Convicted Inside Trader Emerges From Seclusion : Computerbase Enlists Thayer to Guide Growth
It has the makings of a classic comeback. Computerbase International Inc., a small firm that is long on ambition but short on cash, has turned to a fallen giant of the aerospace and defense industry to help guide its future growth.
The Irvine-based company has enlisted the expertise of W. Paul Thayer, the former fighter pilot ace, deputy defense secretary and Fortune 500 chief executive whose high-flying career was scuttled by a 1984 insider trading scandal.
Thayer, who spent a year in federal prison and six months in a halfway house program, was released from custody only six months ago. Now he has emerged from seclusion to join Computerbase as a director, chairman of its executive management committee and president of a new division.
His mission, said Computerbase President Richard Manweller, is to raise nearly $9 million to complete development of a new defense-related computer system. Thayer will also help the company market the product and oversee Computerbase’s long-term growth strategy.
At 67, Thayer will be starting almost from scratch.
Tapped for Knowledge
The last company he captained, LTV Corp. of Dallas, was generating $6 billion in annual sales when Thayer resigned in 1983 to accept President Reagan’s invitation to serve as second-in-command at the Pentagon.
Computerbase reported a mere $2 million in revenue last year along with a net loss of $463,000.
“We’d have to be in operation for 10 years before we’d begin to have the knowledge and reputation of a Paul Thayer,” Manweller said.
“Mr. Thayer is a very astute businessman. His knowledge is based on about 40 years of experience in the aerospace industry. That experience will be invaluable to Computerbase,” Manweller said.
Thayer, who lives in Dallas, declined, through Manweller, to be interviewed.
Manweller believes that with Thayer’s assistance, Computerbase’s annual sales can skyrocket from $2 million to nearly $200 million within five years. That quantum leap would be based on the strength of one product line alone, a computer system designed for defense applications ranging from missile guidance to aircraft avionics.
Thayer’s involvement with Manweller, who founded Computerbase five years ago, is the result of an introduction made in March by a mutual friend and financial adviser whom Manweller declined to identify.
“He introduced Paul to me and the rest of the board,” Manweller said. “It became immediately obvious to us how important Paul could be to our company. I think it also became obvious to Paul that he was ready for a new career.”
In the past, Computerbase derived most of its revenue from contracts to design and develop custom computer systems and telecommunications equipment for large manufacturers such as Xerox, Teledyne and Honeywell.
Seeks Own Products
Although it still relies on contract work as its core business, Computerbase is pinning its ambitious growth plans on the development of its own proprietary computer products.
The first such product is called ALPS, an acronym for ADA Language Processing System. ALPS is a combination of computer hardware and software utilizing the ADA computer language chosen by the government for use in future defense equipment. Computerbase already has plowed $1 million into the development of ALPS but needs another $6 million to $9 million to complete the job.
Robert Hanisee, a defense analyst with Seidler Amdec Securities in Los Angeles, said ADA-based computer systems are a potentially huge market, but the competition will be fierce and the payoff may be years away.
“While these may be very clever people and they may be capable of developing a very nifty little ADA processor, my guess is it’s going to take them a long time to get anywhere,” Hanisee said.
“Still, it’s an interesting hookup. (Thayer) is well regarded in the business community. He’s a bright guy.”
Computerbase’s ALPS program will provide Thayer with an unusual opportunity to renew his contacts and re-establish his credentials in defense circles. According to one associate who requested anonymity, the chief executives of several major corporations have expressed no reservations in recent months about dealing with Thayer.
“There isn’t anyone who won’t support him,” the associate said. “His friends are still there.”
Manweller would not discuss Thayer’s past legal problems or what effect his conviction and jail term would have on his ability to serve the company.
Closely Held Firm
Thayer will become Computerbase’s fourth director, joining Manweller, Chief Financial Officer Theodore Aroney and major shareholder Paul Stout. Although Computerbase became a public company last year, about 80% of its 100 million shares are held by a small group of insiders and associates. The remaining 20% is traded by a handful of over-the-counter “market makers.” The stock has been selling recently for about 25 cents per share.
Manweller said Thayer will receive no compensation for his services. The payoff will come if his efforts on behalf of the company produce tangible results, in which case he will receive a significant ownership position in Computerbase.
It’s a chancy proposition, but Thayer is no stranger to taking chances.
During World War II, Thayer distinguished himself as a Navy fighter pilot. In one legendary encounter, he and another pilot reportedly managed to sink a Japanese destroyer by making repeated passes with their .50-caliber machine guns blazing.
Thayer was credited with shooting down 10 enemy planes and destroying nine more on the ground, and he received a Distinguished Flying Cross for his efforts.
After the war, Thayer worked as a test pilot, flying experimental aircraft. He was the first person to break the sound barrier in a Navy fighter and the first to test an aircraft ejection seat.
He eventually landed at Chance Vought Corp., an aircraft manufacturer that built the Corsair fighter flown by Thayer during the war. Thayer rose through the ranks at Vought to become a vice president and board member in only four years. Vought merged with LTV’s corporate predecessor in 1961, and Thayer was named president of the new aerospace subsidiary.
Became Conglomerate
During the 1960s, LTV evolved into an unwieldy conglomerate. In addition to its basic steel and aerospace operations, LTV had purchased Braniff Airlines, National Rent-A-Car and Wilson Corp.--a maker of food products, sporting goods and pharmaceuticals. LTV had a little bit of everything except operational synergy.
In 1970, with LTV on the brink of bankruptcy, Thayer was made chairman and chief executive.
Over the next few years, he devised a restructuring program involving the sale of several subsidiaries and the transformation of LTV from a diversified holding company into an operating company. Under Thayer’s stewardship, LTV returned to profitability.
(Ironically, LTV was forced to file for protection from creditors under the U.S. Bankruptcy Code last year as a result of the collapse of two of its key markets: energy and steel. It does not expect to emerge from bankruptcy for at least a year.)
In 1982, Thayer served a one-year term as chairman of the U.S. Chamber of Commerce. A year later, he left LTV to serve as Defense Secretary Caspar Weinberger’s right-hand man. Thayer was placed in charge of the Pentagon’s day-to-day operations and eventually won praise from President Reagan for executing a program to “modernize” America’s military forces.
He had been at the Pentagon for barely a year when he unexpectedly resigned on Jan. 4, 1984.
The next day, the Securities and Exchange Commission announced its insider trading case.
In one of the biggest cases ever pursued to that point, the SEC accused Thayer of passing along confidential information about proposed acquisitions by Anheuser-Busch Cos. and Allied Corp. to his stockbroker and seven other friends and associates, who then traded in the stocks. Thayer was a director of both Busch and Allied.
None of the illegal trading involved LTV, and the government did not allege that Thayer personally profited from the trading activity.
For months, Thayer maintained he was innocent, but he eventually pleaded guilty to charges of obstructing justice by lying to SEC investigators about his activities.
He was sentenced to four years in prison and fined $5,000. After spending a year in a minimum-security facility at Big Spring, Tex., Thayer was assigned to a halfway house in Dallas. He was released in December, 1986.
Manweller said Thayer has entered into no other business affiliations in recent months.
A former associate confirmed that Thayer has stayed out of sight and engaged primarily in personal investments since his release from prison.
“He’s maintained a very low profile,” said the former associate, who requested anonymity. “I understand that he is involved in some real estate investments, operating as a private investor. There’s been virtually no public attention focused on him.”
That could change in a hurry if Thayer succeeds in transforming Computerbase from a tiny Orange County research and design shop to a major supplier of defense computer systems.
