THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Sunday, July 10, 1994 TAG: 9407110001
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 254 lines
R. Alan Fuentes is surrounded by wealth.
His $1 million-plus estate sits on four waterfront acres at the tip of Little Neck. The speedboat he once raced with baseball great Pete Rose floats in the river out back. He rides around town in a white stretch limo.
But the boat has no engines. A bank is foreclosing on Fuentes' house. The limo is 9 years old and wasn't running last week.
Since 1992, when Fuentes was forced out of Computer Dynamics Inc., the company he created 13 years earlier, he has had to sell many of his possessions - among them a $14,000 diamond, a $6,500 Rolex watch and a $3,000 Picasso lithograph - just to stay afloat.
Last summer he sold a $1,500 Jet Ski to pay his bankruptcy lawyer.
Through it all, Fuentes is driven by a single vision - not the house, not the limo or the boat, but the hope of winning back his old company.
The one-time millionaire, 44, left Computer Dynamics in 1992 after pleading guilty to funneling $14,000 in campaign contributions through employees to then-U.S. Sen. Paul Trible. He left so the company could keep its defense contracts and stay in business.
Now, Fuentes is in the fight of his life. He has no job, no income and is struggling through Bankruptcy Court. He says he spends 10 to 12 hours a day doing legwork for various lawsuits, trying to wrest control of his old company.
He says he must do this because he can't afford to pay lawyers, although he has a different attorney for each of three pending court actions.
``It's a full-time job to do all this stuff,'' Fuentes says.
For now, Fuentes' hopes of regaining his old firm hang on three hooks:
An $18 million lawsuit he filed against the company and its new owner. Fuentes claims the company's chief executive officer and majority owner, Robert L. Starer, took advantage of Fuentes' criminal problems in 1992 and tookthe company from him.
A bid by outside investors to buy the company at Fuentes' behest. The investors made an offer two weeks ago, but company officials say they don't want to sell. If the sale is made, it might bail Fuentes out of Bankruptcy Court and let him start fresh.
A Navy inquiry that could bar Computer Dynamics from government work for failing to disclose Fuentes' 1991 employment contract. The Navy barred Fuentes personally after his 1992 conviction, forcing him to leave the company.
``It's the company I want,'' Fuentes says. ``I may be living in a cardboard box, but I will never, ever give up. If I have no money at all, I'll find an attorney to help me.''
Starting a new company has no appeal, he says.
``Why would I go out if I have something that already belongs to me? '' Fuentes says. ``It's more principle than anything now.''
This week, Fuentes faces two crucial court hearings.
On Tuesday, a bankruptcy trustee will try to force Fuentes into Chapter 7 liquidation. He filed for Chapter 11 reorganization in November.
On Friday, in another court, a judge may jail Fuentes for not paying $29,000 in past-due child support. That, in turn, could affect his probation from his 1992 conviction.
All of this - the bankruptcy, the contempt of court, the CDI purchase bid, the Navy inquiry - will come together at about the same time.
``Within the next 30 days, the house of cards is going to be rebuilt,'' says Fuentes' lawyer, James R. McKenry, ``or it will be gone forever.''
Bob Starer likes ``toys.''
After greeting a visitor, Starer shows off photos of his Learjet, his personal railroad car, his Colorado getaway home, snapshots with Ronald Reagan, George Bush and Margaret Thatcher. The pictures hang in his spacious office in company headquarters near Pembroke Mall.
Starer also delights in showing off the company's newest computer gadget, a program that converts spoken words into writing. It is a passion that both Starer and Fuentes share: a love of gadgets and of the good life.
In some ways, the two men seem very much alike - strong-willed businessmen, good managers, extroverts who enjoy lavish lifestyles. And they are now fighting over a company they both desire.
At one time, they were friends and partners. Fuentes brought Starer into CDI in 1991 to make painful cuts. Soon after, Starer fired 25 executives and managers, including some of Fuentes' friends.
``That's why you bring in an outsider,'' Fuentes says. ``He did a terrific job.''
In return, Fuentes gave Starer 30 percent of the company.
Soon, Fuentes himself was gone. After Fuentes' conviction for illegal campaign contributions, the company faced ruin if he did not leave. He did, converting his stock to nonvoting shares. Then the company's directors gave Starer more stock in return for loan guarantees to keep the company alive. That made Starer the new majority owner.
Now, Fuentes despises Starer.
Fuentes says of Starer, ``We were going to build CDI into a $100 million company, sell it for $30 to $40 million. I was willing to give him half of it - not the stock, but the profits from the sale. . . .
``But . . . he wanted everything.''
Starer says he holds no grudge against Fuentes. ``I don't have an ill word to say about the guy,'' Starer says.
Starer says he watched Fuentes ``self-destruct.''
``He didn't have to file bankruptcy. The problem is Alan's own spending. . company. But somewhere along the line he lost his rudder.''
Company chairman G. William Whitehurst, a 69-year-old former congressman brought into CDI by Fuentes, agrees with Starer's assessment that Fuentes has been his own worst enemy.
``I feel badly for him,'' Whitehurst says. ``I think everyone who knows Alan feels the same way.''
Fuentes acknowledges his image problem. He knows people see his limo, his Ferrari, his $1 million home, and they wonder if he is really broke.
``You've got to have a car, and it just happens to be a Ferrari. Sorry,'' Fuentes says. As for the limo, ``There's nothing I can do about it. It's there. I can't sell it. I'd personally love to sell it, but it's an asset of the estate.''
Fuentes says he won't be sorry when he loses the five-bedroom house. To reach it, visitors must drive down narrow, twisting, forested roads, then between two 8-foot pillars with bronze plaques inscribed with Fuentes' full name and ``PRIVATE PROPERTY.''
The back yard features a swimming pool and a serene view across Lynnhaven Bay of the Lesner Bridge. The scene spills out from the living room's big bay windows. The white limo is parked alongside the house, just inside the main gate.
The house has been on the market one year. Fuentes lives there alone. He has been divorced twice, and his two children, ages 8 and 12, live with their mothers.
``I'd rather live in a high-rise condo and lock the door behind me and never have to worry about things,'' Fuentes says. ``It takes me a day and a half just to mow the grass.''
Ralph Alan Fuentes faced the judge. He was going to jail.
Despite his apparent wealth, Fuentes owed $29,000 in child support for his 8-year-old son. The judge was angry. He had given Fuentes six months to make good, to no avail. The judge lectured Fuentes on parental responsibility and was about to sentence him for contempt of court.
Fuentes, dressed in an immaculate charcoal-gray suit and red tie, responded: Give me just a little more time. ``I'm on the verge of breaking this thing,'' he said.
That was July 1. The judge would have none of it.
For two years, Fuentes has been promising big things.
In 1992, he told everyone that a speedboat racing team with baseball great Rose would hit the jackpot. For one summer, he was right. The Hit King Racing Team won a national title and big newspaper headlines. But then funding dried up. The boat's engines were repossessed. The team is defunct.
Fuentes had the same bad luck this year. He tried to become vice president of a friend's defense-contracting firm in Virginia Beach, but the deal fell through.
So when Fuentes appeared at the child-support hearing and told Circuit Judge Alan Rosenblatt of his latest plans, the judge was skeptical. ``This is just more speculation,'' the judge said.
He did, however, give Fuentes another two weeks to pay up.
After court, Fuentes complained that the judge wouldn't listen.
Fuentes says he has no time for jail, no time to flip burgers at minimum wage. He must spend his days doing the only thing that matters, fighting to get his company, to bring in the money he needs - for himself, his ex-wives, his kids, his bankruptcy case.
``I don't have the time right now to have a full-time job, or everything here would come to a screeching halt,'' he says.
Fuentes likes to talk about his various cases, and how he will soon be back in control of CDI.
He sued the company and Starer in October. The lawsuit says Starer ``saw an opportunity to take advantage of Fuentes' (legal) problems to benefit himself. At that moment, Starer began to implement a plan to take from Fuentes ownership and long-term control of CDI.''
But Whitehurst, the company chairman, says Starer earned his stock. ``He was willing to take personal risks'' by signing the company's loan guarantees, Whitehurst says. ``Quite frankly, without his personal leadership, I think the company would have gone under . . .
``We're not out of the woods yet. We're doing well to tread water.''
Part of Fuentes' lawsuit focuses on two contracts he signed with Starer.
In October 1991, CDI gave Fuentes a five-year employment contract, renewable for 25 more years, guaranteeing a $250,000 annual salary.
Three months later, Fuentes resigned. At that time, he and Starer signed another contract, guaranteeing Fuentes salary despite the resignation. It says, in part, ``CDI agrees that the resignation of Fuentes does not impair any right to payment under the Contract.''
For the next five months, from January to May 1992, the company paid Fuentes $89,100, mostly $21,000 monthly installments - exactly the same amount as Fuentes' guaranteed salary.
Fuentes says it was his salary. He says these payments show that he had a valid employment contract, despite his resignation, and that Starer later reneged on it.
Starer, however, says the payments were dividend advances, that Fuentes' contract was never valid, and that, in any case, it was void after Fuentes' criminal conviction and resignation.
The payments stopped after May 1992.
Now, Fuentes is trying to use the contract to prove that Starer cheated him of his salary, as part of Starer's conspiracy to steal the company. Fuentes claims the company owes him $6.25 million on the balance of that contract.
The lawsuit, however, is stalled. It is an asset of his estate, and therefore the bankruptcy trustee controls it. The trustee has stopped the lawsuit until the bankruptcy case is resolved.
For CDI, there may be bigger trouble ahead because of Fuentes' old contract.
In September, the Navy learned of Fuentes' employment contract. Until then, the Navy did not know Fuentes had received any money from the company after resigning. In fact, the Navy's agreement with CDI forbids the company from employing Fuentes in any way.
Last Sept. 10, in a letter to the company, the Navy Procurement Integrity Office wrote: ``CDI's failure to disclose the Jan. 9 (employment) agreement, and its failure - even now - to offer explanation and/or mitigation for its ethical lapse presents a potential cause of so serious a nature that it affects the present responsibility of CDI.''
The Navy gave CDI 10 working days to explain why it should not be barred from government contracts ``for failing to disclose the aforementioned agreements.'' The Navy also asked CDI to prove that payments to Fuentes were not charged to the government, even indirectly.
Since then, the company's board of directors has passed a resolution disowning Fuentes' employment contract and stating that the 1992 payments to him were not charged to the government.
Starer says CDI did nothing wrong. ``To me, it's the most ridiculous thing in the world. . . . We haven't heard anything back from (the Navy), and I assume it's a dead issue.''
But the Navy says the case is still open.
``We're still in the letter-writing phase with these guys. . . . Their answers are either very crafty or they don't understand what we want to do,'' says David Ranowsky, a lawyer with the Navy integrity office.
Fuentes is hoping the Navy inquiry will bring him back to power. If the Navy voids its 1992 agreement with CDI, Fuentes says, then every action the company took since then - including giving Starer a majority of stock - is invalid.
That would make Fuentes the majority owner again.
That is, if only Fuentes can avoid Chapter 7 and a contempt-of-court citation in his child-support case.
Predicted McKenry, Fuentes' attorney; ``The bankruptcy hearing on July 12 will either make or break Mr. Fuentes.'' ILLUSTRATION: Graphic
FUENTES' BANKRUPTCY FILE
This listing is based on Alan Fuentes' estimates.
Assets (partial list)
Lawsuit against CDI and its chief executive officer, Robert L.
Starer - $18 million (disputed)
CDI employment contract - $6.25 million (disputed)
Home at Little Neck - $1.5 million
Option to buy Corporate Center III - $250,000
Hit King racing boat - $100,000
Lawsuit against speedboat financier - $65,000 (disputed)
CDI dividends due - $60,000 (disputed)
1985 Ferrari - $30,000
1985 Oldsmobile limousine - $5,000
CDI shares - value unknown
Total: $26.39 million
Liabilities (partial list):
Computer Dynamics Inc. - $1 million*
Home mortgage - $850,000
Boat loan - $110,000
IRS taxes - $106,000**
Norfolk lawyer James McKenry - $40,000
Justice Department fine - $24,000***
Washington lawyers - $22,634
Virginia Beach lawyer Joe Canada - $22,000
Long Jewelers - $20,000
Total: $2.95 million
CDI claims $1.7 million
** IRS claims $161,000
*** Justice Department claims $30,000
KEYWORDS: PROFILE BIOGRAPHY
by CNB