as soon as possible and to re-establish honest relationships with our banks and our vendors." The company said in a statement that Monus and Finn orchestrated an "elaborate financial swindle" in which they allegedly diverted funds from the company for personal use. On Monday, Monus also withdrew as a leading investor in the Colorado Rockies, a major league baseball expansion team.

Monus with other investors contributed $26 million of the $95 million needed to pay the "km lit a lit i IS r'f 1 MARK HOLM JOURNAL George Maloof Jr. displays a scale model of Colo. The casino, about 32 miles west of the Maloof Companies' latest acquisition Denver, is one of two gaming businesses the Central Palace Casino In Central City, the Maloofs plan to open. Summa Works To Overcome Financial Woes By Leah Beth Ward JOURNAL STAFF WRITER Commission, Summa reported that its outside legal counsel had determined "that the ultimate resolution of the lawsuit will not have a material effect on the company's position." Other pending suits, an SEC investigation announced last year of certain loans and "a number of other longstanding liabilities have forced management to spend an inordinate amount of time on urgent, but non-business generating matters," Kaplan said in his letter. The company has not yet filed its annual financial report for the fiscal year that ended March 31, and has yet to schedule an annual shareholder meeting.

In the prior year, Summa lost $7 million. percent over the last six months and to halt internal development work on a high-definition display and voice compression system, he said. Kaplan on Tuesday did not return a phone call seeking elaboration on the letter to shareholders. Among the financial constraints, Kaplan said in the letter, are a $2 million judgment against the company from a 1988 stock transfer suit brought by Broadcort Capital Corporation, a subsidiary of Merrill Lynch, Pierce, Fenner Smith Inc. At one time, Summa regarded the Broad-court judgment as immaterial.

In a May 1990 report to the Securities and Exchange receives $700,000 in revenues it is owed for work performed last year on a contract with the government of Kuwait. When completed, the restructuring plan must be approved by creditors. "If the plan is not approved and no additional financing can be secured, the company will be forced to suspend operations and seek bankruptcy protection," Kaplan said. Summa, which once had interests in biotechnology, is focusing on expanding its work for Kuwait where it designed, integrated and installed a computer network used to produce citizen identification cards. Financial constraints, however, have caused Summa to reduce its staff by 60 Summa Medical Corp.

president Alan Kaplan has told shareholders the technology company is trying to restructure financially to avoid bankruptcy. Summa, which moved from Albuquerque to Vienna, last year, is working oh a plan at providing the company with a chance for the future," Kaplan said in a letter to shareholders dated July 22. Kaplan's letter gave few details of the restructuring plan but said Summa is being helped by an investment banking and financial advisory firm. The plan can't become final, he said, until the company une Decline Ends Statistics that forecast the economy The index of leading economic indicators uses these statistics: i Index of leading Economic Index Gain Building permits Monthly total building permits issued indicators The main index that includes the By Dave Skidmore 11 others shown Manufacturing labor hours Average hours employees work per week THE ASSOCIATED PRESS Unfilled orders for durables Change in Unch unfilled orders for durable goods 11 Rockies franchise fee. Monus, who reportedly was out of the country attending the Olympics, was unavailable for comment Tuesday.

Telephone calls also were left for Finn. The company said it did not know how to reach him. Shapira said Phar-Mor's investigation uncovered evidence that financial statements were falsified to conceal losses and overstate income. Michael Waldner, special FBI agent in charge of the Youngstown office, declined to discuss any specifics of an investigation. Paper Exec Says Electronic Info Battle Not Over By Bob Hagan JOURNAL STAFF WRITER The battle over the shape of the emergirg electronic information industry is likely to continue when the next Congress convenes in January, a newspaper industry executive said Tuesday.

Although a group including media and consumer groups succeeded in getting a favorable bill through a House panel in July, it's unlikely that bill will be passed by both House and Senate and made law this year, said Tonda Rush, National Newspaper Association chief executive officer. The newspapers and the phone companies are contending over the shape of a new hybrid industry that can pipe news reports, stock market quotes, ads, and a wide variety of other information into home computers via the phone lines. The seven regional telephone companies were barred from providing information services when a federal judge broke up the Bell System telephone monopoly in 1984. The phone companies succeeded in overturning that prohibition last year. A coalition that included the newspaper and cable television industries, broadcasters and consumer groups failed to get the Supreme Court to reinstate the baa Now the battle has moved to Congress, where the newspaper industry supports a bill that would require the Baby Bells to get Justice Department approval before entering a new business.

The newspaper industry and its allies fear the telephone companies will use their control of the local phone lines to gain an unfair advantage in the information services business, according to Rush. Rush was in Albuquerque Tuesday to attend the annual convention of the Newspaper Association Managers. The convention concludes this afternoon. TTI Unemployment i nation's unemployment rate has continued to rise. Many analysts now believe joblessness, after hitting an eight-year high of 7.8 percent in June, will improve slightly.

"Unless that rate can drop noticeably between now and November, people are going to feel pretty glum and take it out on incumbents," said economist Paul Boltz of T. Rowe Price Associates in Baltimore. "I think we'll see some improvement but I think the improvement will be perceived as late in the day." In June, six of the 11 forward-looking indicators that comprise the leading index Commodity rices hangein sensitive materials prices claims Weekly claims on unemployment insurance N8W consumer aoods orders 3 Orders for mfg. 0.03 Stock prices 500 common stocks Money supply (M2) Real money supply, month average Consumer confidence consumer gooas and materials Delayed deliveries Percent of firms getting delayed deliveries 0.3 WASHINGTON The government's chief, economic forecasting gauge fell in June 'for the first time in six months, the Commerce Department said Tuesday, signaling a wobbly economy through the November election and beyond. the 0.2 percent drop in the department's Index of Leading Indicators, designed to predict economic activity six to nine months in advance, was the first since it declined 0.1 percent in December and the worst since January 1991.

The drop followed gains of 0.6 percent in May and 0.3 percent in both April and March. Analysts expected the slight decrease and said it was not a sign of renewed recession, but a symptom of the weak and erratic growth bedeviling the economy since, the middle of last year. "It's evidence we're in for more of the same: a lackluster, limpid, lethargic performance that goes on month after month," said economist Robert Dederick of Northern Trust Co. in Chicago. That's bad news for President Bush and other incumbents who would prefer that voters on Election Day feel good about the economy, or at least optimistic that hard, times soon will be over.

An even more politically important statistic the unemployment rate for July is scheduled for release by the Labor Department on Friday. Despite five consecutive quarters of weak economic growth that 'economists say constitute a recovery, the in Consumer New plants, equipment Contracts and orders, plant and equipment 0.13 ft HI economy's health contributed to its decline, one was unchanged and four were positive. The negative indicators were: A drop in the inflation-adjusted supply of money in the economy. A decrease in the average factory worker's workweek from 41.3 hours to 41.1 hours. An increase in new claims for unemployment insurance from an average of 415,000 a week in May to 429,000 in June.

A decline in stock prices as measured by the Standard Poor's 500. A fall in building permits. And a slump in consumer confidence as measured by the University of Michigan's-Survey Research Center. The positive indicators were a gain in new orders and contracts for business equipment and buildings, a rise in new orders to factories for consumer goods, a slowdown in business delivery times, which indicates increased demand, and an in- SOURCE: Bureau of Economic Analysis Knkjht-Ridder Tribune chairman of the Senate Banking Committee, Donald W. Riegle to call for "a significant increase in the money, supply by the Federal Reserve." Private analysts said the central bank probably would attempt to stimulate money supply growth with another reduction in interest rates only if Friday's employment report is worse than expected.

8492 crease in the price of various raw materials. The backlog of unfilled orders at factories was virtually unchanged and did not push the overall index in either direction. The various changes left the index in June at 149.6 percent of its 1982 base of 100, down from 149.9 in May. The leading index report prompted 'the.