Crash Course Crashes Down on Promoters : Marketing: Two Orange County entrepreneurs set out to teach others how to compete globally. Instead, their past came back to haunt them.
Leland Russell and Gordon Walker don’t seem like the type of people that U.S. corporations would ordinarily turn to for a crash course on how to compete in the New World economy of the 1990s.
After all, the former stage managers’ last previous national undertaking was a series of concert tours that included a 96-city Barry Manilow fest in which they were responsible for making sure the lighting was to the singer’s liking.
Nevertheless, these two Orange County residents easily persuaded such major corporations as Time Warner, Motorola and Northern Telecom to spend hundreds of thousands of dollars sponsoring a slick business seminar billed as the “blueprint for success in the new global marketplace.”
Titled “A Day in the Future,” the $595-a-person seminar featured videotaped interviews with 57 business and government leaders ranging from Fortune magazine editor Marshall Loeb to Arkansas Gov. Bill Clinton.
The interviews promoted Russell’s recipe for business success, what he called “the GEO paradigm.” Russell was so convinced of the power of his GEO concept--”the breakthrough business paradigm for the 1990s”--that he had it trademarked. GEO was the central theme for the six-hour seminar, a multimedia event featuring live presentations, videotaped interviews, small skits and music driving home the concept that U.S. companies must adopt a more global outlook.
The seminar debuted at the Beverly Hilton in September with rave press coverage, and Russell and Walker were gearing up for a 21-city national tour.
Two weeks later, the big tour was dead. Word was leaking out that Russell and Walker had some problems in their past.
While Russell and Walker were busy solving the nation’s economic problems, they were facing accusations contained in a class-action lawsuit filed last year in Los Angeles federal court that they ran a massive Ponzi scheme in which 350 investors lost $12.5 million.
Russell and Walker deny those charges.
What’s more, court records reveal that Russell and Walker were principals in more than 30 Los Angeles-based real estate limited partnerships that went bankrupt. Those partnerships had raised about $60 million from investors.
And the lighting and sound companies that they ran in Memphis in the 1970s had their business licenses revoked for failure to pay state revenue taxes. Russell said the companies were just “basically breaking even.”
These disclosures, made public by a former business associate of Russell’s, sent some of the sponsors of “A Day in the Future” running for the hills, raising questions about how they got involved in the first place.
“It’s laughable,” said Michael B. Hyman, an attorney who is familiar with Russell and Walker’s background because he represents investors who claim that they were victims of the Ponzi scheme.
“Don’t they (sponsors) know who these people are, what they have been involved in? I’m just amazed,” said Diana Herold, a Walnut Creek, Calif., investor who lost $25,000 and is a plaintiff in the class-action suit. “I certainly wouldn’t recommend that these people be set up as an authority regarding anything that has to do with business.”
‘Capt. Kirk’ Enlisted
Gordon Walker sat in the living room of Russell’s home in Irvine last week, mulling a reporter’s question about how he got Fortune, California Business and some other magazines to contribute $300,000 in free advertising, persuaded General Electric to loan him $50,000 in projection equipment and talked Levi Strauss & Co. into buying the rights to the program for $200,000.
“I called them up,” he answered.
It seems to have been almost that simple, especially after Russell and Walker hooked a celebrity spokesman, actor William Shatner, better known as Capt. James T. Kirk on the “Star Trek” television series.
Shatner was a natural, Russell said, because “his image really makes you think about the future.” He also happens to be Walker’s father-in-law.
Walker says Shatner’s participation helped persuade Motorola to come on board as a sponsor. After Motorola joined up, Northern Telecom followed.
Each sponsor had its name and logo affixed to “Day of the Future” brochures and advertisements, with the headline: “Sponsored by organizations with vision.”
“We had not done anything quite like this before,” said Anita Giani, a spokesman for Northern Telecom, a telecommunications manufacturer. “We weren’t the only ones. . . . They had Motorola on there when they came to us.”
An attorney for California Business said the magazine became a sponsor after hearing about the other prominent participants.
“Fortune was involved and Motorola was involved . . . and they came to us with those kind of credentials,” said attorney Duff Helsing. “I understand one of them is related to William Shatner. What that’s worth, I don’t know.”
California Business contends that it has lost money promoting the seminar.
“We’re kind of a victim in the thing,” Helsing said.
Russell said none of the companies asked for any extensive background information on him or Walker.
“It was really content they were interested in, not what we had done in the last 10 years,” he said.
Russell said sponsors got a quality program for their money. He said an independent survey of the 240 people who attended the Beverly Hills seminar found that nearly 90% thought the show was either “excellent” or “good.”
Promotional materials for “A Day in the Future” included videotaped reviews of participants in the Beverly Hills program--all laudatory.
Says Dennis Aigner, dean of UC Irvine’s School of Management, in one taped review: “I’m going to try and talk these guys into bringing it down and having the MBAs at my business school see it. I think it is very cutting-edge stuff. Everybody ought to experience this.”
Russell and Walker say their only mistake was charging too much for the seminar. Adds Shatner: “The play itself was wonderful. The people, though, didn’t come to see it.”
But a former business associate of Russell, who asked not to be named, disagreed. He began sending unsigned letters and copies of the class-action lawsuit to the seminar’s sponsors, raising questions about the GEO concept. (The G stands for “globalization of perspectives,” E for “empowerment of workers” and O for “orchestration of technology.”)
“There is someone who has undertaken a real effort to destroy our reputation,” Russell said.
Sponsors began getting nervous, and a Sept. 18 presentation in San Francisco was canceled.
Levi Strauss spokeswoman Katherine Tanelian said her firm was promised 100 tickets to the San Francisco show--worth nearly $60,000--as part of its $200,000 investment in the seminar.
Noting that the apparel company hopes to emphasize “the positive,” she said Levi Strauss has retained ownership rights to the taped interviews with the business experts.
“We just decided at that point, given (the letters), we should just back off, and we did,” Russell said. “If I got that (the letter), I’d say, ‘Hey, wait a minute. What’s the story here?’ ”
The story of “A Day in the Future” begins with a company called Eiger Corp., a now-defunct Beverly Hills real estate syndicator headed by Russell, the chief executive, and Walker, marketing director. Neither had much experience in the real estate world.
By 1980, Eiger was putting together the first of about 80 real estate limited partnerships, investing in apartment buildings, shopping malls and other projects, mostly in Sun Belt states.
According to the class-action suit, by 1985 “a substantial number of these . . . real estate limited partnerships were in very poor financial condition, suffered severe cash-flow deficits and were unable to meet their operating and fixed expenses.”
Investors maintain that Russell, Walker and two other Eiger executives created six partnerships whose sole purpose was to collect money for the faltering real estate deals, according to the suit.
“The Eiger parties were charlatans who devised a scheme to defraud investors,” the class action alleges. They had created a Ponzi scheme that “took some of the investor proceeds and returned (them) to investors via quarterly interest distributions in an attempt to give the false impression that the financial partnerships were in good financial condition.”
Russell and Walker deny any wrongdoing, saying that everything was disclosed up front to investors and that similar partnerships were offered by other real estate syndicators at the time.
By 1987, about 30 of Eiger’s partnerships were forced to file for Chapter 11 bankruptcy protection from creditors. The Beverly Hills firm sold the remaining partnerships and closed its doors.
Russell and Walker blame the bankruptcies on the Tax Reform Act of 1986, which drastically reduced the syndication industry, and the overbuilding prevalent in Sun Belt states in the mid-1980s.
After Eiger closed, Russell and Walker acquired a Newport Beach consulting firm called the Marketing Institute and began planning for “A Day in the Future.”
They spent two years taping segments with business leaders, journalists and futurists about the need for U.S. businesses to take a global perspective.
Evidently, few of those who agreed to be interviewed or featured in promotional materials worried about checking the business backgrounds of Russell or Walker.
“I didn’t do a credit check on him because I wasn’t doing any business dealings with him,” said Stanford University business professor Michael Ray. He praised the quality of the seminar and said Walker and Russell’s business history is a separate issue.
Another prominent professional who participated in the seminar was Marshall Loeb, editor of Fortune magazine. Russell sat down with Loeb to tape a half-hour interview in New York last winter, but Loeb last week said he couldn’t recall their meeting. The Fortune editor sits for numerous television and radio interviews and is a frequent speaker at conferences.
“I’ve never heard of Mr. Leland Russell until this moment,” Loeb said.
Because editorial and advertising operations are separate at Fortune, Loeb also said he was unaware of a big advertising campaign the magazine was preparing for Jan. 14.
Fortune advertisers received a four-page glossy brochure encouraging them to buy space in a special advertising supplement focusing on “A Day in the Future.”
The ad supplement was canceled when Russell and Walker dropped plans for the “A Day in the Future” seminars. Fortune’s ad department last week sent a letter to the two men severing all ties to them.
It wasn’t supposed to turn out this way.
“This innovative program,” the Fortune promotional brochure proclaimed, “has a number of unique aspects that are certain to make it one of the most visible, and widely discussed, corporate education programs of the decade.”
