Sitting at his antique kitchen table, sipping Chablis from a glass, Pete Banaszak seemed by all appearances to be living the idyllic life he had always dreamed of when he was a hard-driving running back for the Oakland Raiders.
Outside his lovely four-bedroom home in Ponte Vedra Beach, Fla., as sunset neared, a cool wind wafted in off the ocean, birds sang on the deck overlooking the pool and the air was fragrant with the smells of cypress and pine. One daughter, Amy, 10, was folded up nearby with an Archie comic book. Banaszak was waiting for his wife, Sue, and another daughter, Becky, 14, an excellent tennis player. He looked good, tanned and rugged, although his hair was graying lightly, perhaps owing to the rigors of his job as an assistant vice-president for a marine transport firm.
On one finger he wore the ring from Super Bowl XI, the game in which the Raiders beat the Minnesota Vikings 32-14, and Banaszak rushed for two touchdowns. Only when he walked, slightly dragging a stiff right leg, was there any evidence of the physical beatings he took in the NFL; and only when he talked did he betray the melancholy sadness that had settled on his life in the last few weeks.
"I've had broken noses, fingers, ribs and wrenched knees, but a true pro plays with that stuff," Banaszak said. "But I always thought that football was tougher mentally than physically. Believe me, this is tougher. This one there are no answers for. It's done, ended, gone. In football, if you make a mistake, you get another chance. We don't have another chance here. You talk about a blow to the belly. This is the hardest hit I've ever taken."
March 24, 1986
The hit devastated him financially, leaving his life in shambles. On Feb. 7, Technical Equities Corp., a California-based company in which hundreds of investors, including Banaszak and other present and former athletes, sank part or all of their life savings, filed for reorganization under Chapter 11 in U.S. Bankruptcy Court in San Francisco, seeking protection from creditors. Technical Equities investors face losses of millions of dollars in stock, debentures and real estate. Others face the loss of millions in promissory notes that were issued by TE founder Harry Stern's management company. Several investors have sued for damages, alleging fraud and negligence. The Securities and Exchange Commission and state agencies are investigating.
What Technical Equities offered was a chance to invest in a variety of high-tech and manufacturing companies and real estate deals set up as supposed tax shelters. Although it also attracted doctors, lawyers and others, at least 70 of its 700 investors were sports figures, and the company beat the bushes at spring training and golf tournaments for new prospects. Not that it always had to recruit; as word of the company spread through the jock grapevine, athletes rushed to get aboard the TE ship, as did some club personnel and TV announcers.
TE's collapse dramatically and sadly points up the vulnerability of athletes when it comes to dealing with agents, investment planners and other financial advisers. One reason athletes fall prey to bad deals is that many of them make a lot of money in a relatively short time. They tend to be young and inexperienced in money matters and have marquee value as well as money to offer. It was no accident that Technical Equities used a picture of pitcher Mark Clear prominently in its annual report; it was a company in which a surgeon, a lawyer or an insurance broker could hope to make a killing at the same time he could brag to the boys at the country club that he was in a limited real estate partnership with one or another famous athlete.
But TE's investors, athletes and nonathletes alike, ended up with less than they bargained for. Banaszak figures that he could lose about $400,000 in TE, all the money that he and Sue had stashed away in a family trust for his retirement and their children's future. "It's like a bad dream," Banaszak said. "When I wake up, I say, 'Boy, that was a bad nightmare.' Then I realize it is no nightmare." Banaszak took another sip of wine. "I hung around for 13 years [1966-78]," he said. "I thought, 'I made this money and I'll enjoy it down the line.' But now that whole dream is gone, shattered. All I've got is a bunch of game balls and trophies in that den. No money and a lot of memories of some great guys. I guess that means something. I didn't have the ability or physical talent. I hung in because I had a lot of heart."
"You liked to mix it up, huh, Dad?" said Becky.
Pete Banaszak looked at his daughter sadly. "You know what the worst thing is? I won't trust anybody, anybody, with a nickel anymore. We live in the best country in the world, and to walk around with an attitude like that, it's very sad.... If we make it through the next three years, I'll get down on my hands and knees and say thanks to the Big Guy up there. Just let me get the money I put into it. Let me walk away."
Banaszak was not the only athlete hurt by TE's sudden collapse. Also in a fix are at least 18 other past or present Raiders, including All-Pro linebacker Rod Martin and place-kicker Chris Bahr, both of whom shared Banaszak's dismay. "There have been a bunch of nights I haven't slept," said Bahr, who had $140,000 in various partnerships and promissory notes. "I've been scurrying around, trying to find out about the properties I own. I stand to lose everything I put in. I could lose my house [in Rancho Palos Verdes, Calif.]."
"I was terrified at the beginning of this thing," said Martin, who declined to say how much he had invested, but whose involvement has been estimated by people close to him at more than $200,000. "I was mad, just like everybody else, very upset. It's a big stinker, man." Last week, holding his 3-year-old daughter, Jessica, in his arms at the front door of his Manhattan Beach, Calif. home, Martin said, "I had some things planned for her, thinking the real estate would come through as we projected it, but now I have to start all over again. If I was a single man, it wouldn't be as devastating to me. I have family, I have responsibilities."
Other Raiders involved with TE include linebacker Matt Millen, who invested $20,000; offensive tackle Henry Lawrence, a 12-year veteran, who figures he may have been in for as much as $200,000; defensive end Sean Jones; safety Mike Davis; center Dave Dalby; and former running back Mark Van Eeghen, who had invested more than $200,000 and is one of those who have filed suits against TE executives, accountants and lawyers; and former linebackers Darryl Byrd and Randy McClanahan.
"We lost everything," said McClanahan's wife, Jackie. "At first you feel anger, then shock. Then it's almost humorous. We have three rental properties, the house and our children. That's it. Everything else is gone. But, hey, you can't take it with you."
Among the most devastated of all was Kathy Whitworth, the 47-year-old golfer who has won more tournaments, 88, than any pro golfer in history. In a 27-year career, which began in 1959, Whitworth has been the leading money-winner on the LPGA tour eight times.
Whitworth declined to discuss her involvement in TE—"I'd rather not comment," she said last week before teeing off in the Glendale Federal Classic. "I don't want the world to know"—but sources familiar with her situation said she had invested more than $300,000 with TE.
The firm seemed to hold a special appeal for baseball pitchers. In the roll call of major-leaguers who invested in the firm were Milwaukee reliever Clear, the San Francisco Giants' Atlee Ham-maker and Dodger Hall of Famer Don Drysdale, now an announcer with the Chicago White Sox. Another pitcher who got involved with TE is the California Angels' Mike Witt who, according to a source, invested $500,000 in promissory notes and real estate partnerships.
"Most everything I've got is with them," Witt said at spring training in Arizona. "Seventy-five percent. I was shocked when I heard about it. I looked at my wife and thought, 'Can you believe this?' I'm very bitter. It knocked me back about four years as far as my future goes. I'm almost back to step zero."
So is Lon Simmons, the 62-year-old broadcasting voice of the Oakland A's. Simmons has $420,000 somewhere in the maelstrom the company left behind. The announcer said, "The phrase I use when someone hits a home run is, 'You can tell it goodbye!' That's a line I could use for my finances."
At the center of the whirlpool, and the object of considerable anger and bitterness, is the 56-year-old Stern, who founded Technical Equities in San Jose in 1969 and built it from a small real estate investment and sports promotion firm into a diversified company that in fiscal 1985 reported $136.4 million in revenues and profits of more than $6.1 million. It owned or managed 22 companies, according to its last annual report, and was involved in "rubber products and packaging, metal fabricating and processing, and real estate." One observer noted that its board of directors reads like a Who's Who of California businessmen. Board members include former astronaut Eugene Cernan and Robert D. Campbell, former CEO and board chairman at Newsweek Inc. Some board members are also said to have taken heavy losses.
Stern is a former sports agent who once represented Raider tight end Dave Casper and basketball star Rick Barry, both TE investors. "A gregarious, outgoing, backslapping guy," Simmons said of Stern. "Full of confidence." A wine connoisseur and a patron of the opera, Stern radiated a continental charm and a charisma that successful men found compelling. He gave away bottles of wine like calling cards. "Big shots were so impressed with him that they called him Uncle Harry," said Martin (Doc) Cadet, a retired Air Force physician who served as a Stern lieutenant, schmoozing with athletes, rounding up investors for TE and scouting for acquisitions.
Stern gave off the aura that he knew what he was doing and that, at bottom, he had the best interests of investors at heart. In fact, there were athletes, such as McClanahan, who had their paychecks sent directly to TE. "Sending TE entire paychecks was standard practice by a number of guys," he said. "Direct-deposited, like you would with a bank."
For more than 20 years Stern prided himself on his successful record, and sources say he routinely told prospective investors that they would not lose a dime if they joined forces with him. "He promised we would never lose money that we put in," said Witt. "He said we'd at least get our investments back."
A few did not buy that spiel. Tom Brunansky of the Minnesota Twins recalls the day in 1983 that he, his father and his brother. Joe. visited Stern and his associates in San Jose and heard their pitch. "They seemed to make a point of guaranteeing it would be a good investment, that we would not lose money," said Brunansky. "Well, any time I hear that kind of talk, a red flag goes up. It sounded great." The Brunanskys decided to put Tom's money elsewhere.
Brunansky said he had considered TE as an investment group after Cadet buttonholed him at spring training in 1981 and began encouraging him to make the visit. At the time, all the lights had been turning green for TE's real estate investments, which depended on continuation of the recent high inflation rate to keep driving up the price of property. "Quite a bit of the Stern philosophy was based on an inflationary spiral," said a TE insider. "If it had stayed the same in 1984-85 as it was from 1976 to '83, there would never have been a problem."
What happened, of course, was quite the reverse. As inflation slowed in 1983, the real estate market softened. But Stern didn't slow down, and by all appearances, TE was flourishing. The headlines in Bay Area papers were almost entirely bullish:
TECHNICAL EQUITIES EARNINGS RISE 15%.... TECHNICAL EQUITIES ACQUIRES MICROWAVE FIRM.... TECHNICAL EQUITIES ACQUIRES 3 COMPANIES.
And so on, onward and ever upward, it seemed. TE was a growth company, energetically diversifying. From 1982 to '85 it purchased at least 12 businesses. Its portfolio included companies involved in tire manufacturing, telecommunications, engineering and even a chain of pizza restaurants.
Brunansky wasn't the only one who sensed something amiss on a visit to TE. So did San Francisco tax attorney Leland Faust, who went to San Jose with a client, former NBA All-Star Phil Smith, to check into Smith's $140,000 worth of investments with the firm. Faust said he got a 10-minute discussion of them, followed by Stern's silky-smooth sales pitch.
"He tried to sell us on the merits of using his firms for advice," Faust said. "It was almost a canned presentation. He gave us a tour of the facility and showed us his new computer. He reviewed his interest in wines and told us how he wanted to share them with us. He gave us two bottles of wine." Faust sensed more style here than substance, but what particularly alarmed him was that TE's accountants could not clearly explain a bewildering series of transactions between several interests in a real estate deal. "I wanted my client to get his money out of there as soon as possible," Faust said. So they were gone.
Stern, who could not be reached for comment, was dismissed as TE's CEO and president by the board of directors on Jan. 23. But the end for him actually began last summer, when TE started missing mortgage payments to its creditor banks on some of the properties owned by its 80 limited partnerships. TE had obviously overextended itself, and some of the lawsuits filed against company principals accuse them of having commingled funds, diverting money earmarked for relatively healthy projects to shore up weaker ones.
Another charge leveled in court papers against TE management and its associates is that they bought property and sold it quickly at inflated prices to their own investors, apparently taking a handsome profit for TE at investors' expense.
Stern's house of cards crumbled in January; as the price of TE's stock plunged from 15 to 10 to 1½, panic set in among investors. Men like Banaszak saw their fortunes slipping away.
Banaszak flew to the Bay Area to meet with Joseph Cotchett, a well-known specialist in fraud litigation, in what he called "the longest, hardest day of my life. Tears were running down my cheeks as I told Joe my story."
Emotions among TE investors continue to run high. Told that Stern was unavailable for comment, despite repeated calls to an answering machine, Witt said sarcastically, "Did you check Peru? I'm real bitter...that some guy had the gall to play God with your money. I don't know how a guy like that can get up in the morning and look into the mirror.... If I saw Harry Stern, it would be tough for me to keep my hands off him."
For Banaszak, the might-have-beens weigh heavily. "You know, it was George Blanda who got me into the transportation business," he said. "At night I lie in bed and think about the games we'd play—cards, cribbage, poker. I loved George. To me he was the greatest competitor. I looked up to him. I remember one time he showed me his bank book. It was a staggering amount. I told him, 'Why not take the money and invest it?' "
Banaszak sighed and sipped his wine. "George said, 'At least here I know it's safe and sound.' I always listened to George, and that was the one time I didn't. I remember those words today. Boy, did they ever come back to haunt me."