Bert Caldwell: Fairness lacking in demise of business titans
C. Paul Sandifur Jr. will soon be $151,000 lighter, E. Stanley O’Neal some $162 million heavier.
Their final dispositions, at least in terms of the organizations they once headed, oddly coincided last week. Each led financial institutions. Each transformed those organizations. Each took a fall.
Sandifur’s tale is an old one by now. He ran into the ground Metropolitan Mortgage & Securities Co., a 50-year-old Spokane company founded by his father. More than $600 million and the livelihood of hundreds of employees vanished when he and his lieutenants could no longer paper over their incompetence, or criminality.
Met had long had a peculiar business model that included the purchase of mortgages and lottery winnings. But under Sandifur Sr. the company had carved out a niche, and for decades, met its obligations to the thousands of area investors who had purchased its preferred stock and debentures.
Under Sandifur Jr., Met’s investment strategies took on a flavor-of-the-month aspect, with a final desperate plunge into the sub-prime commercial loan business. In the end, the company was little more than a Ponzi scheme stopped when regulators finally blew the whistle.
But while Sandifur took his family’s company down, he played at art patronage, political king-making, civic fatherhood. He bought and refurbished The Met theater, recently renamed the Bing Crosby Theater. A $172,000 gift from Metropolitan allowed work to begin on the bridge that takes the Centennial Trail across the Spokane River at People’s Park. In thanks, the Park Board voted unanimously to name the handsome span after his parents.
His money backed several politicians whose antics turned Spokane City Council meetings into angry burlesque. The Spokesman-Review was among his targets.
He/Metropolitan helped the poor, and assisted environmental groups.
Now, Sandifur has left the area. He professes to have nothing. There is doubt he will be able to pay the $151,000 settlement reached Monday with the U.S. Securities and Exchange Commission, or any subsequent judgments against him. If his life savings are indeed gone, so are the savings of many Met investors.
Sandifur strutted on their nickel.
Meanwhile, O’Neal parachuted out of Merrill Lynch with $162 million. Merrill took an $8.4 billion write-down against third-quarter earnings, most for its adventures in sub-prime mortgages. Just three weeks earlier, the company had estimated the losses at $5 billion. There’s more to come.
The Wall Street Journal Friday reported Merrill might have been trying to hide some losses using the same kind of magical accounting that sank Enron.
When O’Neal, without informing his board of directors, approached Wachovia Corp. about a merger, he was done.
Unlike Sandifur, O’Neal’s was a rags-to-riches story that began in the cotton fields of Mississippi and ended with his ascent up Merrill’s hierarchy. Reportedly, he was ruthless with perceived enemies and under-performers, but in his five years as chairman had repositioned Merrill, pumping up returns in the process.
By the end of the week, he was yesterday’s news.
Sandifur and O’Neal, and their respective institutions, are plains apart. The collapse of Metropolitan was catastrophic, the losses at Merrill severe but tolerable — so far. Sandifur was apparently wiped out. O’Neal cashed out.
Were the punishments proportional, given the different worlds they inhabited? Is punishment even admissible in the case of O’Neal, who moved in a rarified financial circle?
The results leave one grasping for the word “justice.”
On an unrelated note, The Spokesman-Review newsroom will soon be roughly 15 reporters, photographers, designers and editors smaller. Their departures will diminish the newspaper, and the communities they served, but not the regard of their peers.