Knew Little About Real Estate 0
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The independent board members haven’t always been dynamos. Bennett B. Sims, a New York screenwriter, says he was offered a directorship on Transcontinental and two other REITs because his girlfriend was a close friend of Mr. Friedman’s wife. A self-described “aging Beatnik,” he acknowledges he knew little about real estate and says he accepted the assignment because he enjoyed the monthly trips to Dallas and needed the yearly stipends, which eventually reached $45,000.
Mr. Friedman, who split with Mr. Phillips in 1992, declined interview requests. Nor did the board’s efforts to assert independence always prosper. At a January 1995 meeting, for instance, Geoffrey C. Etnire, a Palo Alto, Calif., real-estate lawyer, pushed a measure to buy directors’ and officers’ insurance, arguing that this protection against lawsuits and other matters was needed to attract and retain capable directors. Mr. Phillips opposed the plan, arguing it would waste corporate assets, according to people who were present.
At about 11:30 that night, as he was falling asleep in his hotel room, Mr. Etnire says he got a call from A. Cal Rossi, a onetime amateur boxer and hotel developer close to Mr. Phillips. For the next 45 minutes, Mr. Rossi berated him, calling him “obnoxious” and “aggressive,” according to voluminous notes Mr. Etnire kept. During a two-day meeting in June 1995, Mr. Etnire says Mr. Rossi followed him around Basic Capital’s offices as he tried to talk privately to another director about the initiative. When Mr. Etnire objected, “Rossi bodied me, our chests and stomachs touching and him continually moving forward,” Mr. Etnire wrote in his notes. Mr. Rossi, who didn’t return telephone calls, declined comment through a Basic Capital spokesman.
The board initially voted 4-3 to buy the insurance. But in a bizarre twist, Mr. Etnire says an ashen-faced Mr. Sims called him to his hotel room at 8 the next morning and told him he had gotten two threatening phone calls in the night. According to Mr. Etnire and court documents outlining his version, Mr. Sims said the callers had told him that they knew he was “vulnerable” to the Internal Revenue Service and that “it would be in his best interests to change his vote.” The next day, Mr. Sims and at least one other director changed their vote. The initiative died.
In an interview last October, Mr. Sims acknowledged that he failed to file income taxes for more than 15 years and said he was working out a settlement with the IRS. He also acknowledged that Mr. Etnire’s account of their conversation that morning in 1995 is roughly accurate. But Mr. Sims denied that anyone actually called him that night or improperly pressured him — a position supported by Mr. Phillips, Basic Capital and a sworn affidavit Mr. Sims submitted to the court. He said he made up the story because he believed Mr. Etnire wouldn’t accept anything but a sinister explanation. “I wanted to get him out of the room,” said Mr. Sims, who said the real reason he changed his vote was because he was concerned that a close vote might be used against the REITs by plaintiffs in the shareholder suit.