Sunday, October 18, 1992

Pyramid Dreams: Pyramid Schemes, Part 3 of 3

How did Sidney Shlenker's Promise Die?

Commercial Appeal
By Louis Graham

Part 3 of 3 (Continued from Part 2, Part 1)

Fuji, the huge Japanese lender, bowed out over fear the company would not get the project completed. This wasn't another apartment development. It would be hard to find someone to step in and complete the pyramid additions. The Japanese would reconsider, but only if the city and county would guarantee completion.

The National Bank of Australia expressed interest both in a construction loan and permanent financing. But it, too, required city and county participation. If The Pyramid Companies missed a payment during the first five years, the Australian bankers wanted Morris and Hackett to ask the City Council and County Board of Commissioners to make the payment. But the political risks, particularly with Hackett facing re-election, made it an impossible request.

Finally, at an April 1991 meeting with an increasingly restless City Council, Shlenker predicted financing in two to three weeks.

The Pyramid Companies paid SoGen $75,000 in January to conduct its investigation. The engineers returned a favorable report. The pack of lawyers and finance people seemed to have the major details worked out.

A sample press release was even faxed to the mayors. It announced the process of due diligence, or an investigation of the financial background, was to begin.

Eighteen days later, SoGen dropped the deal like a hot potato.

An anonymous letter, written in French but from a Memphis resident, was mailed to the bank's Paris office. It suggested Shlenker would be unable to assemble the rest of the deal that required Memphis banks share a portion of the loan; that the deal was a can of worms.

AS publicity about the difficulties grew, individuals claiming they could help walked in off the street. Invariably, they knew someone who could make the loan. There was this guy in Buffalo. . . . Every lead was investigated. It meant kissing some frogs in search of that one prince.

Shlenker flew off to Canada with one Memphian who said he could help, to South Florida with another as the hourglass emptied.

An El Paso company led them to one would-be prince in Lakeworth, Fla.
The Florida man provided Shlenker with hope and a Memphis broker with the promise of a large fee. Then the Floridian requested $200,000 in advance.

Up-front fees were a common practice in the 1980s, often of con men who took them for loans that never materialized. Today, Florida law makes it a felony to collect such a payment even if the loan is eventually made. There was no such law when Shlenker met the loan broker.

Shlenker immediately balked at the up-front payment. He would not take the chance. It was one thing to pay SoGen, a multibillion, multinational bank, to conduct due diligence; it was entirely another to pay this Floridian a 'commitment fee.'

But while Shlenker searched elsewhere, brokers in Memphis raised the funds from other clients.

Shlenker was uncomfortable about the deal. He met face to face with the investors and urged them not to do it. When they persisted, he joined up, putting in $20,000 of his own money.

The $200,000 was wired.

But the loan never came.

Shlenker went to the FBI. Now, more than a year later, the white-collar crime unit continues its investigation. A federal grand jury in Memphis has heard testimony.

THE Pyramid Companies had millions of dollars' of debts and no way to pay them. Shlenker was under siege.

The city and county had begun acting like a jilted lover.

"When historians look back at the positive results which the pyramid produced," Morris said in a 1989 letter, "at the top of the list will be its part in bringing you into our city."

Now, two years later, the county mayor faced a decision between two far less flattering letters. One began the legal process to remove The Pyramid Companies from the deal. The other gave the company a two-week extension to cure its most serious financial problems.

He signed both, leaving the decision to Hackett. Hackett chose the extension.

Forget the grandiose plans. Shlenker needed $3 million to replace the GOI stock in the escrow fund as promised. He needed another $5 million just to get the arena ready for basketball. There was no floor, not even rims and goals.

He could not turn to the man who brought him to Memphis.

As Tigrett said in a January 1991 letter to his partner:

"With much regret, I must say that if you wish to continue running The Pyramid Companies, you will have to borrow on some of your own assets for funding or find funding from other sources."

SO as word spread through the offices at 245 Wagner of a hastily planned staff meeting on May 28, 1991, there seemed to be only two possibilities. Either Shlenker had miraculously found a loan. Or he was giving up.

The Great American Pyramid was to have opened the following morning. But at best the opening was months away.

The crush of 3 million tourists a year would not begin at restaurants, bars and high-tech museums in the 32-story, stainless-steel pyramid and next door at a remade Mud Island. Four acres of space sat empty in the shell of the pyramid.

He made the dramatic announcement to his employees first. Then he rushed off to meet both mayors in Morris's office in the county administration building.

He had a loan, he told them. But he wouldn't name names. He wouldn't risk another SoGen fiasco. This time no one could be trusted. He handed Hackett and Morris a copy of the commitment letter, but with the lender's name removed. It was crudely typed and bore an illegible signature.

Morris fumed. He viewed it as another last-minute tactic, just like the NBC proposition that rainy day in May 1990, just like a deal only days before in which Shlenker offered a $3 million surety bond from an unlicensed company.

Shlenker borrowed a phone and dialed a Las Vegas telephone number. He spoke briefly, then put Morris on the line.

Morris was never certain who he spoke with. But the man at the other end - perhaps Shlenker's genie, as Morris suggested - confirmed what the letter said. The first money would arrive in two weeks.

It didn't.

The mysterious company that was the conduit to an $80 million loan in exchange for 20 percent of Shlenker's company was Universal Financial Service.

The company operated from a small suite at Flamingo Executive Park in Las Vegas. It had one secretary, sparse furnishings, and suspiciously few files.

Eleven days before making its last-minute offer to Shlenker, UFS received the first of three cease-and-desist letters from Nevada authorities. It had no license to operate as a lender but argued it did not need one since it was a joint venture partner, not a lender. State Commerce Department officials knew nothing of the Memphis deal; their actions resulted from other complaints.

Universal Financial had a Nevada corporate charter. But the address its founders gave, 100 East Tropicana, Suite 138, was actually that of the company's president: Space 138 in a Las Vegas trailer park.

Nevada Commerce Department investigators said the man behind the company was not Albert Feink, the Tropicana Mobile Park resident whose signature appeared on Shlenker's letter, but Louis Pihakis, who had been linked to several loan scams.

It was not Feink, but Pihakis, who spoke with Morris on the telephone.

Though unknown in Memphis, Pihakis was well known among white-collar crime investigators. He was featured in a 1973 book, The Fountain Pen Conspiracy, which linked him to an Alabama loan scam and a real estate deal with Detroit mob bagman Peter Lazaros.

Authorities said Pihakis touted two sources of cash: insurance companies and the fortunes of several Greek shipping families.

In 1988, Pihakis, representing the Greek shipping trust, surfaced in Charlotte, S.C., trying to provide financing for evangelist Jim Bakker's $172 million purchase of PTL. He surfaced in Las Vegas as the possible source of funds for a 1991 bailout of the Alladin Hotel.

Shlenker grew hopeful. Pihakis did not ask for any advance fees. That hope was only bolstered when he ran into Pihakis at a Las Vegas coffee shop meeting with a longtime friend of his father. The man was a successful Houston real estate developer and he, too, was discussing a loan.

State files, though, revealed complaints from several of the company's customers who paid large, up-front fees for loans that had not materialized.

Pihakis was among several people indicted in February 1992 as part of an alleged advance-fee loan scheme in Columbia, S.C. He is scheduled to be tried in January.

His name did not appear on Universal's corporate records. He was not an executive or even a director. Yet Deputy Commerce Commissioner Glen Walquist made an unannounced visit and found Pihakis sitting behind a desk in the largest office, discussing possible loans with customers.

Walquist said Pihakis agreed to divulge the names of his insurance company backers once he received their permission. The state investigator dictated this sardonic note to the state file:

"In the course of a one-hour conversation, Pihakis challenged Bud Abbott and Norm Crosby as a champion of gibberish speak. He was unable to tell of a single deal he had closed. . . .

"I feel confident in predicting that he will be unable to obtain (the insurance companies') permission. Or, the insurance companies will be located in caves without phones."

Shlenker saw salvation in this pot of gold at the end of the desert trail. But Nevada authorities viewed it as a mirage.

ON June 17, 1991 - 794 days after their deal began - the city and county terminated their contracts with Shlenker and Tigrett, thrusting the celebrated deal into court, where it remains today. City and county legal costs, already in excess of $300,000, continue to mount.

On July 23, 1991, the six companies comprising The Pyramid Companies filed a Chapter 11 bankruptcy petition, claiming $16 million in debts. After a year of legal maneuvering, five of those companies were ordered liquidated by U.S. Bankruptcy Judge Bernice Donald. Should the order stand on appeal, creditors may recover only a portion of what they are owed.

The sixth company, Pyramid Management Co., clings to life on a ruling from Donald that the city and county did not properly terminate the management contract.

At 6 p.m. on July 9, 1992, The Pyramid Companies orphaned Mud Island, abandoning its responsibility to operate the park and pay its annual operating loss. City taxpayers again assumed that responsibility, although efforts are under way to find another company to adopt the $63 million park.

Shlenker, now 56, continued to pursue financing for months after the bankruptcy, traveling to places such as Las Vegas, New York, Seattle, Geneva, Luxembourg, Milan, Paris and Stockholm. As he did, the company continued its assurances that a loan deal was imminent, even to the bankruptcy examiner.

But increasingly bitter about his dealings in Memphis and the new city administration's unwillingness to settle legal action, Shlenker moved to Los Angeles in August. His East Memphis home remains for sale.

John Tigrett, now 79, continues his regular practice of jetting to New York and London. When in Memphis, Tigrett remains aloof and secluded, but through his lawyers is heavily involved in the legal battle.

Isaac Tigrett, 42, has become an investor in Dan Aykroyd's planned New Orleans blues club. He works on that project, and others, from an office on the rails - a private railroad coach pulled from city to city by Amtrak.

Bonham, 41, is president and majority owner of Bonham Communications and continues to sell sponsorships on other ventures around the United States, including Memphis.

Omnis has remained in business, although it is owed an estimated $600,000 (disputed by Shlenker) for pyramid work. Lindsey, one of the company's founding partners, has left the firm.

Leisure Management survived its involvement with Shlenker to become the city and county's arena manager. It is paid an annual fee.

The Great American Pyramid, known today as The Pyramid, opened Nov. 9, 1991. It had an operating loss of more than $450,000 last fiscal year. By the time a final debt payment is made on the building in 2010, principal and interest on the project will be an estimated $110 million.

The Cast of Characters (opens in separate window)


About this report

Reporter Louis Graham spent more than a year preparing this story of the Memphis Pyramid. He reviewed thousands of letters, statements, contracts and other legal documents left in the wake of the pyramid plans and the collapse of The Pyramid Companies. He interviewed scores of people involved in the project.

Graham, 35, is a special projects reporter who joined The Commercial Appeal in 1979. He has reported extensively about the pyramid and promoter Sidney Shlenker since 1988.

Copyright 1992, 1994 The Commercial Appeal, Memphis, TN

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