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When Albert J. Dunlap became chief executive of appliance maker Sunbeam Corp. in July, 1996, he was a legendary turnaround artist, lauded as the hero of the American investor and a role model for managers everywhere. Just the announcement that "Chainsaw Al" was joining Sunbeam caused its stock to rise by nearly 60%, at that time the largest one-day jump in the history of the New York Stock Exchange.
If Dunlap's mystique wasn't destroyed by his stormy ouster two years later, or the company's bankruptcy in 2001, his saga is now certainly over. On Sept. 4, Dunlap settled Securities & Exchange Commission charges that he cooked the books to hide from investors Sunbeam's true financial state from 1996 until early 1998. Dunlap neither admitted nor denied the allegations that had been brought by the SEC in a civil lawsuit in Florida.
SMALL COMEUPPANCE. To put the debacle behind him, Dunlap agreed to pay $500,000 -- from his estimated net worth of roughly $100 million. He also accepted a lifetime ban from serving as an officer or director of any public company. (Dunlap's chief financial officer, Russell Kersh, anted up $200,000 and agreed to the same employment ban.)
To many observers, the settlement seems little more than the proverbial slap on the wrist -- and they're right. After all, the Dunlap era cost thousands of workers their jobs, resulted in shareholder losses of $4.4 billion, and ultimately led Sunbeam into a humiliating bankruptcy. It's not much of a comeuppance for a 65-year-old ex-CEO who never has to work again anyway. In fact, he took far more from Sunbeam -- at least $16 million in cash -- in salary, benefits, and reimbursed taxes.
In a way, Dunlap and Kersh were simply lucky because they were both pioneers of sorts in this era of corporate excess. They came on the scene years before the now-familiar scandals at Enron, WorldCom, Adelphia, ImClone, and Global Crossing, and before the SEC began filing criminal indictments. More recently, regulators and prosecutors have wisely decided that people should be criminally charged with cooking the books -- and go to jail if they are found guilty.
LESSER STAKES. In the post-Enron era, Al Dunlap looks pretty much like a piker, although his outsize personality may allow him to fit the role of villain better than Enron's Jeff Skilling or WorldCom's Bernie Ebbers. Unlike many of the executives paraded before Congress in recent months, Dunlap never exercised a Sunbeam stock option or sold a single share of its stock. He was arrogant enough to think he could eventually sell Wall Street on a turnaround story. So why should he have sold?
By today's tawdry standards, the Sunbeam fraud itself is small potatoes. The company overstated its net income in 1997 by $71.1 million, vs. restatements of $586 million at Enron and $6 billion at WorldCom.
Certainly, the SEC has bigger fish to fry. It says the fine took into account Dunlap's personal $15 million payment to shareholders in a class action that won a judge's approval last month. Dunlap reached into his deep pockets to pay that settlement while steadfastly denying he did anything wrong.
AN OBITUARY. "I believe to this day that the claims and charges against him are flatly untrue," says Donald Zakarin, a New York attorney who represented Dunlap in the class action. Zakarin says he believes neither Kersh nor Dunlap was involved in any alleged scheme to defraud investors. Neither of the execs could be reached for comment.
Dunlap's corporate career can now be written as obituary -- and that may be fitting. "His life as a businessman is over," says a onetime friend and business associate. "For a guy with his ego, it's the ultimate insult. He walks away with nothing, $15.5 million poorer. He'll never victimize another company or board or shareholders again." For me, it's a somewhat comforting thought to a less-than-satisfactory settlement.
BusinessWeek Senior Writer Byrne is the author of Chainsaw: The Notorious Career of Al Dunlap in the Era of Profit at Any Price
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