THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, May 9, 1995 TAG: 9505090248
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 151 lines
Once, Computer Dynamics Inc. was the most promising minority-run business in town.
The defense contracting firm, founded by a local businessman named R. Alan Fuentes, had 89 contracts and 600 employees. Fuentes was honored at the White House as one of the nation's top minority businessmen.
Now, Computer Dynamics is dead, company chief Robert L. Starer said Monday.
Starer made the statement upon learning that four creditors have filed a petition in Bankruptcy Court to force the company into Chapter 11 reorganization.
Starer said he was not surprised by the petition because Computer Dynamics has lost nearly all its government defense contracts.
In any case, Starer said, there is nothing left for the company's creditors to get. The company, which had about 470 employees last year, lost almost all its assets to foreclosure last month. They were taken when the company could not pay $9.5 million in debts, Starer said.
Starer announced the foreclosure to employees on April 28, in a memo that was also their termination notice. Now, the company's only remaining asset is its building across the street from Pembroke Mall - and that, too, is about to be lost to foreclosure, Starer said.
Starer blamed the company's demise on Fuentes, who has been been fighting with Starer since 1992 to regain control of the computer contracting firm. Fuentes lost control after pleading guilty to federal campaign-law violations.
``Alan's stated purpose for the last two or three years has been if he can't have CDI, no one can. He wants to see it sunk,'' said Starer, the company's chief executive officer and majority owner. ``I hate to say it, but Alan has won. The company is dead.''
Fuentes, however, said that Computer Dynamics still exists and that Starer has simply broken it up and acquired the most profitable pieces himself.
Fuentes still owns 32 percent of Computer Dynamics. Starer, whom Fuentes hired in 1991 to save the company, owns 68 percent. The two men no longer speak to each other.
Some of the company's component parts do still exist, but in different forms.
For example, an adult education school bearing the CDI logo still teaches about 350 to 400 local students on three campuses. Computer Dynamics sold the school to a new company owned by Starer - Computer Dynamics Institute Inc. - in the fall, Starer said.
Also, a computer training company formerly owned by Computer Dynamics - Accelerated Computer Education Inc. - still operates in nine cities nationwide, but it was sold at a foreclosure sale last month. The purchaser was also a company controlled by Starer.
All this was done ``strictly for business reasons,'' and not to rid Computer Dynamics of Fuentes, said G. William Whitehurst, a former congressman who is chairman of Computer Dynamics' board of directors.
``There is no conspiracy there at all,'' Whitehurst said Monday.
On Friday, four creditors who are owed a total of $47,000 - The Whitlock Group of Glen Allen, Va.; Federal Marketing Co. of Richmond; First Hospital Corp. of Norfolk; and Tweed Locksmiths of Portsmouth - filed a petition in Bankruptcy Court, asking that Computer Dynamics be forced into Chapter 11 reorganization.
Vincent R. Olivieri, the creditors' attorney, said his clients rushed to Bankruptcy Court after hearing rumors about Computer Dynamics selling off its assets. Olivieri said Fuentes is not connected with the creditors and did not prompt the bankruptcy filing.
Still, Starer said Monday, ``We expected it. We thought Alan would do that.'' He said Fuentes has been meeting with Computer Dynamics' creditors in recent weeks, trying to buy their claims so he could force the company into bankruptcy.
Starer said the company's troubles began when Fuentes filed lawsuits against it in 1992 and 1993. Fuentes accused the company and Starer of fraud and breaking his contract. Two lawsuits are still pending.
Then, in September, the Navy announced it would ban Computer Dynamics from future government work after complaints from Fuentes. The Navy reversed itself two weeks later, but it took the government three months to remove Computer Dynamics from the debarment list, Starer said.
As a result, the company lost most of its government contracts, worth millions of dollars, Starer said.
At about the same time, in the fall, Computer Dynamics sold its local schools to Starer for $1.3 million. ``That was done in a completely proper manner,'' Starer said.
Finally, on April 20, two companies that had lent Computer Dynamics $9.5 million foreclosed on the firm's assets. They were sold for $9.5 million in cash and assumption of debts to another company led by Starer.
Fuentes is skeptical of the deals.
``I would never destroy something that I started,'' Fuentes said.
Starer disagreed. He said he suspects Fuentes prompted the bankruptcy petition. ILLUSTRATION: Graphic
Color photos
R. Alan Fuentes
Robert L. Starer
[Timeline: Events leading up to bankruptcy]< A HISTORY OF COMPUTER
DYNAMICS
1979: R. Alan Fuentes, a high school dropout, founds CDI in his
Virginia Beach home. It grows rapidly with the help of millions of
dollars in no-bid contracts through the Small Business
Administration's minority set-aside program.
1983: Virginia Beach Chamber of Commerce honors CDI as its small
business of the year.
1985: CDI named the nation's 49th fastest-growing privately owned
small business by Inc. magazine. Fuentes honored at the White House
as one of the nation's top minority businessmen.
1987: CDI has 500 employees and $15 million in gross sales.
September 1988: CDI awarded $150 million Navy computer contract
previously held by rival Systems Management American, igniting a
feud between the two local companies.
December 1988: The Small Business Administration says Fuentes is
too rich to qualify for a Defense Department program that helps
minority businesses. This threatens the big computer contract. CDI
has 89 federal contracts and about 600 workers.
October 1989: Judge overrules the SBA. Declares Fuentes qualified
for the minority program.
December 1989: CDI loses the $150 million contract when a judge
rules Fuentes is not eligible.
1991: Fuentes hires Robert L. Starer as chief executive officer.
January 1992: Fuentes resigns from CDI because of pending
criminal investigation, but he remains majority owner.
April 1992: Fuentes pleads guilty to making illegal campaign
contributions to then-Sen. Paul S. Trible Jr. Gets a suspended
two-year sentence and is fined $50,000.
September 1992: Starer becomes majority owner.
October 1993: Fuentes sues CDI and Starer for $18 million.
Alleges fraud and breach of contract.
November 1993: Fuentes files for reorganization in Bankruptcy
Court.
December 1993: CDI sues Fuentes for $2 million.
September 1994: Navy recommends that CDI, Starer and Fuentes be
barred from future government work. Two weeks later, the Navy
reverses itself.
Fall 1994: Starer buys CDI's profitable school division.
January 1995: Bankruptcy judge orders Fuentes to sell his stock
to CDI. Fuentes appeals.
April 1995: Starer fires the last 25 CDI employees. Declares the
company broke.
Friday: Four creditors sue in Bankruptcy Court to force CDI into
Chapter 11 reorganization.
KEYWORDS: BANKRUPTCY COMPUTER DYNAMICS by CNB