Slain Entertainment Executive : Jose Menendez’s Conflict and Controversy
Exactly who was Jose Menendez?
The Hollywood community and police investigators have been furiously pressing that question since Menendez--a relatively little known entertainment executive whose career nonetheless connected with some of the biggest names in show business--was shot dead with his wife, Mary Louise, in their Beverly Hills home last Sunday night.
Extensive interviews with associates reveal the Cuban-born Menendez to have been an extremely aggressive boss and deal maker, in whom friends saw a charismatic leader--and in whom adversaries sometimes saw an over-reacher who cut jobs, cut corners and occasionally broke his word on the way to the top.
“If you took a poll, a lot of people whose oxes were gored by Jose would have to tell you they didn’t like him,” offers Robbin Ahrold, an officer of Broadcast Music Inc. who worked with Menendez several years ago at RCA Records in New York.
That characterization is disputed by Peter Hoffman, president of Carolco Pictures Inc., an independent movie company of which Menendez was executive vice president at the time of his death. After the murders, Hoffman became acting chairman of Live Entertainment, a video firm, 49% owned by Carolco, of which Menendez had been chairman and chief executive.
“He can often be insensitive,” Hoffman admitted, still speaking of Menendez in the present tense during a Thursday afternoon interview at Carolco’s West Hollywood headquarters. “He’s a guy who reaches for every advantage in a transaction. He’s very self-conscious, self-confident and charismatic in the way he deals with things. . . . In my judgment, these are assets, not liabilities.”
The Beverly Hills police have publicly identified no suspect in the murders and have put a tight clamp on details of the crime, refusing to disclose even the caliber of bullets used or the number of times the Menendezes were shot. The police also haven’t said whether they believe the crime to have been a robbery.
Official silence has led to widespread speculation that the Menendezes died in an execution-style slaying that could somehow have been related to the executive’s business activities. (“Please, please, tell me he was a drug lord!” one of the Menendezes’ shocked neighbors, herself an entertainment executive, said one day after the murders.)
Carolco executives adamantly refuse to discuss any aspects of the slaying. “We don’t care to discuss anything (about it). It’s a dangerous, vicious world we live in, and we’re all subject to bizarre events,” Hoffman said.
Yet the apparent homicides have cast a powerful spotlight not only on Menendez’s fast-track performance since becoming involved with Carolco in 1986, but also his somewhat spottier record as a top executive in RCA Corp.'s Hertz and RCA Records divisions, where he left under a cloud as questions rose about his accounting methods.
According to several former RCA Records executives, Menendez was edged out as executive vice president and de facto chief operating officer of that company shortly after General Electric Co. purchased RCA in 1986.
Elliot Goldman, who became president and chief executive of RCA Records five days before the GE purchase, says a clash of styles between him and Menendez was largely responsible for the latter’s departure. “He was very bright, very energetic. But he really kept a very tight rein on everything. I felt (that style) was not appropriate to the kind of company I wanted to build.”
Goldman, now an officer with Personics Inc. in New York, says he stripped Menendez of his chief operating officer’s duties but offered to let him remain as head of a division. Menendez, who was “very disappointed,” instead chose to work out the remaining months of his contract doing various tasks with the RCA corporate staff before joining Carolco.
At the same time, Goldman confirms reports by other ex-RCA executives that Menendez was discovered to have engaged in a common record industry business tactic, shipping too many units, which makes immediate sales look good, even though heavy returns will deflate the numbers again within a year or two. According to the executives, the aggressive shipping resulted in an unusually large $25 million in written-down returns in the first six months after Menendez left the company.
“It’s absolutely true,” Goldman said. “He’s was a very aggressive businessman who was not afraid to take risks. But who’s to say who’s right and who’s wrong?” Goldman said.
Another RCA executive said Menendez was not setting aside adequate accounting reserves for future returns of unsold records and tapes.
Carolco’s Hoffman finds the charges of questionable practices at RCA “laughable.” He attributed the claims to “personality clashes” among RCA executives.
Ahrold, who worked with Menendez for three years as a public relations officer at RCA, remembers him as being “very fair, one of the quickest finance people I’ve ever met.”
Some RCA staffers claim that Menendez--who had previously worked as a top executive with RCA’s Hertz car-leasing division--had little flair for the creative side of the music business. Yet Ahrold says he had a passion for Latin music and revitalized the company’s moribund Latin product line.
That work often took Menendez to Miami, where he set up a regional headquarters for the company, and to Latin America, where he brought stars such as Puerto Rico’s Menudo and Mexico’s Emanuel to RCA Records.
Claimed to Be Well-Born
A knowledgeable source at Hertz Corp. says Menendez joined the company in 1972, after serving as an auditor on the Hertz account for Coopers & Lybrand. He worked initially in the car-leasing division, where he became chief financial officer within a year, and went on to become general manager. When he left Hertz for the record division in 1980--at the behest of then RCA Executive Vice President Herb Schosser, who was known as Menendez’s strongest corporate backer--he was executive vice president in charge of equipment rental and car leasing for the United States.
According to Ahrold, the executive claimed to be from a well-born Cuban family, most of which died in prison or otherwise by violence early in the Castro regime. “They were the nobility of Cuba. Very aristocratic and very rich,” Ahrold said.
Menendez’s wife, known as “Kitty,” was American-born and not of Cuban extraction. Friends describe her as “absolutely devoted” to her family, which includes two college-age sons.
A part-time teacher at Queens College of the City University of New York recently recalled Menendez as an ambitious but financially struggling married student who attended classes at night and worked during the day.
Menendez, who received an accounting degree at Queens College in 1967, “would batter me for a better grade,” said David Inerfield, who still teaches accounting at the college.
“He was an excellent student, a guy with a lot of drive,” said Inerfield, who immediately recalled Menendez after more than 20 years. “I had him for two or three classes. He’d say to me, ‘What do I have to do to get a better grade?’ ”
Inerfield said it appeared that Menendez and his wife were struggling financially at the time because Menendez said he would “have to wait until payday” before paying for a $3 class-related expense.
Inerfield said Menendez told him that his father, an accountant, brought his family to the United States from Cuba.
In 1986, Menendez joined Carolco, where he oversaw the dramatic turnaround of International Video Entertainment Inc., a failing video company that Carolco purchased that year from Noel C. Bloom. A San Fernando Valley businessman, Bloom had started his video empire as a purveyor of sexually explicit cassettes and gradually branched into other lines.
(Hoffman said IVE itself never included the sex tapes, and Carolco didn’t acquire any of that business.)
“IVE was a mess, probably on the verge of bankruptcy. Carolco bought on a dip (in earnings), in the hope and belief they could turn it around,” says Lisbeth R. Barron, a securities analyst who follows the entertainment business for the investment firm McKinley Allsopp Inc. in New York.
Menendez slashed the company’s staff to 167 employees from 550 and got rid of expensive offices in Woodland Hills, while using Carolco’s strong connections with mainstream Hollywood to sign multiple-picture deals with film makers such as producer Ed Pressman (“Wall Street”), director Taylor Hackford (“Everybody’s All-American”) and actor Sylvester Stallone, long an associate of Carolco founders Andrew Vajna and Mario Kassar. (Among other films, IVE will distribute “Wired,” the recently released chronicle of comedian John Belushi’s death by drugs.)
According to company officers, IVE lost $20 million in 1986 but almost immediately became profitable under Menendez. The company posted net income of about $8 million in 1987 and twice that much in 1988.
In a complex deal largely engineered by Menendez and Carolco President Hoffman, IVE also struck a deal to merge with Lieberman Enterprises Inc., a Minnesota “rack jobber” that distributes records and cassettes to retail stores such as the Wal-Mart discount chain.
Once again, Menendez more than doubled reported earnings at Lieberman in 1988--this time by cutting inventories in half and luring new accounts, including Ames Department Stores, a major retailer in the Northeast, and the Wherehouse chain. “He was one of the brightest businessmen I ever met. He was brilliant,” maintained 56-year-old David Lieberman, a former Lieberman Enterprises officer who is now executive vice president of Live Entertainment.
At the same time, however, Menendez became deeply entangled in an existing dispute with Noel Bloom and Carolco over obligations stemming from the movie company’s purchase of the video unit.
In 1987, Bloom sued Carolco in Los Angeles Superior Court, alleging that the movie company had breached its contract to purchase IVE by “fraudulently” promising to pay an outstanding loan he owed a third party, while “secretly intending” not to pay the debt, among other things.
Menendez became involved in the litigation when Bloom later charged that the video executive, on taking over the company, had blocked him from acquiring rights from Hasbro to a children’s film called “G.I. Joe, the Movie,” by trying to hold him to supposed “non-compete” provisions of the sale agreement, even as Menendez tried to force Hasbro to give IVE the film for $100,000, despite an earlier verbal agreement by an IVE officer to pay $500,000 for it.
Last September, a court referee found in favor of Bloom, while stating that Menendez had engaged in “highly inappropriate conduct” and a “squeeze play” in trying to reduce his own verbal deal. The suit clearly left strong animosities on both sides. Carolco is appealing the decision, while Richard H. Floum, an attorney for Bloom, now says of Menendez: “He was a very tough, arrogant witness.”
According to a filing with the Securities and Exchange Commission, Live bought a $15-million life insurance policy on Menendez, whose employment contract with Live extended to Dec. 31, 1991.
Beneficiaries of the policy, according to Hoffman, were Bankers Trust Co. of New York and European-based Credit Lyonnais Bank Nederland, both of which are lenders to Live. According to Hoffman, $10 million of the policy is designated to go to Bankers Trust and $5 million to Credit Lyonnais. Credit Lyonnais’ entertainment lending operation is headed by Franz Afman, who is also a director of both Carolco and Live.
The so-called key man policy, normally written on the lives of top corporate executives, was issued by American General Life Insurance Co. of Houston. A senior vice president with the insurance firm, Dan Leitch, confirmed that his company had written the policy on Menendez but refused to comment on the beneficiaries.
“A key man (policy) is not unusual in the insurance business,” said Dan Leitch, a senior vice president of American General.
As to the apparent homicides, he said that “our investigative unit will treat it as we do any other claim.”
Yet another deal that has drawn attention to Menendez was his purchase, earlier this year, of the Strawberries record chain from a company controlled by music executive Morris Levy for about $40.5 million. Levy was sentenced last year in New Jersey to 10 years in federal prison and fined $200,000 for conspiring to extort money from a Philadelphia-area record distributor. He is free on bail awaiting the result of an appeal of his conviction.
According to court records and law enforcement officials, Levy has long been an associate of Vincent (The Chin) Gigante, the reputed boss of the Genovese crime family, one of New York’s five major organized crime groups.
According to Barron, Menendez was able to make the deal on highly favorable terms, largely because Levy’s legal problems left him unable to run Strawberries, an 80-store chain in New England, New York and Philadelphia. “They were essentially able to steal the company because Morris couldn’t run it,” Barron said.
Andrew Nichols, a Boston attorney who represented Levy in the deal, sharply disputes Barron’s claim, maintaining that the price--about 12 times reported earings for the chain--was relatively high for such a company.
Nichols said he never met Menendez during the negotiations and that Menendez and Levy generally left the talks to others. “Jose got involved only at critical junctures. He was the decision maker at the company,” Nichols said.
In 1985, the FBI wiretapped a conversation in which Levy appeared to indicate that reputed organized crime figures owned a 25% stake in Strawberries. Nichols said he wasn’t associated with Levy in 1985 but is certain that the company had no crime connections at the time of the sale. Menendez and his officers, he said, “visited stores. They hired a Boston law firm to do legal due diligence. They did a good job.”
“Due diligence” refers to customary inspections of a business by a prospective purchaser. Roger Davis, who was appointed president of Live Entertainment at a board meeting Thursday, said the examinations in the case of Strawberries included queries to federal organized crime investigators to determine whether Strawberries had any known mob involvement. The answer, he said, was a categorical “no.”
On a separate front, Carolco co-founder Mario Kassar has been negotiating to buy the approximately 11 million company shares held by fellow co-founder Andrew Vajna. Together, the pair control about 72% of the company’s 30 million shares. Hoffman confirmed that the two had recently considered mutually selling up to 2 million shares each to outside investors but changed course for reasons Hoffman declined to discuss.
One source close to the company said the pair planned jointly to build a large Beverly Hills mansion with cash from the planned stock sale but got into a dispute over how many Carolco shares each would part with. Hoffman confirmed that Vajna and Kassar are planning some sort of real estate venture. Vajna is in Hungary and couldn’t be reached for comment on his plan to sell the Carolco stake.
In yet another action, Carolco has filed a plan with the U.S. Bankruptcy Court in Los Angeles to acquire control of De Laurentiis Entertainment Group, which is being administered under Chapter 11 of the U.S. Bankruptcy Code. A group headed by Italian investor Giancarlo Parretti and movie producer Dino De Laurentiis withdrew a competing bid, making it likely that Carolco will complete the DEG purchase, Hoffman said.
Speaking again of Menendez, Hoffman added: “We always wonder whether we’ve said enough about how much this guy meant to us, either professionally or personally.”
The executive’s death, he said, reminded him of Israeli Gen. Moshe Dayan’s statement before the graves of some fallen warriors. As Hoffman recalled the words: “These men were indispensable, in their time.”
Times staff writers Sam Enriquez, Jane Fritsch and Ronald L. Soble contributed to this story.