The Oregonian






Investment Firm Collapse Leaves Friends In Lurch


Associates of Barclay and Jeffrey Grayson have mixed reactions to the fall of Capital Consultants




By Jeff Manning and James Long of The Oregonian Staff Wednesday, October 25, 2000



After six months of mounting evidence that Portland investment firm Capital Consultants LLC was in trouble, retired real estate developer Robert Dutcher sought an audience with the company's top executives. Dutcher, who developed much of downtown Salem's newer retail core, had entrusted $1.5 million of his money to the firm.


In early September, Barclay Grayson, then president of Capital Consultants, reassured Dutcher that all the talk of government investigations and bad investments was just that -- talk.


Three weeks later, the federal government seized Capital Consultants and accused Barclay Grayson and his father, Jeffrey, of running a Ponzi-like scheme that could cost its clients more than $200 million.


The court hasn't had the opportunity to decide whether the Graysons are guilty of the massive fraud and deception alleged in lawsuits filed by U.S. Department of Labor and Securities and Exchange Commission. But clients such as Dutcher have reached their own verdicts.


"Anyone can accept risk," said Dutcher, who estimates that his losses could reach $400,000. "But you can't accept fraud."


Steven Ungar, Barclay Grayson's attorney, declined to comment on the validity of the allegations against his client or the opinions of former Capital Consultants clients.


The government has already said it thinks losses of more than $200 million will hit thousands of union members, whose retirement money had been entrusted to Capital Consultants.


But the case has enveloped some of the wealthiest and savviest power players in the state as well. Jeffrey Grayson operated for nearly 30 years among the business elite of Oregon, with longtime friends and powerful allies.


Today, a month since he was accused of misleading investors to conceal the losses, friends' reactions range from outrage to stunned sadness to stubborn support.


Some Portland powerbrokers say they have been contacted about a trust fund formed in the name of Susan Grayson, Jeffrey Grayson's wife, to provide financial assistance to the couple.


Portland investor Peter Brix and auto dealer Ron Tonkin said that Roger Craig, in-house counsel for Portland timber company Crown Pacific, had informed them of the fund. Neither Brix nor Tonkin contributed.


"I don't think it's appropriate," Brix said. "They say he needs money. I don't know that that is true."


Craig said the trust fund is intended "to help Susan keep Jeff alive." Craig refused to say who formed the trust fund or who has contributed to it.


Jeffrey Grayson suffers from multiple sclerosis, which has left him wheelchair bound. In conjunction with the lawsuits, the federal government has frozen all his assets, putting out of reach all his bank accounts, real estate and securities.


At a recent court hearing, Barclay Grayson sought permission to sell his West Hills home. Without a job or income, the 30 year-old can't afford the payments, said Ungar, his lawyer.


Meanwhile, other Capital Consultants clients are estimating their potential losses. Richard Tinney, former chief executive officer at Bohemia Inc., a former Eugene timber company, figures that his losses will exceed $300,000. He said he felt misled when the Graysons assured him in September that his investments were safe. "Jeff should be in jail, so should Barclay," Tinney said.


Ungar declined to comment.


Jeffrey Grayson, through one of his lawyers, Norm Sepenuk, said: "For (Tinney) to make a comment like that is absolutely ludicrous. He has made a considerable amount of money in transactions with Capital Consultants amounting to hundreds of thousands of dollars. There are literally hundreds of private investors I have dealt with over the years who would object to Mr. Tinney's statement and feel that my efforts on their behalf have been scrupulously honest."


Many Capital Consultants clients don't know at this point whether they have lost money. Tonkin said he still has "in the low hundreds of thousands" invested with the firm and believes his money is safe. Tonkin said he bore no ill will toward Grayson. "But I must tell you," he added, "I have tremendous empathy for the union people. If I was involved in that, I'm sure my feeling would be different."


Recently filed court documents in the five federal lawsuits spawned by Capital Consultants' collapse show that the firm managed between $900 million and $1 billion from 172 clients.


Capital Consultants invested about half of its assets in traditional stocks, bonds and fixed income investments. The balance was invested in an exotic mix of commercial loans, real estate mortgages and private placements.


Trustees from nine union trust funds sued Capital Consultants and the Graysons shortly after the government seized control of the firm. Some wealthy individuals are also weighing their legal alternatives.


Tinney, for one, wants to know why Capital Consultants' advisory board didn't keep the Graysons on a tighter leash. "I think these guys should be held accountable."


Four of Jeffrey Grayson's friends -- all of them prominent Oregon business leaders -- served on Capital Consultants' advisory board. They were Dick Reiten, chief executive officer of Northwest Natural; John Emrick, head of mail-order house Norm Thompson; Brian Obie, chief executive officer of Obie Media in Eugene; and Brix.


All four said the advisory board didn't serve as a formal Capital Consultants board of directors. Rather it was a casual, informal group of friends that had gotten to know one another as members of the local Young Presidents Organization, a business and social group for young executives.


"It was a loosely knit group. We didn't vote; we didn't view ourselves as a real board of directors and neither did Jeff," Emrick said.


For his friends, the charges against Jeffrey Grayson came as a nasty shock. "It's really just a tragedy," Emrick said. "This whole thing, I wish it just didn't happen. It's like a bad dream where there's no waking up."


Jeff Manning can be reached at 503-294-7606 or by e-mail at


James Long can be reached at 503-221-4351 or by e-mail at

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