ComputerLand’s Founder Moves to Pacific Isle, Will Sell 96% Stake in Company
ComputerLand founder William H. Millard, 53, has ensconced himself and his family on a Pacific island and intends to sell his embattled 96% share of the computer store chain, company officials said Tuesday.
Millard announced his plans at what was apparently a sparsely attended news conference on his new home, the 47-square-mile island of Saipan about 200 miles northwest of Guam. Word began trickling back to Hayward, Calif.-based ComputerLand on Tuesday.
Millard’s plans, a surprise to executives at ComputerLand and others involved in the long legal battle over the company, appeared to contradict an agreement that he made in December to sell his stock in a public offering.
But Herbert Hafif, an attorney representing a group of investors that threatens to seize control of ComputerLand, said Tuesday that “if properly handled, a sale could be a very successful and viable alternative for all parties.”
According to company officials, Millard’s Oakland home is for sale, and he moved his family, including daughter Barbara, the former president of ComputerLand, to Saipan in March. They intend to invest in “business ventures in the Pacific Rim.”
Millard might have reasons other than the tropical weather for his move to Saipan. As part of the Northern Mariana Islands, the island is a U.S. possession of the type that was recently upheld as a tax shelter for U.S. citizens, according to Richard G. Heller, a partner in the Los Angeles office of Peat, Marwick, Mitchell & Co.
In a case involving the U.S. Virgin Islands earlier this year, a federal judge ruled that a U.S. businessman who became a resident of the islands satisfied his U.S. tax liability by satisfying his Virgin Islands tax liability--which happened to be considerably smaller than the U.S. burden.
Heller said the U.S. Senate’s version of tax reform, now being debated in Washington, specifically closes that loophole and cites, among other regions, the Northern Marianas by name. If the bill is enacted as now written, the loophole would be closed as of next Jan. 1--the date by which Millard would apparently have to sell his holdings to avoid paying U.S. taxes.
“It’s very clever,” said Heller.
“I don’t think it’s coincidental that he did one (move to Saipan) before the other (sell his holdings),” said one ComputerLand executive. “Saipan is well known as a tax shelter.”
The value of Millard’s holdings has been estimated by Forbes magazine to be more than $480 million.
Company officials said Millard has not yet put a price tag on his ComputerLand shares. They said he plans to entertain offers but apparently has not talked with any potential buyers.
Millard’s empire has been under siege since March, 1985, when a jury awarded Micro/Vest, an investor group, a 20% stake in ComputerLand to satisfy an old debt owed to early principals in the company. The plaintiffs were also awarded $125 million in punitive damages.
While the Millard family struggled to post a $25-million appeal bond, an uprising by ComputerLand dealers last October drove William and Barbara Millard out of top management. In December, a partial settlement of the Micro/Vest case stripped the Millards of their board seats as well as voting rights for their stock.
But IMS, the family holding company, continues to own 96% of the stock in the $2-billion-a-year, 700-store chain. Millard had to post 35% of the stock with a court-appointed trustee for the duration of the appeal process, leaving him free to sell about 61% now.
Set Price for Stock
A sale would establish a value for the stock and set the stage for the outcome of the appeal.
“If it was a good price, Micro/Vest would probably let him sell all of it,” said one official close to the case. “Then, if they win the appeal, they’d get a percentage of that amount.”
An executive at ComputerLand said a sale by the controversial Millard, an unpopular figure among many of the company’s retail franchise owners, would be welcome.
“Our reaction is this should be positive for the company. It should remove the controversy over who owns us,” the executive said, asking anonymity.
As for Millard’s future, company officials said he discovered on settling on Saipan that the local public utility was not capable of powering his personal computers. Millard has proposed to local government officials that he establish a private electric utility on the island.
“I’m sure he has big dreams, but he doesn’t have much cash,” the former colleague said. “He just has stock.”
