Old Neighborhood Asks Karcher Protege, ‘Why?’ : Business: Fallen fast-food king made young Daniel Holden his lawyer, a board member, backed his deals. He voted to oust mentor.
Daniel Holden might count himself lucky that he moved out of the old neighborhood a year ago. His longtime Anaheim friends haven’t known quite what to make of him since he had a falling out with one of their own: Carl Karcher.
For more than 30 years, a dozen families living within blocks of each other have attended the same Catholic church, sent their children to the same schools and socialized at the same parties. In their younger days, they formed a parents’-night-out club, organizing monthly excursions to the race track or the Hollywood Bowl.
Karcher’s bond with Holden went even deeper. In 1960, the budding restaurant magnate hired Holden--17 years his junior and fresh out of law school--as his personal attorney. Six years later, he chose Holden as the first outside director of his new company, Carl Karcher Enterprises Inc. Holden shares his legal practice with Karcher’s son-in-law.
No one could have guessed that the two men’s long association--built on mutual respect and a common religious faith--would end. In an emotional board meeting earlier this fall, Holden voted with the other outside directors of Karcher Enterprises to topple the company’s 76-year-old founder from his post as chairman.
“The neighborhood really supports Carl,” said Stan Pawlowski, one of Karcher’s closest friends, “and we all have the same question for Dan: why?”
Their relationship started to unravel months before the board broke ranks with Karcher.
The distancing began in 1990, when Holden took a two-year hiatus from his legal practice to try his hand at real estate development. Another friend from the neighborhood, Maurice Monnig, brought Holden into his San Bernardino home-building company as executive vice president and general counsel.
Already, Karcher had funneled millions of dollars into the decade-old company, which has built about 1,700 homes. That investment was in character: Karcher’s friends call him a generous man whose checkbook was always open to neighbors trying to get businesses off the ground.
On Holden’s counsel, Karcher said, he put more money into Monnig Development after his old friend joined it--for a 10-year total of $13 million. He also agreed to guarantee a number of bank loans to the company with the Karcher Trust, which holds his personal fortune.
But disaster loomed, for California’s real estate market was teetering on the brink of collapse. Many of Monnig Development’s projects are now in financial distress, with lawsuits, loan defaults and Internal Revenue Service liens pending against them.
In June, Karcher filed suit demanding that the company and its partnerships be dissolved and a receiver appointed to oversee their liquidation. According to court documents, Monnig Development and 11 related partnerships are insolvent, and loans backed by the Karcher Trust are delinquent.
Real estate investments gone south put financial pressure on Karcher--an ordeal that coincided with his estrangement from the board.
The final confrontation centered on his insistence that Carl’s Jr. restaurants test-market Mexican fare prepared by Green Burrito. The five outside directors refused, charging that Karcher’s motivation lay in a $6-million loan promised him by Green Burrito’s controlling shareholder, William Theisen, should the deal go through. Karcher adamantly disputes that.
Today Karcher--who once thought nothing of showering a favorite charity with a $100,000 donation--finds himself fending off bankruptcy.
Of all the directors who voted against him, Karcher says, he feels the most disappointed in Holden. “It’s a great big hurt,” he said in an interview last week. “He was my confidante, and I trusted his counsel” regarding Monnig Development. “I’m not saying people don’t have business problems--it’s not a bed of roses out there. But I should have gotten better guidance.”
Holden declined to be interviewed, but he did so with the extreme politeness that earned him his reputation as a gentleman. “I’m just not comfortable talking about something of such a personal nature,” he said. “But good luck with the story.”
Fellow board members describe Holden as tormented by the turn of events.
“Dan feels very bad that the real estate market went down the tubes,” saidKenneth Olsen, a Karcher Enterprises board member since1980 and former vicepresident of the Vons Cos. supermarketchain.
“He has said on more than one occasion that, if it were appropriate for him to resign from the board, he would not hesitate. But for now, we are sticking together. To abdicate our responsibilities at this time would be injurious to the shareholders.”
Holden, 59, is known as a quiet, unassuming person--someone content to stay in the background while others take center stage. He and his wife, Dee Dee, have four daughters and six grandchildren.
“They’re a very close family,” said Rose White, a homemaker who raised her own three daughters a few blocks away from the Holdens’ house.
Last year, Holden moved from the Anaheim neighborhood to Yorba Linda, a quicker commute to his new law office in Brea. The old gang seldom sees him any more, and he has dropped out of the social scene.
Sperry recalled a sad time for the Holdens, and recounted how their strength became an “inspiration” to her. “When I was a young girl, their last daughter was born with hydrocephalus and lived only six months,” she said, describing the debilitating condition that causes fluids to accumulate in side the skull. “Dee Dee spent every day at the hospital, and Dan cut back on his work schedule to stay home with the kids. They’re a really, really neat family. Every daughter is a wonderful, happy, spiritual person.”
Before they left the neighborhood, the Holdens congregated with their friends every Sunday morning at St. Boniface Catholic Church--where Karcher and wife Margaret were married 54 years ago. Along with the rest of their crowd, Dan and Dee Dee Holden were active in a number of Catholic organizations.
Holden has professional as well as personal ties to the church. Since 1976, he has served as general counsel for the Catholic Diocese of Orange, overseeing everything from routine “slip and fall” lawsuits to more complicated cases.
Generally, Holden reviews cases for the Diocese and refers them to other attorneys, though he keeps tabs on lawsuits as they make their way through court.
“He’s the point man, so to speak,” said Lynne Goodwin, a Tustin attorney who has worked with Holden on numerous occasions.
Goodwin said that Holden never loses his composure, despite the high-profile cases that periodically land on his desk. “He’s not a person to give in to hysteria,” she said. “He’s always calm, collected and levelheaded.”
It’s not as though they would run Holden out of town if he showed his face in the old neighborhood.
“We wouldn’t tar and feather him,” said Karcher friend Pawlowski, who is president of Corporate Bank in Anaheim. “But if I got the chance, I would pull him aside and say, ‘Dan, perhaps I’m missing something here, but I can’t understand how you made that decision.’ ”
Holden and the rest of the board made that decision, the directors say, because they had no choice. Karcher precipitated his own downfall, they say, by relentlessly pursuing strategies that would not have been in shareholders’ best interest.
And offers that the directors made to Karcher--such as buying some of his stock and some Carl’s Jr. locations to provide him cash--did not satisfy him, they say.
“This whole thing has been very difficult for all of us,” said board member Peter Churm, former president of Furon Co. in Laguna Niguel. “However, we feel a strong responsibility to the outside shareholders.”
Karcher’s neighbors, though, see only the heartbreak. “He told me, ‘This has been the worst two years of my life,’ ” White said. “His wife had breast cancer, his brother died, his daughter (Carleen) died. For his friends to do this to him, knowing his state of mind, I just can’t grasp.”
Holden still associates with at least one person from the community: Donald Fergus, his law partner and the husband of Karcher’s daughter Janelle.
Fergus could not be reached for comment. His relationship with Holden remains cordial, Karcher said: “You know how attorneys are. They’re professional about things.”
Certainly, Holden “must feel pulled in every direction,” Pawlowski said. Still, Pawlowski’s loyalty is to the neighborhood patriarch--the man who founded a fast-food empire with a single hot-dog stand 52 years ago.
“I feel sorry for Dan,” Pawlowski said. “But I feel doubly sorry for Carl. He shouldn’t have to go through this--not at this late stage in life.”
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Profile:
Daniel Holden Age: 59 Position: Board of directors, Carl Karcher Enterprises Inc. Occupation: Lawyer, Yorba Linda Education: Law degree, Loyola Law School, 1959 Background: Carl Karcher’s personal attorney, 1960-1990; first outside director on CarlKarcher Enterprises board, 1966 Monnig connection: Executive vice president, 1990-92, of Monnig Development Inc., San Bernardino home builder in which Karcher invested $13 million
Source: Carl Karcher Enterprises
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Times correspondent Debora Vrana contributed to this report.
