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THIS BOGEY HAS ARNIE'S NAME ON IT
Few athletes have cashed in on their fame like Arnold Palmer. He's a spokesman for Cadillac cars and appears on commercials for Jiffy Lube International Inc. service centers. His golf-course designs are in demand by exclusive country clubs and public golf courses alike. And Palmer is just starting to tap his popularity overseas. In Japan, his name appears on a variety of goods from sportswear to lunch boxes. In Taiwan, memberships in a new club featuring a Palmer course are among the hottest tickets around.
But Palmer may want to keep a low profile in Orlando. An ambitious plan to build a nationwide, publicly traded chain of auto dealerships bearing Palmer's name has slid into a swamp of lawsuits and finger-pointing. The golfer says he holds no equity interest in the company, Orlando-based APAG Holdings Inc., and Florida corporate records do not list him as an officer. But because he lent the company his name--APAG stands for Arnold Palmer Automotive Group--the venture is becoming a headache for the 61-year-old golfer.
For starters, Sun Bank is suing APAG and its chairman, James O'Neal Jr., for $4.8 million for defaulting on a loan. APAG's Braun Cadillac Inc. dealership in Orlando was placed in receivership on Dec. 4. And now, the dealership's disgruntled former owner, Edward R. Braun, is trying to drag Palmer into the fray: He says O'Neal owes him several million dollars, and he claims Palmer assured him he would get the money.
NO STAKE? In an interview last November, before APAG's collapse, Palmer told BUSINESS WEEK that he had essentially no knowledge of APAG's dealings and that the outfit was O'Neal's project. "It hasn't progressed," he said as he autographed photos in his Orlando office. "To my knowledge, APAG's problems have something to do with the economics of the automobile business." Court records state that on Jan. 13, O'Neal checked into Florida Hospital and was unavailable for comment. O'Neal's lawyer wouldn't say if he has been released.
While he says he has no stake in APAG, Palmer and autos go way back. He got into the business in the early 1970s, when he bought a friend's dealership in Charlotte, N. C. O'Neal, a small-time real estate entrepreneur from Indiana, met Palmer in the mid-1970s. He took over as manager of Palmer's Charlotte dealership in 1979, eventually adding five others to Palmer's stable.
Under O'Neal, Palmer's Hilton Head (S. C.) Lincoln-Mercury dealership sold $421 million worth of cars in 1988--the highest volume of any dealership in the U. S., according to Ward's Auto Dealer. In large part, that was because of its huge fleet sales to Hertz Corp., the rental-car company that also employs Palmer as a spokesman. But industry profit margins were sagging, and a recession loomed. O'Neal saw a shakeout coming, he told BUSINESS WEEK in a November interview. He plotted a strategy designed to make sure Palmer's dealerships were survivors.
The plan was straightforward: Acquire other top dealerships and merge them with Palmer's under the APAG umbrella. O'Neal was predicting sales of 200,000 cars and $2 billion in revenue by this year. In early 1990, things appeared to be proceeding nicely. He signed a management contract and took charge of Braun Cadillac. While APAG did not own the Arnold Palmer dealership yet, it carried a letter of intent to buy the Coggin-O'Steen dealership in Jacksonville.
Then the plan bogged down. O'Neal was juggling complex financial and management arrangements with Palmer's dealerships, Coggin, Bankers Trust, an investment group that included the Pritzker family, and a third dealer, Don Massey of Detroit, who says he was supposed to run APAG's Cadillac dealerships. There were simply too many pieces to the puzzle, say some people involved in the deal.
'HE'S INVOLVED.' APAG's downfall was just beginning. In September, with business in a slump, it defaulted on the $4.8 million Sun Bank loan that was used to purchase its first and only dealership, Braun Cadillac. Now, Braun's former owner claims he has received only about half of the $11 million purchase price. His attorney, Nader Baydoun, says Braun will hold Palmer responsible. "Arnold Palmer gave my clients assurances the deal would close, and it never did," says Baydoun. "He's involved in this." Baydoun says Palmer guaranteed that the sale would close during two meetings in Orlando.
Palmer's agent, Alastair Johnston, denies that his client played any role in the transaction. He says Palmer met with Braun once and offered only to ask O'Neal about any money he might have still owed Braun. For now, Palmer isn't commenting on the APAG affair. Dogged by a mess like this, it's no wonder he would rather concentrate on golf.Antonio N. Fins in Orlando