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Coffee Talk
+ Score one for the little guys
Coffee Talk appreciates a good David slays Goliath story, especially during the holiday season, and the case of the Bellehumeurs versus St. Louis-based national brokerage firm A.G. Edwards definitely fits the bill.
The particulars involve Roger and Joelle Bellehumeur, an Ithaca, N.Y. couple that retired to Venice in the mid '90s. In 1999, the couple, using proceeds from selling their optician business, began investing with Brian Christensen, a broker with A.G. Edwards' Venice office. Over the next four years, the couple invested a little more than $1 million with Christensen in entities not approved by the firm, including a nonprofit child-care facility. It was also alleged Christensen forged some documents to make it appear the money was invested in places it wasn't, and he lied to the Bellehumeurs and other clients about where the money was invested.
What's more, Christensen's activities continued, the Bellehumeurs attorney alleged, even after the broker was called a "financial danger" by an A.G. Edwards supervisor, investigated by federal authorities and ultimately fired - information the Bellehumeurs say they were never made aware of.
That latter accusations, that the brokerage firm didn't follow federal guidelines of publicizing why a securities broker was fired, was the core of the case the Bellehumeurs attorney, Drew Clayton from the Sarasota firm of Johnson, Browning & Clayton, argued to the National Association of Securities Dealers hearing panel. Clayton says while A.G. Edwards took steps to correct the problems with Christensen (read: they fired him in March, 2003) they didn't let his next investment brokerage employer, nor clients such as the Bellehumeurs, know about the fraud and improver investing selections. The Bellehumeurs invested with Christensen for another year before discovering the fraud. "We showed a snowballing effect of a cover-up," Clayton tells Coffee Talk, "that kept people in the dark."
The case culminated last month when a three-person NASD arbitration panel in Tampa awarded $1.2 million to the Bellehumeurs, including $750,000 in compensatory damages, $250,000 in punitive damages and lawyers' fees. A.G. Edwards gave the Bellehumeurs $949,000 earlier this month, Clayton says, but the firm could still appeal the remainder of the awards, including the fees. A.G. Edwards officials in St. Louis didn't return calls for comment.
Clayton, whose Sarasota firm specializes in representing aggrieved investors, says this case was particularly sweet because the Bellehumeurs were such deserving clients. Roger Bellehumeur has been battling diabetes and heart problems, Clayton says, while his wife says she didn't buy any new clothes during the entire four-year process. Says Clayton: "Every once in a while you get a case where it feels really good."
Southwest Florida home prices continue to fall
Median sale prices for existing single-family homes fell across the Gulf Coast of Florida in October versus the same month last year. A positive exception was the Tampa Bay area, which saw median prices level off, according to figures from the Florida Association of Realtors (FAR).
However, comparisons may be difficult because Hurricane Wilma crossed Southwest Florida during the last week of October 2005, likely skewing the numbers. For example, the number of home sales in Fort Myers-Cape Coral more than doubled in October versus the same month in 2005. To complicate matters, FAR says a computer problem caused Fort Myers-Cape Coral's October 2005 sales to be misreported in the latest home-sales report. To be consistent, the Review used 2005 numbers reported last year.
Single-family existing homes
#of sales #of sales Median Median
Oct. Oct. % price price %
Metro area 2005 2006 Change 10/2005 10/2006 Change
Fort Myers-
Cape Coral 264 686 160 $322,000 $249,200 ?23
Naples 254 204 ?20 $495,500 $420,000 ?15
Punta Gorda 225 226 - $243,900 $202,800 ?17
Sarasota-
Bradenton 797 604 ?24 $340,700 $277,900 ?18
Tampa-
St. Petersburg-
Clearwater 3,735 2,419 ?35 $225,700 $225,800 -
Existing condominiums
Fort Myers-
Cape Coral 87 153 76 $326,500 $269,000 ?18
Naples 266 152 ?43 $380,300 $355,600 ?6
Punta Gorda 62 47 ?24 $178,000 $326,500 83
Sarasota-
Bradenton 354 172 ?51 $294,000 $216,000 ?27
Tampa-
St. Petersburg-
Clearwater 1,119 545 ?51 $198,400 $159,900 ?19
Bottom 10 markets, Median single-family home prices:
City Third-Quarter, 2006 Change from 3Q 2005
Detroit $154,100 -10.5%
Sarasota-Bradenton $320,700 -9.4%
Canton-Massillon, Ohio $112,300 -9.2%
Palm Bay-Melbourne $193,600 -9%
Bloomington-Normal, Ill. $156,300 -8.5%
Akron, Ohio $118,200 -8.4%
Cape Coral-Fort Myers $255,400 -8%
Toledo $115,400 -6.6%
Lansing-E. Lansing $139,800 -6.2%
Miami-Fort Lauderdale $365,100 -5.6%
Top 10 markets, Median single-family home prices:
City Third-Quarter, 2006 Change from 3Q 2005
Salem, Ore. $228,000 24.7%
Elmira, N.Y. $93,600 21.4%
Salt Lake City $216,300 19.2%
Virginia Beach-Norfolk, Va. $243,800 16.9%
Gainesville $215,200 15.9%
Gulfport-Biloxi, Miss. $154,400 15.7%
Wichita $127,900 15%
Seattle-Tacoma $372,400 14.6%
El Paso $129,900 14.3%
Baton Rouge $178,400 14.1%
Spokane, Wash. $191,100 14.1%
Source: National Association of Realtors
+ Payday at Private Capital Management
Coffee Talk bets that Bruce Sherman and Gregg Powers at Naples-based Private Capital Management are celebrating the $300 million check they recently got from Baltimore-based Legg Mason.
The third-quarter cash payment completes Legg Mason's acquisition of PCM announced in May 2001. Originally established to manage money for the Collier family, PCM was a limited partnership owned by its co-founder, Miles Collier, and by its two operating principals: Sherman, who co-founded the company with Collier in 1985 and serves as PCM's chief executive officer, and Powers, its president. The firm manages money for high-net-worth individuals and institutional investors.
When Legg Mason bought PCM in the fall of 2001, the Baltimore-based firm paid $682 million in cash up front and agreed to two "earn out" payments on the third and fifth anniversaries of the acquisition, based on PCM's asset growth. At the time, PCM managed $8 billion in assets. Today, the firm manages nearly $23 billion. The total deal, which was announced in May 2001, was capped at $1.382 billion.
Sherman and Powers couldn't be reached. They have a longstanding policy of not speaking publicly.
Meanwhile, the firm's equity portfolio continues to struggle in the short term versus the benchmark Standard & Poor's 500-stock index. Net of fees, PCM's equity portfolio returned 5.9%, versus 10.8% for the S&P 500 for the one-year period ended Sept. 30. On a three-year annualized basis, the same portfolio returned 10.7%, versus 12.3% for the S&P 500.
In a letter to clients, Sherman and Powers suggest one reason for the underperformance is due to the fact that they have not invested in unpredictable and volatile commodity-based businesses. "While it can be frustrating to not participate when such sectors lead the market, the concept of investment discipline only has meaning when adversity tests one's convictions."
The firm also cut its investments in languishing newspaper stocks, recent filings show. The value of PCM's newspaper holdings declined to about $2.1 billion in the third quarter versus $2.4 billion in the second quarter. Sherman, who has long believed that newspaper stocks are undervalued, was among the vocal shareholders who forced newspaper publisher Knight-Ridder to sell itself to rival McClatchy Co. in March.
Despite the short-term results, PCM's long-term track record is strong. On an annualized basis, the equity portfolio has returned 19.6% over the past 10 years, versus 8.6% for the S&P 500.
+ Southwest Florida pegged a no-no
Take the folks at Business 2.0 magazine off the Christmas card list. The magazine's New Rules of Real Estate issue pegged Southwest Florida as the number two area in its "Where not to buy" list. Only California's Central Valley, made up of cities such as Fresno, Bakersfield and Sacramento, ranked worst. The Jersey Shore and Phoenix also made the not-desirable list.
On Southwest Florida, which was listed as Fort Myers, Naples, Punta Gorda and Sarasota, the magazine was painfully succinct in why buyers should look elsewhere: "A typical home goes for $500,000 and prices rose 25% last year. A local economy with a thin base - retirees - can't sustain the heat."
Ouch.
The Sunshine State, however, was heavily represented in the magazine's "Where to buy list," just not on the Gulf Coast. Panama City was first, Vero Beach second and Lakeland finished fourth. Those three area were praised for current low home prices and good job markets.
+ SEC targets Whitney for investigation
Cape Coral-based Whitney Information Network's shares fell 31% Nov. 21 after it said the Securities and Exchange Commission is conducting an investigation of its stock-market education programs and corporate acquisitions.
Just a week earlier, the company had said it is seeking to list its stock with a national stock exchange. The shares currently trade over the counter (symbol RUSS, recent price $6). With the SEC investigation cloud hanging over it, Coffee Talk suspects that effort will likely be delayed.
Whitney spokesman Richard O'Dor says it's not clear what corporate acquisitions the SEC is investigating because the regulators didn't specify it.
Taking on Everest
Like succeeding in life, it requires never giving up.
Entrepreneur and Net Infuse CEO John Turner didn't take just any vacation this year: The 44-year-old took on Mount Everest - the world's highest peak - to prove he could and to raise money for The Children's Home, Tampa.
And he nearly made it all the way.
He lost Pinjo, a native Sherpa guide helping his team, during the 2 ½-month climb, he battled ice falls, blinding snow storms and temperatures of minus 50 degrees Fahrenheit to get within two hours of the peak. He climbed 28,000 feet to an area called the "death zone," before a stomach parasite made him too weak to continue.
But Turner hasn't given up. He plans on trying again in a couple years.
In a dispatch from Mount Everest, Turner wrote to The Children's Home: "I have found that the bigger the goals that I have set for myself in life, the higher the probability I will experience temporary failure during the journey to that goal. Typically, temporary failures provide the lessons needed in order to achieve your goals."
In sum, never give up, he says.
Turner continues to run his business, a Tampa consulting firm that has done work nationally for companies such as Husqvarna and what was NationsBank. At Husqvarna, he says he helped the company increase revenue by 70% over three years and increase operating profit by 568%.
His climb helped raise more than $15,000 for The Children's Home and he continues to work on behalf of the home, which houses about 60 children in need of adoption or foster care.
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