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Raiders work their wizardry on an all-American company

When takeover artists targeted Simplicity Pattern Co., it had $100 million in reserves. Today, it is $100 million in debt.

Editor's note: The following story ran Oct. 26, 1991, on Day Seven of the nine-day "America: What went wrong?" series published in the Inquirer.

* * *

It was the fall of 1979 when the first of the moneymen descended on Simplicity Pattern Co.

By the time they were finished a decade later, a company that once had $100 million in the bank was more than $100 million in the hole.

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  • 1991 SERIES:
    AMERICA: WHAT WENT WRONG?
    DAY 1
  • How game was rigged against middle class
  • After three decades, American worker loses out to Mexico
  • Who - and how many - in America's middle class
  • DAY 2
  • The lucrative business of bankruptcy
  • DAY 3
  • Big business hits the jackpot with billions in tax breaks
  • DAY 4
  • Why the world is closing in on the U.S. economy
  • DAY 5
  • The high cost of deregulation: Joblessness, bankruptcy, debt
  • DAY 6
  • For millions in U.S., a harsh reality: It's not safe to get sick
  • How death came to a once-prosperous discount-store chain
  • DAY 7
  • Raiders work their wizardry on an all-American company
  • DAY 8
  • When you retire, will there be a pension waiting?
  • Workers saving for their retirement lose on junk bonds
  • DAY 9
  • How special-interest groups have their way with Congress
  • For more than half a century, Simplicity was as much a part of the American home as the radio and the sewing machine. It helped dress generations of girls and boys, women and men, through the sale of billions of patterns for the home-sewing market.

    Decade after decade, the company's revenues grew. It enjoyed good relations with a loyal workforce at its plant in Niles, Mich.

    But, as with many mature companies, the earnings from Simplicity's major business - the sale of patterns - had begun to trail off in the late 1970s, a problem the company's management had yet to deal with.

    Then came the moneymen.

    They were men like John Brooks Fuqua, an Atlanta investor who made so much money swapping corporations like cards in a poker game that he once earned a spot on Forbes magazine's list of the 400 richest Americans. And Victor Posner, another onetime member of the Forbes 400, a Miami Beach wheeler-dealer who led Sharon Steel Corp. into Bankruptcy Court and was convicted of filing false income tax returns to evade more than $1 million in taxes.

    There was Graham Ferguson Lacey, a British takeover artist and born-again evangelist who prayed with Jimmy Carter at the White House. And Charles E. Hurwitz, a Houston investor whose business associates included former President Gerald R. Ford and Michael R. Milken, who is now in prison for securities-law violations.

    There were others, and throughout the 1980s they all worked their managerial and financial wizardry on Simplicity Pattern Co.

    When they were done, they had turned a venerable, money-making business, which paid federal income taxes, into a money-losing business that paid no federal income taxes.

    They had, in fact, driven Simplicity to the edge of bankruptcy.

    In that decade, the moneymen:

    • Bought and sold the company four times and made tens of millions of dollars running up the price of Simplicity stock in threatened and actual takeovers.
    • Drained $100 million that Simplicity had in its bank account and investment portfolio.
    • Raided the company's pension funds on two occasions, taking out $10.7 million.
    • Issued bonds and borrowed from banks, sending the company's debt soaring from near-nothing to $100 million.
    • Sold off properties to raise badly needed cash after they had depleted the company's $100 million cushion.
    • Created so much debt that Simplicity could no longer generate enough cash to make the interest payments.
    • Defaulted on the interest payments on bonds and bank loans.

    It was just one more American business success story - if you measure success by how much money assorted investors made buying and selling Simplicity stock, buying and selling the company itself.

    And they got help from the U.S. government rule book. Thanks to several provisions of the federal tax code, including the net operating loss deduction and the deduction for interest expense, they were able to build their empires on debt and write off the interest.

    So the raids that cost hundreds of Americans their jobs and made millions for the raiders were, in effect, subsidized by the American taxpayer.

    Consider John Brooks Fuqua, who accumulated enough of a fortune that he earned the ultimate accolade, a business school named in his honor - the Fuqua School of Business at Duke University.

    Fuqua was the third of the four moneymen who acquired Simplicity in the 1980s.

    Fuqua, 73, was chairman of Triton Group Ltd., a Los Angeles company that in an earlier incarnation, under a different name and management, had been a failed real estate investment trust. In 1983, three years after the company emerged from bankruptcy proceedings, Fuqua and several associates took control of Triton, which was little more than a corporate shell.

    Triton bought Simplicity Pattern Co. for $65 million in late 1984 and sold it three years later for $117 million, for a profit of $52 million before taxes.

    That was good for Triton.

    It was not so good for Simplicity Pattern.

    The company, bought with borrowed money, was burdened with so much debt that it couldn't sell patterns fast enough to pay the interest on its bonds and loans.

    And it definitely wasn't good for Simplicity's employees - people such as Charlotte L. Mitchell, a secretary at the plant since 1970.

    On June 8, 1988, six months after Fuqua's group sold Simplicity to Wesray Capital Corp., Mitchell got a big surprise. It was on her birthday.

    "They (her co-workers) had a big party for me in the office," she remembered. During the party,"my boss got back and he said, 'Charlotte, I've just been told you are going to be let go. '"

    Others got the news equally abruptly.

    Mitchell told of a secretary who had been on sick leave. Her bosses called her at home and said they'd like to take her to breakfast.

    "After breakfast was over, they told her she didn't have a job to come back to," Mitchell said.

    However the notification, the reasons were the same: debt and declining sales.

    That was the explanation given to Edgar C. Stanley, manager of the bindery and finishing department, who'd been at the plant since 1971. He was dismissed the same day as Mitchell.

    In a"Dear Ed" letter, Charles E. DeWitt, a vice president and plant director, wrote:

    "As you know, the performance of the home sewing market has been weak and sales trends in the industry for the first five months of 1988 have been soft. These unit sales declines and our outstanding debt have created the need for Simplicity to reduce costs. . . . The decision was made that Simplicity must reduce its workforce. . . . Thus, effective today, your employment with Simplicity will end."

    At 62, after more than 17 years at Simplicity, Stanley was out on the street.

    His medical insurance was paid for three months, after which he was on his own. His life insurance was paid for two months, after which he was on his own. And he got a reduced pension.

    The new Simplicity executives had handled the layoffs with about as much skill as their predecessors had dealt with the company's underlying problems. Which is to say that Simplicity Pattern was hardly a model of a well-managed company.

    * * *

    Simplicity had been founded in New York City in 1927 by an advertising man, Joseph M. Shapiro, and his son, James. It opened the Niles plant in 1931 and, through low prices and solid marketing, became the world's largest pattern maker. But in the mid-1970s, a disturbing trend began to emerge.

    Although the company was financially healthy, it was making more and more of its money from its investments, less and less from the sale of patterns.

    Between 1976 and 1980, income from patterns dropped from $24 million to $9 million. During those years, income from investments rose from $3 million to $9 million.

    The explanation was simple enough. As more women left the home and moved into the workforce, they had less time for sewing. Fewer women making clothes for their families meant the sale of fewer patterns.

    While that trend had been clear for some years, Simplicity's longtime management seemed unable to develop other business lines to take advantage of the company's equipment and expertise.

    In short, Simplicity Pattern Co. was a Harvard Business School case study of a stagnating company - an entrenched management unable to meet the challenges of a changing market.

    Simplicity was also a company ready-made for the corporate raiders.

    By the early 1980s, the raiders were being glorified as the saviors of American business: MBAs flying about the country buying up companies, ousting unimaginative managers, installing tight spending controls, selling off or shutting down peripheral operations, restructuring businesses and putting them back on a solid foundation.

    That, anyway, was the image.

    As Drexel Burnham Lambert Inc., the Wall Street investment house, explained to a congressional committee in March 1985:

    "Drexel believes that corporations that have undergone restructuring as a result of acquisition activity or strategic change have evolved into stronger companies better equipped to compete in today's domestic and international markets.

    "An unsolicited acquisition can also result in the replacement of management with a new team better able to realize the full potential of a target company. . . . Merger and acquisition activity results in a shifting of assets to more productive uses . . ."

    Not really.

    Drexel Burnham itself proved that. It filed for Bankruptcy Court protection in February 1990, a victim of its own philosophy.

    Simplicity Pattern was another victim of that philosophy. Its story, with variations, has been repeated at hundreds of businesses, with the same consequences for tens of thousands of workers.

    It began in 1979, when corporate raiders started poring over Simplicity's financial documents, taking note of the more than $100 million parked in investments and pension funds.

    Among the early arrivals was Victor Posner, an investor described by one newspaper as a"corporation empire-builder." While empire building, Posner arranged for the publicly owned corporations that he controlled to pay personal and living expenses of himself and his family.

    Securities and Exchange Commission (SEC) records show that corporate funds were used to redecorate his apartment, to buy jewelery, to pay for groceries and for the yachts that his Sharon Steel Corp. - based in the landlocked Western Pennsylvania community of Sharon - owned and docked next to Posner's home in Miami Beach.

    Posner began acquiring Simplicity stock in earnest in August 1979. Over the next four months, his holdings grew to more than one million shares, or 7 percent of the stock. The four-month cost: $7.1 million.

    Drexel Burnham fanned the speculative fever after Simplicity postponed its annual shareholders' meeting in 1980.

    In a report to its clients, the investment firm suggested that Simplicity management had delayed the meeting because it feared it might lose control of the company. That fear was good reason to speculate in Simplicity stock. As Drexel Burnham put it:

    "Such a change (in management) is, in our judgment, a valid reason for speculating in the shares for those who are inclined to a short-term philosophy."

    Meanwhile, Posner continued to add to his Simplicity holdings. By the end of 1980, he owned 1.2 million shares, or nearly 9 percent of the company.

    In Niles, Simplicity's management was trying to cut costs and threatening to move the company to a part of the country where wages and costs would be lower.

    Under the headline "Simplicity considers abandoning Niles plant," the South Bend (Ind.) Tribune on Nov. 8, 1980, quoted company official Kenneth James:"We've got to look at the alternatives of getting out of here."

    In the end, Simplicity's unions agreed to concessions that would cut the manufacturing payroll by 10 percent over the next four years and the company agreed to stay in Niles, at least through September 1985.

    With the labor concessions in hand in Niles, the takeover action began to heat up on Wall Street.

    In a friendly deal initiated by Simplicity's management, NCC Energy Ltd., a little-known oil and gas company out of London, bought up 15 percent of Simplicity's stock in the spring of 1981.

    NCC Energy was controlled by British financier Graham Ferguson Lacey and boasted of having oil, gas and mineral properties in Australia, Asia, Ireland and the United States. Its investment adviser was Drexel Burnham Lambert, and among those touting the deal was Peter Ackerman, the right-hand man of Drexel's junk-bond creator, Michael Milken.

    Drexel liked the deal so much that it picked up 5 percent of Simplicity's stock for itself - a transaction it kept secret.

    Additional Simplicity stock had been acquired by another member of the Milken-Drexel family of investors, an inner circle of financiers that traded stocks, bonds and companies among themselves.

    That was First Executive Corp., a Beverly Hills, Calif., holding company that owned Executive Life Insurance Cos. in New York and California. First Executive is now in Bankruptcy Court.

    NCC Energy bought out Posner, paying him $22 million for his holdings. That gave Posner a profit of $10 million.

    This set the stage for the world's largest pattern maker, which had no experience in the oil and gas business, to go into the oil and gas business.

    NCC Energy's intention, a Simplicity spokesman said at the time, was to use millions of dollars of Simplicity's reserves to explore for oil and gas. This would be good for Simplicity, the spokesman said, because NCC's oil and gas exploration was thriving, and pattern-making was declining.

    But before the NCC-Simplicity business combination could be finalized, another raider appeared on the scene.

    In August 1981, companies controlled by Carl C. Icahn reported they had acquired 1.6 million shares of Simplicity, or 11.2 percent of the stock outstanding. By November, Icahn controlled 13.3 percent and had made a tender offer to buy an additional 18 percent - effectively blocking the NCC- Simplicity deal.

    To fend off Icahn, NCC Energy enlisted the help of an Australian company, Waltons Bond Ltd., to make a counteroffer for Icahn's holdings. A month later, in December 1981, Waltons Bond paid Icahn's companies $26.5 million for their 1.8 million shares.

    That transaction was especially lucrative for Icahn, whose businesses picked up a quick $15 million profit on the turnaround in Simplicity stock.

    Now the scorecard read: Investors Posner and Icahn: $25 million. Simplicity, its employees and customers: reduced earnings and higher pattern prices.

    While Icahn was selling his stock to Waltons Bond, another company, Cook International, was buying Drexel Burnham's 5 percent of Simplicity shares for $6.8 million. Cook later sold the stock to NCC Energy.

    There was but one problem with the roughly $60 million in Simplicity stock purchases made by NCC Energy, Waltons Bond and Cook International:

    None of the companies had the cash to pay for the securities.

    Not to worry.

    Once NCC Energy assumed control, it would merely take the money out of Simplicity to pay for buying Simplicity.

    A new management team took over in January 1982. Graham Ferguson Lacey, 33, chairman and chief executive officer of NCC Energy, took on the same titles at Simplicity. Six of Lacey's allies also joined the board.

    Befitting his growing reputation as a fast-moving entrepreneur, Lacey began making acquisitions as soon as he assumed control.

    Interestingly, Lacey's Simplicity made the acquisitions from Lacey's NCC Energy.

    There were a pair of buildings in New York City, including a townhouse in which Lacey lived; an interest in a regional airline that had yet to get off the ground; oil and gas exploration, and common stock in an unidentified company - $10 million in all.

    This was good for NCC Energy, because its parent company back in England, Birmingham & Midland Counties Trust - also controlled by Lacey - was on the verge of bankruptcy. It was not so good for Simplicity.

    Lacey's Simplicity also decided to pour cash into a gold-mining project in Australia - a Waltons Bond venture - and to buy $25 million of notes issued by a Waltons Bond-controlled mining company. This would be good for Waltons Bond, which needed cash. It would not be so good for Simplicity.

    Simplicity's top officers that spring spoke enthusiastically about the acquisitions and its future as an energy producer.

    In an April 1982 report to stockholders, Lacey and two members of the old Simplicity management, Harold Cooper, vice chairman of the board, and Lilyan H. Affinito, president, wrote:

    "The board has embarked on a program designed to provide the company with both capital and earnings growth through . . . acquisitions in oil and gas opportunities in the United States; acquisitions in energy and mineral opportunities in Australia, and other acquisitions, primarily in the United States, that will not be energy-related."

    Then, the deals unraveled.

    Simplicity's small stockholders, worried about the drain of assets, filed a lawsuit on April 30 of that year to block the board's actions.

    The suit alleged that NCC Energy, Waltons Bond and Cook International had ''failed to disclose that they intended to use the cash assets of Simplicity in order to finance their acquisition of Simplicity stock" and that they"intended to use the cash assets of Simplicity to prevent Birmingham (NCC's parent company) from being forced into receivership."

    This was self-dealing, served only the personal interests of the defendants and constituted fraud, the suit said. The board had been checkmated.

    NCC Energy's parent company could no longer meet its debts. Birmingham & Midland Counties Trust was forced into receivership in England.

    Waltons Bond announced it was severing ties with NCC Energy and Simplicity, and was returning a $10 million Simplicity mining deposit. And four months after gaining control of Simplicity, NCC Energy announced it would sell its 20 percent interest.

    No problem. Another moneyman, Charles Hurwitz, a 42-year-old Houston financier, was standing by.

    In May 1982, a pair of Hurwitz companies, MCO Holdings Inc. and Federated Development Co., announced the purchase of Simplicity's stock from NCC Energy and an agreement to buy the Simplicity stock held by Waltons Bond. Total purchase price for the 33 percent interest: $48 million.

    MCO Holdings, based in Los Angeles, had investments in oil, gas and geothermal resources. Federated was a New York holding company.

    Perhaps more important, Hurwitz had access to an unlimited supply of cash. His banker was - surprise - Michael Milken.

    Now Simplicity had another chairman and chief executive officer - Charles E. Hurwitz. And Hurwitz's allies, naturally, joined him on the Simplicity board.

    They included George Kozmetsky, a director of the Institute for Constructive Capitalism and immediate past dean of the College and Graduate School of Business of the University of Texas, and Barry Munitz, former chancellor and professor of business administration at the University of Houston.

    In the beginning, Hurwitz's Simplicity abandoned the oil and gas business and gold- mining ventures. Instead, the pattern maker began buying stock in a New York company called Twin Fair Holdings Inc., which owned properties that it leased to major retail chains, such as Gold Circle and Hills department stores. By the end of 1983, Simplicity Pattern owned 96 percent of Twin Fair.

    Simplicity also began buying stock in Amstar Inc., a century-old company best known for its Domino brand sugar.

    While Simplicity's new managers were spending money to buy sugar refineries and real estate, they were seeking to cut the pay and benefits of employees in Niles.

    And Hurwitz initiated the paperwork required by the Internal Revenue Service that would lead to the removal of $2.9 million of $7 million from one of the pension funds covering Simplicity workers in Niles. Federal law allows companies to remove money from a pension fund if they certify that there are sufficient assets to meet pension obligations.

    As 1983 turned to '84, Simplicity's management continued to look for business investments unrelated to its pattern-making and pattern-printing operations.

    In April 1984, Twin Fair Holdings Inc., now a subsidiary of Simplicity Pattern, began buying stock in another sugar refiner, Holly Sugar Corp., and acquired a golf and tennis development in Naples, Fla.

    Hurwitz also decided to change the name of the business to Maxxam Group Inc., and stockholders agreed.

    The proposal was put to the stockholders this way:

    "The name Simplicity Pattern Co. Inc. was chosen at a time when the company was engaged exclusively in the manufacture and sale of paper patterns for home sewing to retail merchants.

    "The company's pattern business is now conducted primarily through the company's wholly owned Delaware subsidiary, Simplicity Pattern Co. Inc. With the acquisition of Twin Fair Inc., the company is now also engaged in real estate development. . . .

    "By reason of these changes, management believes that the proposed new name will more appropriately identify the company."

    In May 1984, Simplicity management renewed the pressure on the unions to reduce wages and benefits. A headline in the South Bend Tribune for May 30, 1984, said:"Simplicity wants pay cut to '82-'83 levels." If the company could not reduce its labor costs by $1.9 million a year, it would leave the city, the Niles Star reported.

    Both the city of Niles and Simplicity's workers responded. The city promised to help arrange financing for more modern equipment and to give Simplicity, the area's second-largest employer, a 50 percent property tax break on plant improvements.

    Working against a July 2, 1984, deadline set by the company, Simplicity's five unions agreed to trim 3 percent off wages, which averaged about $9.90 an hour. They also agreed to give up two paid holidays and to eliminate the jobs of about 70 workers. Some of those who were terminated had been at Simplicity for more than three decades.

    The savings added up to $1.5 million, or 79 percent of the $1.9 million the company sought.

    Bruce Bracken, director of employee relations, was quoted in an area newspaper as saying:"We fell short of our goal, but management was willing to stay here anyway because of the proven workforce and high risk of starting off fresh somewhere else."

    In reality, management was not staying anywhere. Management, in fact, was about to move on.

    Now that Hurwitz had invested Simplicity money in sugar and real estate; now that the company name had been changed to Maxxam; now that Niles taxpayers were going to subsidize the purchase of equipment; now that workers had agreed to pay cuts, he decided to unload the business.

    For a hefty profit.

    Less than two weeks after the labor agreements had been sealed, Hurwitz announced that Simplicity would be sold to Triton Group Ltd., a holding company controlled by John Brooks Fuqua.

    The moneymen loved the idea.

    Especially the dealmakers at Drexel Burnham Lambert.

    "Simplicity Pattern is a cash cow," Drexel Burnham told its clients in a report extolling the benefits that Triton and its parent, Fuqua Industries Inc. of Atlanta, would derive from owning Simplicity.

    "Last year, pre-tax income and depreciation generated $12 million in cash flow and the pre-tax profit margin in 1983 was 14 percent," the brokerage house said.

    "Even though the pattern business has been going nowhere for years because of the declining interest in home sewing, nevertheless pre-tax margins in this proprietary business consistently ranged between 12 percent-14 percent. Pre- tax profits approximated $15 million in 1983."

    And then, the real reason that the Simplicity-Fuqua-Triton marriage made so much sense: Triton possessed"a potential tax loss carryforward of about $200 million to shelter future earnings. In order to take advantage of the carryforwards, Triton obviously needs to acquire operating companies with good cash flow and a consistent record of profitability."

    Translation: The losses run up in earlier years by a long-dead company - the real estate trust from whose corporate shell Triton had been formed - would be used to offset the taxes owed by a profitable firm.

    * * *

    The losses had originated in a real estate business in Massachusetts called Chase Manhattan Mortgage and Realty Trust, which went into Bankruptcy Court in 1979. A year later, it emerged with a new name, Triton Group Ltd. It was acquired by Fuqua Industries in 1983.

    In a report to Simplicity shareholders after Fuqua asssumed control, he offered this glowing assessment:

    "Simplicity has a dynamic new management team which in only a few months has made innovative moves to more widely use the Simplicity name, which has become synonomous with sewing through many decades of consumer product use . . .

    "Simplicity is already beginning to pay off a significant amount of the debt incurred to acquire this fine company, and the outlook is indeed bright . . ."

    Did this mean that an innovative new management had made structural changes to turn around a declining company?

     Of course not.

    Simplicity's seemingly changed fortunes were attributable to three factors: the tax code, a raid on a company pension fund and concessions by Simplicity's workers.

    Triton Group, Simplicity's new parent company, reported profits of $13 million for 1985, $11 million for 1986 and $76 million for 1987. For the three years that it owned Simplicity, profits totaled $100 million.

    Yet according to records filed with the SEC, Triton paid no federal income taxes on that $100 million.

    How could that be?

    Remember all those losses run up by the defunct realty trust before it went into Bankruptcy Court and came out as Triton?

    Well, Triton merely subtracted the old losses from the taxable income of Simplicity and Triton's other subsidiaries.

    Having made use of the tax code, Triton now took aim at the pensions of Simplicity workers.

    In December 1986, Triton tapped one of the pension funds covering hourly workers. It removed $7.8 million of the $8.5 million in the fund, according to records filed with the Pension Benefit Guaranty Corp. in Washington. This was the second raid on a Simplicity pension plan in three years.

    Before the money was removed this time, the pension of each Simplicity employee enrolled in the plan was backed, on average, by assets of $39,535.

    Afterward, the average per worker was $3,256.

    In the footnotes to a financial report filed with the SEC, Triton explained where part of the $7.8 million in pension-fund money went:

    "Simplicity's retirement plan for salaried employees was terminated during the year. Refunds received from the termination . . . will be held for or applied to redemption of the Simplicity Series B preferred stock until all such shares are redeemed."

    And who owned Series B stock?

    Hurwitz's Maxxam Group Inc., the previous owner of Simplicity, which had received the stock as a part of the $65 million package of cash and notes it received when Triton bought Simplicity.

    In other words, Triton used the pension fund money of Simplicity workers to help pay for Triton's purchase of Simplicity.

    What about all those advantages that are supposed to come with corporate reorganization: the innovative ideas, the management efficiencies, the new lines of business?

    There was a lot of talk about diversifying, said Douglas G. Wimberly, a former manager of computer services. There were discussions about printing national magazines. One salesman even brought in a $1 million printing order, but no decisions were made and the order was lost.

    "Rumor was that management could never make up its mind," Wimberly said.

    Paul M. Borowski, who was Simplicity's general accounting manager, agreed. ''We'd bring up at staff review meetings different (proposals). The managers would say, 'Yeah, we're going to look into that. ' I'd sit there, I'd say, 'I thought we were going to look into that four months ago. '"

    Not only did the Triton management not diversify, but Simplicity was actually losing ground in the business it once dominated.

    More than 50 percent of all the patterns sold in America had carried the Simplicity label in the 1970s. The figure had dropped to 43 percent by 1983, and to 37 percent in 1986.

    The gloomy sales figures aside, Triton did very nicely with its investment in Simplicity, thanks to the tax advantages. But after three years, Triton decided it was time to dump the pattern maker and move on.

    To manage the sale, it turned to a familiar face - Drexel Burnham Lambert, always ready to collect another round of fees.

    That was in November 1987. A month later, Drexel arranged the sale of Simplicity to Wesray Capital Corp., a company that had established a reputation through the 1980s as the most successful get-rich-quick operation in the field of corporate takeovers.

    Wesray's name was derived from the letters in the names of its two founders, William E. Simon, former secretary of the Treasury, and Raymond G. Chambers, a tax accountant who became a buyout specialist.

    By the time of the Simplicity purchase, Simon had moved on to other corporate deals unrelated to Wesray. Although Simon continued as chairman of the board, Chambers ran Wesray.

    Why did Triton want to sell?

    One reason was that control of Triton had shifted from Fuqua to Charles R. Scott of La Jolla, Calif., a stockbroker turned corporate raider. Like Fuqua, he had made millions buying and selling companies.

    Scott had amended, slightly, Triton's mission. As he described the philosophy in a report to stockholders:"Triton is in the business of acquiring and adding value to promising American growth companies. . . . Simply stated, our aim is to build shareholder value by acquiring promising companies, guiding management in restructuring, refinancing and repositioning for accelerated growth and, ultimately, selling our interest in a well-timed transaction."

    In the Simplicity sale, timing was everything.

    Wesray paid $117 million for Simplicity. Triton walked away with a $52 million profit before taxes.

    In the amazing world of American business, a company that was worth $65 million in 1984 was worth $117 million in 1988 - even though its sales and market share had all declined.

    Wesray purchased Simplicity with borrowed money, meaning that Simplicity would have to pay for itself all over again. As it did when Triton bought it. As it did when Hurwitz bought it before that.

    Only now, the debt load topped $100 million. And the $100 million that Simplicity had squirreled away in cash and investments when the decade began had long since disappeared.

    Nonetheless, the people at Wesray thought they had engineered a good deal.

    At Simplicity's plant in Niles, the people who ran the day-to-day business knew better.

    So did the company's suppliers. They were being paid very, very slowly.

    It was the sure-fire sign of a business - or an individual - in financial distress: The old check-is-in-the-mail ploy.

    Paul Borowski, the general accounting manager whose duties included issuing the checks, remembers those days well.

    When a supplier would call and ask about payment, Borowski said,"as a good accountant, following directions, I'd say, 'We've got new internal auditors hired and they're reviewing all our payments. ' I said, 'I will call him tomorrow morning and have him release your check.' . . . You know, give him the line."

    Borowski said he was disturbed by the practice. But he was even more disturbed when the corporate office in New York ordered him to send the checks to New York for mailing, further delaying payment. After the checks arrived in New York and were approved there, they were then eventually shipped back to Niles to pay the suppliers.

    Borowski said he also was directed to take the discount that suppliers give if payment is made within a certain period, say 10 days, but then delay the payment:

    "If I'm dealing with you, I negotiate with you in good faith for a discount. Then I take the discount. Then I don't even mail the check till about two weeks later.

    "We had one vendor, a big paper company, they had done business with for 50 years, they refused an order until the check was certified in their New York office."

    There was a solution to the cash crunch: more layoffs.

    About 20 Niles workers were dismissed in June 1988, when Charlotte Mitchell and Edgar Stanley lost their jobs. Douglas Wimberly, the computer services manager, lost his job as well.

    "The way it was put to me, it came down from New York that X amount of dollars were going to be cut from personnel," said Wimberly, 41.

    Borowski survived the June 1988 cuts. But not for long.

    Late one week in mid-August, on very short notice, he was asked to have checks for suppliers printed by the following Monday.

    "I called one of my clerks back from vacation, to come in at noon (that Monday) to work," he said."We were running two systems to get it all done. . . .

    "Came in (Tuesday morning), had everything balanced. . . . Checks all signed, you know, through a machine. And the ones that needed two signatures all ready. All checks were stuffed (in envelopes).

    "And when I called New York - it must have been about 10 o'clock or so - he says, 'Are they in the mail yet? '

    "I say, 'Waiting for your OK to take them to the mail table. '

    "He says, 'Give them to the mail table right away. '

    "I did that myself. . . . Went down there at 10:15. About 10:30, I get a call: 'Checks out? '

    "I said, 'Yeah, they're at the mail table. 

    " 'OK, thank you very much. '"

    Twenty minutes later, Borowski was summoned to the plant manager's office. He was told his job had been terminated.

    So had the jobs of another dozen or so employees.

    But Simplicity now had so much debt that even reductions in the workforce didn't free up enough cash to make the interest and principal payments.

    In an effort to stay afloat, Simplicity reached an agreement to merge with one of its main competitors, Butterick Holdings Inc. based in Altoona, Pa., in 1988. The plan called for the closing either of Simplicity's Niles plant or of Butterick's Altoona plant. Each had about 550 employees.

    But the Federal Trade Commission blocked the merger, contending that a union between Simplicity, the largest pattern maker, and Butterick, the third largest, would create a monopoly.

    After the aborted merger, conditions continued to deteriorate.

    Wesray's Simplicity failed to make $10.5 million in interest and principal payments due in June 1989. It failed to make $4.4 million in interest payments on notes due in October 1989.

    During the three months ending April 30, 1990, Simplicity incurred a loss of $2.6 million. Its debt totaled more than $100 million.

    The company stated the obvious in a report filed with the SEC: Simplicity ''is highly leveraged as a result of the (1988) acquisition. . . . This high level of indebtedness results in significant interest expense and principal repayment obligations for the company."

    Past-due interest and principal on its senior debt now totaled $23.4 million. Past-due interest on notes totaled $8.8 million.

    In a June 1990 report to the SEC, Simplicity painted a picture that was growing more grim with each passing month:

    "(These) conditions raise substantial doubt about the company's ability to continue as a going concern."

    In the fall of 1990, Simplicity Pattern underwent yet another change in ownership, as the outstanding debt was restructured and new investors were brought in.

    There was a touch of irony.

    The corporate raids and restructuring of the 1980s that led to the loss of middle-class jobs, the elimination of health-care insurance and falling living standards had turned on those who had started it all.

    The process had become so destructive that the raiders - who once made so much money on takeovers that their exploits were chronicled in newspapers and magazines, on radio and television - now were losing millions of dollars.

    As might be expected, those involved are reluctant to say exactly how much. In fact, they don't want to even talk about the company or its revolving ownership.

    So who owns Simplicity Pattern now?

    They don't want you to know.

    Representatives of Wesray failed to respond to repeated requests for information. A spokesman for Raymond Chambers said that he no longer was associated with the firm.

    When a reporter called Simplicity Pattern's executive offices in New York City and asked if Wesray still owned the company, a spokeswoman replied:

    "We can't really give out that information."

    Later, a man identified as a company official called and said:

    "You're not going to be able to get any information. We are presently a privately held company that operates in a small industry, that basically everybody keeps to themselves and we don't talk to our competitors and our competitors don't talk to us. And it's so small and tight-lipped that we don't want any information at all getting out about us.

    "And so we just come across with big, flat 'no comments' any time we get any inquiries about what our current ownership is, our financial situation or anything along those lines."

    Still later, in a second interview, the Simplicity officer had this exchange with an Inquirer reporter:

    Simplicity:"We would prefer not to be mentioned in the article at all. Are we still going to be mentioned, regardless of my request?"

    Reporter:"Yes."

    Simplicity:"OK, if we're going to be mentioned, I am prepared to make a brief statement and I will not answer any specific questions, but I can at least tell you this:

    "That the company has positively turned around its operations, is now doing well, very competitive in the marketplace. All of our bankers and creditors are happy with us. And we anticipate in both the near future and on a long-term basis to be successful.

    "And that's basically it."

    Donald L. Barlett and James B. Steele INQUIRER STAFF WRITERS
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