The Oregonian





Capital Consultants Losses Revealed



By Jeff Manning and James Long of The Oregonian staff

October 25, 2000



For the reeling investors of Capital Consultants, the coming days could provide more unpleasant news.


"It appears that many of Capital Consultants' private investment activities will result in substantial losses," said Thomas Lennon, the government-appointed receiver now in charge of the firm, in an Oct. 13 letter to clients.


Apart from the loans to the former Wilshire Credit Corp., which are a subject of two federal lawsuits, Capital Consultants also poured client money into dozens of commercial loans, real estate mortgages and limited partnerships, some of which are in default or have other problems.


In federal court, Lennon's attorney said he believes Capital Consultants' $507 million portfolio of more traditional stocks and bonds is relatively healthy. Lennon plans to transfer the conventional investments to another manager while retaining control of the $350 million to $400 million portfolio of private loans and other private investments.


Lennon is scheduled to present the court with his first appraisal of the firm's private portfolio late this month.


Meanwhile, Capital Consultants' quarterly statements to clients, lawsuits and SEC documents indicate potential trouble spots.


Brooks Financial LLC/Beacon Financial Group LLC –According to reports to union clients, Jeffrey and Barclay Grayson lent these related used-car and furniture finance companies and other associated companies at least $85 million. Regulators allege that Brooks and Beacon worked with the Graysons to conceal the Wilshire loss. Tim Gamwell, head of Brooks and Beacon, hasn't returned repeated phone calls over several weeks.


Oxbow Capital Partners LLC -- This Tacoma-based investment firm borrowed about $10 million from Capital Consultants in summer 1998. Oxbow founder and Chief Executive Daniel D. Dyer also cooperated with the Graysons to cover up the Wilshire loss, federal regulators allege. Seth Taube, the Newark, N.J.-based lawyer for Dyer and Oxbow, denies that his clients did anything untoward.


Pacific States Health & Welfare Trust Fund – This Northern California Teamsters union health insurance plan had received $2.9 million in loans from Capital Consultants since 1997. The U.S. Department of Labor threw out the Pacific States trustees earlier this year and sued them, accusing them of violating numerous provisions of federal pension law.


A-Fem Medical Corp. -- Capital Consultants has invested about $15 million in this struggling maker of feminine hygiene products, according to Steven Frankel, A-Fem's chief executive officer. According to SEC filings, the company has never earned a profit in its five years as a publicly traded company. For the quarter ended June 30, the company lost $439,779 on revenue of $9,073, according to the SEC filings. Marine Finance Corp. /Douglas Watson -- A Capital Consultants affiliate sued Marine Finance and Douglas Watson, its CEO, earlier this year, claiming Marine Finance had defaulted on more than $3 million in debt. Watson in turn filed a counterclaim against Capital Consultants claiming Jeffrey Grayson conspired with others to take away Watson's business.


Crossings Development Corp./ The Legends/Richard Boehlke Capital Consultants sued Crossings and Boehlke, the head of the firm, seeking more than $6 million that Boehlke's companies borrowed to develop the high-end Legends condo project in Portland's Goose Hollow neighborhood. Capital Consultants alleges that Crossings and Boehlke couldn't meet payments.


Barry Groce, lawyer for Boehlke, said the suit is on hold. He's been notified, he said, that the receiver's attorneys are replacing Capital Consultants' attorneys in the case.

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