3 Postscripts as 1992 Nears

Editor’s note: How a banker, a surfing legend and a computer industry executive all found satisfaction in their lives long after making Orange County headlines.

The diamond-studded Mercedes-Benz emblem hangs from Douglas E. Patty’s neck like a gold badge of courage. It is the ultimate icon of the “in your face” attitude that brought the maverick banker to ruin, and back again.

Once the very model of a brash new breed of newly deregulated bankers, Patty presided over the demise of Heritage Bank in Anaheim.

It its heyday, Heritage was seen as the largest and most prestigious bank in the county. The Federal Deposit Insurance Corp. (FDIC) shut Heritage down in 1984, charging Patty and other bank officers with fraud, negligence and other wrongdoing.

Even in Orange County, where many a fortune has been made and misappropriated, Heritage became the biggest banking scandal since the Great Depression. And it set the stage for a string of bank and savings and loan failures in the 1980s, culminating in the recent conviction of Charles H. Keating Jr., former owner of Irvine-based Lincoln Savings & Loan.

But life has been good once more to Doug Patty. He lives at the Balboa Bay Club in a remodeled penthouse. He drives a red Mercedes-Benz convertible. He plies Gold Coast waters in a speedboat. At 51, his ponytail is streaked with gray, but he is deeply tanned from the tennis he plays most every morning.

He remains brash, charming, egotistical--and unrepentant.

“You’re seeing me all dressed up today,” said Patty, looking natty in blue slacks, a red V-necked sweater, shiny loafers and The Pendant. “. . . Usually you’d see me how I dressed in the banking days, which used to really (upset) the government. Levi’s, gold chains, all that stuff. . . .

“It used to just really irritate the FDIC, ‘cause here I ran the largest bank in Orange County, and all these other stuffy bankers were in three-piece suits, and I’d always be wearing tennis shoes with maybe a sock that didn’t match.”

Founded in a trailer in Anaheim in 1975, Heritage Bank had $291 million in assets at its peak in 1982. Its closure sparked a $150-million lawsuit that the FDIC filed against Patty, a $54-million suit by Patty against the FDIC and “around 20” other suits by shareholders and others “for everything from mismanagement to causing World War II,” Patty said.

The FDIC alleges that Heritage approved big loans for favored customers who were not paying back what they already owed; lent money to customers to buy stock in the bank’s parent company; gave bank insiders better loan terms than the general public could get, and spent lavishly.

Patty has stuck to his story: The bank’s problems could have been remedied, and he was targeted because regulators did not like independent small banks, his style or his delight in baiting them.

Once, when FDIC inspectors paid Heritage a visit, he told his secretary to “tell them I’m in the bank vault playing Monopoly with real money,” Patty said.

When a customer gave him 40 cases of beer on his 40th birthday, he jokingly told an employee, within earshot of regulators, to dump the cash out of the vault to make room for the beer, Patty said.

“If I’d been smarter and maybe more reserved, I think Heritage Bank would still be here today--maybe,” Patty said. “I had no use for them because the only people who work for the FDIC have been fired from banking.”

He still had sharp words for the “corrupt” banking industry, which he said continues to extend credit to speculators, promoters and “high rollers” such as Donald Trump, while strangling small business in a credit noose.

And he insisted that federal regulators wink at vast foreign loans and other questionable practices by the large money-center banks, while shutting down small banks and thrifts unfairly.

After regulators moved in on Heritage, depositors did receive their FDIC-insured money. Creditors were paid up to 97% of their claims, Patty said, “which just goes to show you the reason; the bank did not need to be closed.”

Patty estimated his personal losses at $3 million. The lawsuits with the FDIC and others were ultimately settled by his insurance company, he said, but he never conceded any wrongdoing.

Internal Revenue Service auditors expected to find that he had looted his customers’ accounts, Patty said, but they ended up returning to him $37,000 in overpaid taxes.

“I never paid a dime on any suit,” Patty said.

Today, he runs Patty Enterprises, a Costa Mesa-based construction company he started 20 years ago, before his banking career. He built a 58-unit apartment complex in Riverside, which he named “Heritage Apartments--just to kind of tick people off.” Another apartment project is under construction in Cathedral City near Palm Springs.

He won’t reveal where he banks today, lest he invite more unwanted federal scrutiny.

Patty said he is also owner of D.P.’s Pub & Grill, a sports bar in Newport Beach that he hopes to turn into a chain.

“I had nine Heritage bank (branches). My goal right now is to have 10 of these,” he said about the bar.

Hobie Alter

Hobie Alter lived the dream. Then he sailed off into the sunset. And he loves it.

The surfboard king of Southern California began making balsa boards in the garage at his family’s summer cottage in Laguna Beach to avoid having to work as a lifeguard. By 1954, Alter opened his first surf shop in Dana Point.

Then came Hobie foam and fiberglass surfboards. Next, there were the Hobie catamarans. The first 14-footer cost $995 and could be stashed on the roof of a car. Then came Hobie Cats in 16- and 18- and 21-foot lengths and the Hobie 33 single-hull sailboat.

After Alter sold his boating business to the Coleman camping company in 1976 for $3.2 million, he started the Hobie line of sportswear and became part owner of Ocean Pacific Swimwear.

“No matter what he’s done, it’s been exactly what he wanted to do,” said Alter’s wife, Susan. “He has a particular knack for making a business out of what he thinks is fun to do. He looks around and finds something he truly likes, something that maybe isn’t mainstream yet, and then develops that idea.”

In 1989, Alter designed and built a 60-foot, diesel-powered luxury catamaran that can cruise at 23 knots. “A nice toy,” said Alter, who christened it the Katie Sue, for his mother and his wife. He and his wife sailed it up the West Coast to British Columbia, then to their retirement home on Orcas Island in the San Juan Islands of Washington state.

Now 58 and in “excellent” health, Alter is building a floatplane, this time from a kit. Next summer, he and Susan plan to sail to Alaska for some trout fishing. The idea is to lash the light plane on the back of the boat so they can fly inland to land on pristine lakes.

Back in Orange County for the holidays, Alter said retirement is “wonderful.”

“It’s really fun to not do anything,” he said. “. . . All my life was pretty fun. I have no complaints at all. It was really neat.”

Now, he said, he spends his time landscaping their oceanfront property, building the airplane and looking after the boat, with breaks for golf.

“It’s a job to look at the newspaper in the morning,” he said. “I’m even into gardening.”

Meanwhile, the Alter children have followed in their father’s surf-and-sun tradition. Jeff, 29, runs Hobie Design Inc. in San Clemente, which licenses the Hobie trademarks. Paula, 36, works for a consulting firm in London. Hobie Jr. sold his sunglass company but still designs the shades, and he is researching real estate opportunities, his father said.

“We’re looking and learning, I hope, and I’m keeping my money in my pocket,” Alter said in an interview from his car phone. “This is a scary place around here right now.”

But Jeff Alter is thinking about the family’s next toy. “We’re kind of looking at the snow board industry right now,” he said. “They would be Hobie snow boards. I can’t say we can make them better, but we can sure try. That’s what we do.”

Charles Missler

For Charles W. Missler, 1990 wasn’t kind. But in 1991, he discovered that disaster has a divine lining.

Missler was formerly chairman of Western Digital Corp., which he rescued from bankruptcy in the late 1970s and quit in 1983 after cashing in $5 million in stock options. He burst into the limelight again in September, 1989, when he announced that his Phoenix Group International, a small technology company in Irvine, had landed a joint venture that would sell up to 6 million IBM-compatible personal computers to schools in the Soviet Union in exchange for raw materials.

It was called the biggest computer sale agreement ever struck by a U.S. company with Soviet businessmen. Two years later, there is no more Phoenix Group--and no more Soviet Union.

Within 15 months of the announcement, the Phoenix Group filed for bankruptcy protection. Missler said the joint venture had foundered from lack of capital, problems dealing with Soviet partners and bad publicity on the deal from the local press.

Phoenix is being liquidated, Missler said in a Christmas Eve telephone interview from a home he rents in Big Bear. Most of the investors, including Missler, were wiped out. He estimated his losses “in the eight figures.”

“I lost everything I had, including my home,” said Missler, 57. “It was my own fault. I became overly zealous for the project, and those things happen. . . .

“I’ve taken six companies out of Chapter 11, and I’ve put one in.”

Attempts are under way to reorganize a Phoenix subsidiary, Netcom Research Inc. of Irvine, which is in Chapter 11 bankruptcy proceedings but is selling network computer systems, mainly in Europe, Missler said.

He is still chairman of Netcom but hopes to pass the baton as soon as the company is on firm ground. Meanwhile, Missler is trying to make whole those investors who staked Phoenix because they had a personal commitment to him--including Chuck Smith, pastor of Calvary Chapel in Costa Mesa, who invested $150,000, and Hal Lindsey, pastor of Tetelstai Christian Center in Torrance.

But Missler, a longtime Bible scholar, has found a new calling. For years, he taught Monday night Bible classes at Calvary Chapel, and his taped sermons found a wide following.

“When I was going through my personal setbacks, I discovered there were 7 million of those tapes around the world,” Missler said. “What I considered a hobby had become very substantial.”

He devotes his time to writing and teaching Bible studies. His Monday night classes had to be moved to Wednesday nights by the time about 2,000 people were showing up. He teaches Tuesday nights at Tetelstai and Sunday evenings in Big Bear.

“I’m living in effect as a minister,” he said. “I live off offerings and donations from people who have responded to some of the materials that I speak to.”

A book Missler wrote with Don Stewart, entitled “The Coming Temple,” was published by Dart Press in April and is in its second printing, Missler said.

He also writes a donation-supported newsletter, Personal Update, which he said has a circulation of about 10,000.

“Frankly, without a sound biblical orientation, I probably couldn’t have handled it,” he said. “This sounds really corny and strange, but I really believe this is God’s way of getting my attention and putting me in the job he wants me in.”

While his business career was rewarding, Missler said, he is finding greater satisfaction in spreading the Christian Gospel.

“What I’m doing now is vastly more gratifying than anything I’ve done in the past,” Missler said, adding: “That impact is, frankly, vastly more satisfying than improving the balance sheet.”