Guest Column  
by Harold Duffield - Florissant, Missouri - USA
http://www.oneuglyboat.com/

Searching for Sven

I once owned a marina on a large lake in down state IL that was known for great winds, and therefore, had a great number of sailboats. Being an avid sailor, I too had a boat at the lake marina. Not the, "other marina," but "the" marina. You know, where the big boys kept their boats. In the process of sailing over a number of years, I got to know the owners, a number of brothers and in-laws from the local town nearby. They had several disputes amongst themselves, and decided they'd sell the marina for the sake of family unity. Of course their asking price was too high, so they were not able to find a buyer with the money.

Along I came, not with the money, but with a plan. The bottom line is, they were desperate, and I had a very good plan that allowed them to sell out and get their money in increments over a four year period. I scoped out the docks, and figured I could move the dock sections around and gain over 90 new slips to rent. Brilliant! These 90 slips would bring in around $50k in rents. Almost enough to make the payments. Of course, I didn't tell them of my plan.

The deal went down, and I owned a marina. I guess I sensed there might be a problem at some time in the future, so I structured the ownership of the stock in the Marina Corporation to be owned by a separate holding corporation, not by me directly. I did own all the stock in the holding company. That way I could sell my stock in the holding company, and get out of the deal without having to sell the marina company that had the lease. . A very good idea if you want to cash out without a lot of involvement with a lease transfer.

The marina was on a Corps lake, so I went to meet the 'Landlord'. They welcomed me with open arms, and in fact, referred to me as their, 'white knight'. I was all wet with enthusiasm as I drove back to my marina that I had just agreed to pay several hundred thousand dollars for.

It was exciting, it was hard work, and it was wonderful. The Corps people at the lake office were great. They were more than happy to see me improving the facility and serving the public who used the lake. The Colonel in the regional office was laid back, and that attitude permeated the organization.

Life was good. In fact, it was so good, I bought a home on the lake and went to work each day by walking down to my private dock, and skimmed over the mirrored water of the calm lake in my brand new Boston Whaler. 'It can't get any better than this,' I'd think, with the cool breeze blowing in my face as I went to work each day.

I was the envy of all my friends, living my dream. I loved my Customers, and they loved me. Of course my plan worked, and over a period of four years, I paid off the marina., just as planned. To do so, I had to sell the meat business I currently owned, but that was part of my master genius plan.

Over the following 2 - 3 years I poured the profits from dock rents, boat handling and repairs, and brokerage sales into the infra structure. We built a large repair shop, redecked the docks, and added more docks to the facility. The business grew from 140 slips to over 350. Finally I was able to reap my reward and take some money out for my family and my future. After all, that's what you do, right?

Along the way it wasn't all joy and prosperity. There were floods, ice incidents with the docks, and hours of hard bone grinding work to get the job done. I wasn't one to just manage, but instead, I worked the boats, and acted as the salesman on weekends. I built a transport trailer and hauled boats free from the surrounding lakes and river to the marina.

But, it was part of the deal when you are a marina owner. And after all, you're building a business that someday will be worth some real money. When you are the owner, you knock your nuts off sometimes to make your business prosper.

The key word here is, 'owner'. When you buy something, you own it, right' Well , not exactly. You own the business, the docks, and the buildings, but not the land or the harbor. That's owned by the government, and managed by the Corps. But you do have a 25 year lease! Yeah, right. You think you have a 25 year lease. This realization came to me with the first disagreement I had with my landlord. It was over the installation of a flag pole for the Yacht Club members.

Every change or addition made to the facility had to have an approval from the Corps. That's part of the deal, and ok with me. I didn't have a problem with any of that over the past 7 years with two Colonels who oversaw the regional operations. But then, well, let's just say, 'I did now!'

The Corps rejected my application for permission to put in the flag pole for the Yacht Club. The reason' I wasn't done with my complete dock re-decking project, and didn't ask permission to paint my building navy gray instead of army green. ' navy gray's nice', I said with a smile. 'But you didn't ask first', the Major (shooting for Colonel} scowled. 'As soon as you're in compliance, we will consider the flag pole request, but not until you are fully in compliance with our requirements.'

Seems like a trivial concern, right' Well, stupid is stupid! And the leader of stupid at that time was me. I told him what I thought of their reason for not allowing the flag pole installation. Big mistake! To add fuel to the fire of discontent with me, the Yacht Club Leaders were 'connected' in Washington, and asked their Senator why the Corps would not allow the American flag to be flown at the Lake. Not a good thing to happen to me at that time. Reluctantly, under pressure from above, the flag pole request was granted and installed. Winning one for the Gipper might be fine, but winning one from the Corps ain't so fine for your future.

I wasn't being a team player. I didn't realize they were the Army, and I wasn't. My biggest mistake was telling them what I thought of their system of total micro control. Another big mistake. Now I was on their list. Starts with 's' and ends with 't'. But I had a 25 year lease and have some rights under that lease to run my business and earn a profit.

At the end of the season I made an application to increase the rent by 50 cents a foot to generate added revenue for the following season. We had not requested a rate increase in our 7 years, and it would cost each boat owner only about $35-50 per season more for rent. I informed the new Real Estate manager that I wanted to expand the docks, and put in more boats. The request was rejected. The reason' Excessive. Excessive' 'What are you talking about' I can't build more docks without more revenue to pay the bill,' I objected. Again, they replied to my second request, 'Excessive'! I made a third amended request for a rate increase, 49 cents a foot. 'Not smart, but it has to stop somewhere', I thought.

I had a meeting with the new Real Estate Manager and candidly told him, off the record, what I thought, and how thankful I was that I had a lease that still had 18 years to run.

'You don't have anything!' was his response. 'The Corps wrote the lease, and we'll interpret it any way we want', Then he added, ' we can get rid of you anytime we want.' That sure made me want to pour in more money after the $650k I had in the deal!

There were other incidents over the next year or two, including an attempt to cancel my lease for being out of compliance when I put in some railroad tie steps to one of the docks, and then applying for permission to do so after the fact.

My reasoning was; it was an emergency safety hazard created when dirt was piled by the Corps on a new berm above the ramp to the dock. It was the Corps action that created the hazard, and I assumed they'd welcome my covering their tails with the steps... However, I knew they'd do the flag pole routine with my application, and time was of essence. My customers were sliding on their butts down the hill on the steep slope.

I was ordered to first remove the steps, before they would consider my application for the steps installation. That made a lot of sense. First re-create the hazard, and then after months of waiting for the x's to be in the right boxes, and jumping thru their bureaucratic hoops to get permission, then undo the hazard and rebuild the steps' I requested that they inspect the steps for safety, and if there was a problem, I would correct the problem immediately.

The answer came back. 'You are ordered to remove the steps immediately, you are not in compliance.' I purposely waited before I made any response. A couple of weeks passed, and nothing. Charlie, my carpenter, looked out the window and saw the parade first. 'Hey, there's a pot full of Corps cars driving down the field toward 'G' dock'. I came to the window and sure enough, four or five Corps cars were parked near the steps.

I could see the army uniforms from a distance, I could also see them setting up a video camera and start to take their video, sweeping back and forth with the camera.

I took a long time to let them do their thing before I appeared. I walked down the path to the entourage, and respectfully approached the Major and his cohorts, nodding my head when getting near. 'Thanks for coming by to see that the safety hazard created by the berm has been corrected', I said with a smile. All I got in return was a scowl from the Major. I then offered, ' I'm sure the steps meet the safety requirements as outlined. But, if there are any changes you want, I will make them this afternoon'. I again smiled. 'And I want to thank you for understanding the safety situation, and the apparent need for fast action', I added. Not a word of greeting or acknowledgment. Then, the Major stepped into my face in his long practiced military posture. Chest out, arms at attention, and teeth clenched. 'I order you to take those steps out, and now!' he growled in his best ever command voice.

There I was, nose to nose with this fool, standing in the mud on top the berm, and not wanting this to be happening to him or me in front of his command. I was a few inches taller than he was, so it was a little awkward with him standing there with his chin out looking up at me, his face a foot away from mine, his hat crisp and spotless with a shinning rank symbol; and mine, a faded red with finger grease stains on the bill from taking the hat off and on for three years. The tension spiked to unbearable. It couldn't stay at this level without something exploding. I didn't know whether to bend down and kiss him on the forehead, or cough, or laugh!. Anything to break the tension! What could I do to maintain my manhood and not embarrass the Major, or myself?

I guess we stood there for seconds, but it seemed like minutes. I could see he was serious, with his face turning red, as his people began to mill around a bit, and glance down to the ground in nervous anticipation of the next move. I know now, I should have been a tad more diplomatic, and asked the Major if we could discuss the problem in private, but I didn't. I too was a fool under the tension. ' Major,' I said very slowly, measuring my voice, and using an artificial country boy drawl, ' I'm not going to remove the steps unless they are unsafe, but you' all can. You can order your people up on the hill to bring your bulldozer down here, and you' all can push the steps up over the hill, and down in the valley. Then, I will take your picture doing it, and if someone breaks their leg and wants to sue, I'll give them the video!' Then, I think I apologized, but probably not, but I wished I had.

The Major didn't say a word He turned on his heel in perfect drill fashion, and taking mother may I giant steps, briskly popped into the back seat of his car, and away it sped, dust flying as they zipped onto the road and out the gate. The others looked up from their focus on the ground to me like I was dead meat, and smiling nervously, also left without a word. I knew without a doubt what would happen. But, what could I do? I really felt bad for the Major. But not too bad.

Their attempt to cancel the lease was immediately challenged in the Federal District Court, and we won. The Judge asked them, 'why the trivial minimus litigation with the marina''. 'That's two strikes, including the flag pole face down' , was my conclusion. Why wait for three. Who knows what will happen then. I decided I wanted out. But, I was finally off their s-t list, and unfortunately, now on their dead meat list.

Again I had a brilliant idea. 'Build, Sell, and Lease back', it's called. It's the way they made the Holiday Inn chain, and Sears. The way it works is: you build a structure, sell it to investors, and then lease it back from those same investors for use in your business. You can then use your money to do it again and again. Brilliant! I could do the same with my assets. My docks, buildings, and marina equipment. I owned all these assets, right' They weren't part of the leasehold, they were mine and I could do anything with them I wanted, right' With my plan I could extract several hundred thousand dollars just from the sale of the docks, and still own the buildings and business. Lease payments could be figured as a percentage of the rent they generated. Happens all the time in the business world. It's like the old hooker says, 'You got it, you sell it, you still got it!' What a stroke of business genius!

My rich customers at the marina were enthusiastic about the investment opportunity. It was the 80's and investments were going great. I made deals to sell every dock I owned, and then have the Marina Corporation lease them back from the investor's Leasing Company. $700k for 350 docks. I could then sell the holding company stock to another group of investors, and slip quietly out of town. A new president of the Marina Corporation could manage the marina and continue business as usual. After all, there would be no change of ownership of the Marina Corporation, which had the lease, and owned the buildings and business. Nothing would change, except I would be gone.

Then, the Corps got wind of my deal. 'You can't do that. You're selling the marina to Investors without approval from the Corps', they informed me. 'We will cancel your lease if you try to go through with such a scheme'.

My explanation was futile. 'I'm selling some assets I own. There's nothing in my lease that says I can't sell some assets'. I asked them if it would be ok if I leased some new docks from a leasing company, and then put those docks in the marina. They responded that it would be ok, 'Happens all the time', they said. When I then inquired if it would be ok if the Leasing Company had the new docks fabricated by another party, they said that would be ok too. 'But if it's ok for an outside company to make the docks and sell them to the Leasing Company, and then I lease the docks from that company, what's difference' If I make the docks, sell them to a leasing company, and then lease them from that company, isn't it the same deal'' Linear thinking is not a good thing to try when you are on that now, 'dead meat list'.

'It's a scheme to sell the marina without our permission'. You are not in compliance!

I cancelled the lease deal with the investors and made more docks out of operating income over the next boating season. Things settled down for a time. The Corps was busy building the new dam at Alton, IL, and it took their mind off of war planning. Then, when it was time to change Colonels, the Major made Colonel, and acted as interim regional officer until a new permanent Colonel was installed.

Strike three, July 7th 1989. I was pulling a customer's boat for bottom paint, when up pulled the small white car with the Corps logo on the door. Not the regional lake manager's car, but the 'company' car from St. Louis. Out stepped the big duo, the Real Estate Director, and the Corps Attorney. 'We're here to deliver this lease cancellation notice', they snickered. 'You are out of compliance and have 60 days to get in compliance before your lease is cancelled', they added. I was astonished. What on earth could this be' The Major made Colonel. The war was back on!

  • 1] Re-deck all the docks. That's an easy one. I had done that already.
  • 2] Tear down the covered docks on dock 'D'. it is not in compliance.
  • 3] Tear down the main building that housed the marina store, office, and showers and lounge for the dock renters. The building is not in compliance.
  • 4] Tear down the bait shop building and replace it. The building is not in compliance.
  • 5] Pay over $25,000. in additional rents that were refigured using a different formula than the one outlined in, and part of, the so called 25 year lease that we both had signed.

I could see by the list of compliance requirements that it was not achievable, and they knew it when they made the list. To attempt to do anything that would satisfy their demands would be futile. It was just a formality they had to go thru before canceling the lease and booting me out of the business. It didn't even matter what I tried to do, because they were on a road to ridiculous, and I was on the back of the bus. Not even sitting in the back seat, but strapped on the bumper like a sack of disposable garbage, to be dumped at the side of the road when the 60 day period expired.

Off to my Lawyer's office again. I sure knew the way. Back to District Court for an injunction. But this time they had done their legal homework. This time the case could not be settled in the District Court where we had previously won, and surely would win again. . No indeed! This time, they argued that because they had included a money dispute ($25k rent refiguring}, the District Court did not have jurisdiction, and the case would have to be settled in the Court of Claims in Washington DC because the amount was more than $10k. It was out of our favorite judge's hands. They had me, and they were glib and enthusiastic. They knew it would take months, if not years, to get the case on the docket in the Court of Claims, and even then, I couldn't financially defend myself. Meanwhile, they would cancel the lease, and boot me out the gate.

We wrote them a certified letter that explained that the docks had been re-decked and we included a survey done by a registered engineering firm that certified that the docks were safe, and had all new boards installed. The engineering report gave the buildings a passing grade for structure and safety. Their response was, 'the cracks are to wide between the boards on the docks.' We responded that the cracks were 3/4th of an inch, what is the requirement for cracks' Is there a regulation for board cracks' 'Less than what you have', was their reply. We were in it deep.

To counteract the rent dispute, we paid the rent requested, but under protest. . They responded that we were still out of compliance with the other items and that the lease would be cancelled. The hand writing was on the wall. We were toast when the 60 day period was up. What could we do' Were we finally screwed and tattooed' I knew that immediately after the 60 day compliance time was up, they'd lease the marina immediately to another party, and we would be in a legal battle to undo the undoable.

We put a group of marina patrons together in a limited partnership, and tried to sell the marina to the partnership and settle the ongoing dispute. We made an appointment to meet with the St. Louis cabal, and the partnership offered to buy the marina from me for one million dollars, but on a purchase contract with minimum cash down. The group was rejected outright. 'not qualified' Another group of local hotel investors met with the Corps and offered to buy the marina from me for $500k cash and put up a hotel as part of the deal. They were told, every building, dock, sewer, electric line above and below ground, would have to be razed and replaced to the specs as outlined by the Corps. Two million was the estimate to do all that. 'What did you do to them to make them so mad at you', they asked. ' I should have kissed the son of a bitch on the lips', I thought, but didn't say it.

In a word, they had my butt in their pit bull jaws, and they weren't going to let me get out of the deal with one red cent. It was blatantly obvious, they were out to destroy me, and the $650k I had in the investment. I asked my congressman to intervene for me, but to no avail. They insinuated to him that money spent by the Corps in his district might be reconsidered . He jack rabbited out of my problem with a, 'keep in touch'.

The time ground down, and the 60 day grace notice period was fast approaching. They sat patiently waiting for their final hammer blow. I'm tired, and out of cash, with all the legal bills piling up. That's the way they operate. Beat you down legally with the tax payer's money until you go broke. They had done it to others, and I wasn't even noticed.

Then, another lawyer marina customer came on the scene. He welcomed a battle and came up with a, ' plan of attack', instead of defense. File bankruptcy in the Federal Bankruptcy Court and sue the Corps for the rents that were over paid. Bankruptcies are heard at the District Court level, no matter the amount. Ask as part of the Bankruptcy Settlement, that the Corps be required to return the rents paid under protest because they were not in compliance with the terms of the lease. And therefore, acting as a preferential creditor, illegally holding the assets of the marina for their benefit, and denying those assets from the other creditors; and also allow me to sell the marina to fully pay off those other creditors.

The last day of the 60 day grace period we filed the Bankruptcy Petition in the Federal Bankruptcy Court in East St. Louis, and came under an automatic 120 stay period of protection We sent the Corps a letter informing them of the protection order.

Again, three days later, up pulled the little white car with the 666 door label. Out stepped the Deadly Duo. ' Here's your lease cancellation, your lease has been canceled ' they smirked. 'You have 30 days to get your equipment, buildings, and docks off the property, or it becomes the property of the US government.' Under my voice I whispered to myself, 'you forgot another 'S' and the 'R'. It was all I could do to smile, but I did. 'Didn't you get the notice from the Bankruptcy Court about the 120 day stay period'', I said. Their reply was, '30 days!'. They got back into the 666 transporter, and out the gate they went.

This time we had them! It was a kinda nice feeling to have my jaws in their butt too. Tasted real good in fact. They had made a very serious mistake with the lease cancellation. They were in contempt of court with the 120 day stay period violation, and my devious new lawyer joyfully filed contempt of court charges against the Deadly Duo.

They appeared in court at the scheduled time with a gaggle of attorneys and Corps puppets in tow. They told the Judge they didn't understand that the stay included them, because they were the Corps, and part of the executive branch of government.

They tried to argue that we were not really bankrupt, and were only trying to keep the suit in the Bankruptcy Court, instead of the Court of Claim in DC. The Judge didn't buy their lack of understanding, and you could tell by his gaze over his glasses, he had done business with these dudes before, and he wasn't a team player either. He did drop the contempt charges, and asked them if the dispute should not be settled instead of argued. He pointedly responded to the accusation that we were not bankrupt, that it could not be determined until the case was heard, and he agreed to hear the case if it was not settled first. Ball One!

We put our original group of marina Limited Partner Investors back together again and went political one more time.

They finally agreed to settle the lawsuit in the Bankruptcy Court after Senator Simon, our flag pole guy, contacted the Corps head in DC again. It went down like dominos. All it took was the creation of a tipping point, and it was done.

They agreed that the Customer Limited Partnership could buy the marina from me for $200k less than my build-sell-lease back scheme. They had an immediate attitude adjustment, and told their new White Knights that the current assets and docks were ok, as is, and could be included in the deal. I could get out with something if I sold the marina to settle the Bankruptcy, and my new best friend the Judge agreed. Part of the settlement was I got my $25k rent paid under protest back, less $5k for their expenses. But so what. My butt was spit out of their jaws like I was a skunk, and I beat it out of town with my wounded pride somewhat intact. Some salve, and my many wounds would heal, I guess.

Now I'm searching for, Sven. You too may some day have a need for Sven's services. I hope not, but if you do, you should have him on retainer just in case.

Sven, as I see him, is a 240 lb Svedish Guy with a boot size of at least 14. I intend to make a standing contract with Sven when I find him. Our deal will be, that in the future, before I buy any business that involves any government contract, that I take Sven with me when I consider such a venture.

Sven's duties are simple. When I get all excited about the income opportunity offered by such a deal, Sven will immediately start kicking me, time after time, until I yell, 'enough Sven! I give up!' Then, I will pay Sven $1000 per kick administered, and send him on his way until next time. There are good investments, and there are great investments. Sven is a great investment!

If you ever have a need for Sven's services, I will get you in touch with him. Assuming of course, that his leg is not to tired from my adventures.

SAILS

EPOXY

GEAR