Friendship Ends in Claims of Deceit, Hired Guns
On the surface, American businessman Hans Frederick Johnston and Swiss engineer Miklos Vendel seemed like the perfect corporate match.
Johnston’s peers describe him as “ambitious and autocratic,” a savvy deal-maker with an eye for ripe companies. Vendel fit the traditional scientific persona, studious and cautious, opting for a hands-off approach to his investments.
Together, they decided to buy Statek Corp., a struggling high-tech firm in Orange. Like so many technology executives in California, the pair dreamed that a promising new product--miniature timing devices for consumer electronics--could make them rich.
But over time, the relationship soured. A decade-long battle ensued over control of the 140-employee company, a struggle that underscores the pitfalls of mixing money and friendship.
Covert directors meetings, allegations of embezzled millions and charges of attempted murder have plagued the top levels of Statek, according to court records.
In 1996, a Delaware court found that Johnston had deceived Vendel of much of his ownership in Statek. The court awarded Vendel control of the privately held company, whose annual sales will top $13 million this year.
After Johnston left the country, Vendel sued his former partner, alleging that he embezzled $26.5 million and used the money to feed personal whims: rare art, a racehorse, a house in the Bahamas. The suit is pending and Johnston denies all fraud charges.
Risk, mismanagement and financial failure have long been hallmarks of the high-tech world, where today’s high flier can become tomorrow’s flop.
Yet few corporate conflicts escalate as far as this one: Last month, the 71-year-old Johnston was arrested in Britain on charges that he plotted to kill Vendel, 57, and three of Vendel’s attorneys.
“Business scandal, passive investors, mismanaged companies--that’s all normal. But charges of attempted murder? Now that’s different,” said Dan Lavin, research director for International Venture Associates in San Mateo. “In general, California’s high-tech people are too laid-back to try to kill each other.”
While Johnston sits in a British jail awaiting trial, the people he allegedly hired to kill Vendel remain at large. No one closely tied to this strange tale wants to talk about it--not Johnston, not Statek officials, and certainly not Vendel and his legal staff, who say they still fear for their lives.
Yet Statek’s convoluted tale, now the subject of scrutiny by the FBI and Scotland Yard, is detailed in extensive court records in Delaware, where the company is chartered.
“This is an unusual case,” said Thomas J. Allingham II, one of Vendel’s attorneys, in a court transcript. “I think all sides concede that.”
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While they owned Statek for 12 years, Vendel and Johnston were more like ghosts in Orange County’s high-tech community, where they were virtual unknowns.
Neither purchased a house in Orange County. Vendel lives in Lucerne, Switzerland, and Johnston made the Hilton Suites in Orange his local home for nearly five years.
Hotel staffers remember Johnston as an eccentric man, someone who spoke of possessing vast wealth but lived frugally. He traveled often to Europe and the Bahamas and told Statek employees that he spent every Boxing Day--a British holiday commemorated just after Christmas--with Prince Charles.
“The guy had no patience. He would only fly on private jets and chartered planes, because he didn’t like to wait around commercial airports,” said Glenn Kurzenknabe, a former sales manager at Greenray Industries, a Pennsylvania company that Johnston once owned. “I went out to dinner with him once. I watched him pay a band to stop playing for the night because it was annoying him.”
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Johnston and Vendel come from very different backgrounds. Johnston was born in 1927, grew up during the Great Depression and was educated at Cornell and Harvard Business School. He joined the military during World War II and worked on intelligence-gathering operations in Europe, according to court records.
After holding various executive positions in the late 1960s, he managed a group of companies that specialized either in engineering or technology research. His method was simple: Take struggling companies, find outside financing, turn them around financially and sell them for a profit.
Vendel was born in war-torn Hungary in 1941. A political rebel, he distributed pamphlets denouncing the Soviet Union and the Red Army during his teenage years, according to court records. When strife between Hungary and the Soviet Union exploded in the mid-1950s, he and his sister fled their homeland and eventually immigrated to Switzerland.
Vendel later received an engineering degree, then went to work for Hewlett-Packard in the computer manufacturer’s Geneva offices during the early ‘70s.
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Johnston and Vendel met in 1975, when Vendel was working for a Swiss watch company called ASUAG. The firm had sent Vendel to the United States to look into electronic timing devices that were being made by a company called BAI Corp., which was controlled by Johnston.
The two became fast friends, Vendel said in court transcripts. When Johnston traveled to Europe on business, he often would stop by Vendel’s home to visit and eat dinner.
In 1983, when ASUAG decided to spin off its struggling California subsidiary Statek, Vendel called Johnston.
Statek, founded in the early 1970s, makes electronic timing devices called crystal oscillators. These components, which produce a voltage that repeats at a certain frequency, are used in wristwatches, cellular phones and personal computers. About 40% of Statek’s revenue comes from medical-device manufacturers, who use its products in heart monitors and pacemakers.
The oscillators “set how fast a computer or piece of electronics executes an instruction, for example,” said Lawrence Larson, a professor of communication electronics at UC San Diego. “Anything that has a computer in it has one of these in them.”
Vendel and Johnston decided to buy Statek, paying $1.35 million for the company. Each agreed to put up $250,000. They took out a bank loan to cover the balance. They planned to split any profits or dividends, according to trial transcripts.
Johnston, who lived in Connecticut at the time, would manage Statek. The pair decided to make Technicorp International II--one of 15 companies that Johnston controlled--Statek’s parent company.
Johnston served as Technicorp’s chairman, president and treasurer. Sandra Spillane, a longtime business associate of Johnston, became vice president, secretary and a director of Technicorp.
“I thought this was a simple agreement. . . . Johnston was my trusted friend,” Vendel said in court transcripts.
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Though the $250,000 that Vendel invested represented “the bulk of my savings,” the Swiss engineer admitted he never signed a business contract with Johnston. Vendel also didn’t have any physical proof of Statek’s or Technicorp’s financial records. Vendel said he preferred to take a hands-off approach to the day-to-day dealings, court documents revealed.
“How gullible can you be?” said Lavin of International Venture Associates.
Over the next eight years, Vendel received a steady stream of small payments from Statek that eventually totaled about $500,000. Vendel said he thought the payments represented distributions of Technicorp’s earnings.
For years, Johnston put off Vendel’s periodic requests for a stock certificate. When Vendel finally did get the document in 1990, he realized that he owned a minority share of Technicorp.
The change stemmed from a secret 1985 directors’ meeting, according to court records, one held without Vendel’s knowledge.
Vendel then hired a Swiss investigator to look into the matter. A preliminary report indicated some unsettling information: Financial records for Technicorp did not appear to exist and Johnston may have invested only $100,000 in Statek, less than half of what he had agreed. If true, that would make Vendel the majority shareholder of Technicorp, giving him the power to remove both Spillane and Johnston as directors.
Vendel filed suit in 1994 against Technicorp and Johnston and Spillane in the Court of Chancery in Wilmington, Del. The case, which would decide who controlled the most stock in Statek’s parent company, was both lengthy and complicated.
Vendel accused Johnston and Spillane of routing millions of dollars in Statek dividends through Technicorp, then allegedly taking this money as loans that they never intended to repay.
Johnston and Spillane denied the charges and insisted that Vendel knew of--and agreed to--his minority position. Johnston claimed to be the majority shareholder of Technicorp, and thus in control of Statek.
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One major problem arose: Complete financial records for Technicorp did not exist, according to court records. What is available was described by the presiding judge as “sketchy and diffuse.”
There was a handwritten ledger, which contained “confusing, and sometimes contradictory, information,” wrote Vice Chancellor Jack B. Jacobs, the presiding judge, in his 1996 decision.
One key piece of evidence was found in Johnston’s divorce case, which had been filed several years earlier in Connecticut. In a sworn statement disclosing his net worth as part of an alimony settlement, Johnston said he owned only 1% of Technicorp’s common stock.
“That affidavit, which was clearly designed to minimize the worth of his assets, was at best highly misleading and at worst an outright fraud,” Jacobs wrote in his January 1996 decision.
The Delaware court named Vendel as Technicorp’s majority stockholder, a decision that was later upheld on appeal by the state Supreme Court.
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After the verdict, Vendel fired both Johnston and Spillane as company directors. That move, say Statek sources, immediately cut off the pair’s access to corporate credit lines and phone cards.
By June 1996, Vendel had filed a fraud complaint against the pair, charging they stole more than $26 million between 1984 and 1996.
The money allegedly was used to pay for, among other things, extensive personal travel to areas where Statek had no business ties, including Gibraltar; rent on homes in the Bahamas and London; a racehorse; shipping Johnston’s personal wine and art collections to the house in the Bahamas; $16,000 worth of Chinese language lessons; more than $300,000 in art pieces from Christie’s and Sotheby’s auction houses; and numerous shopping sprees at Harrod’s, the chic London department store.
Johnston and Spillane, through their attorney Allan M. Pepper, denied the charges. Pepper said that Arthur Andersen & Co. has audited Statek’s financial statements for years and that Statek “always received ‘clean’ opinions” from the accounting firm.
The fraud case is scheduled to go to trial next month in Delaware.
While Vendel’s attorneys were preparing for the fraud trial, Johnston was spending most of his time in Britain. Sources said that Johnston, allegedly suffering from back injuries he received during his military service, had moved to London for medical treatment.
And then, unexpectedly, the FBI contacted Vendel’s attorneys last month to let them know that Johnston had been arrested.
On April 21, Scotland Yard’s Organized Crime Group picked up Johnston in London, where he was charged with conspiracy to murder Vendel. Investigators charge that Johnston contacted--and made an initial payment to--an unknown number of people in Dublin who have criminal histories.
The FBI, which is assisting in the investigation, has declined to release the names of those targeted in the plot. But law enforcement officials familiar with the case say the list includes Vendel, as well as his Delaware attorneys Allingham, Cathy L. Reese and Robert J. Reese Jr.
“The plot never got carried out,” said Jeffrey Troy, an FBI agent who supervised the Delaware portion of the murder-conspiracy investigation.
Law enforcement officials say they are continuing their investigation in Dublin. Neither Scotland Yard nor the FBI has said if the Irish individuals involved in the alleged plot have been detained.
If found guilty, Johnston could serve a minimum of 10 years in British prison.
“If it’s a particularly serious case, a person could receive a life term,” said barrister Michael Grieve, a spokesman for the Bar Council in London. “Obviously, it all depends on the severity of the charges. For someone who’s already 71, even the minimum could mean life.”
Robert Reese could not be reached for comment. Allingham declined to discuss the matter. Cathy Reese said she was “pleased the matter has been brought to a conclusion.”
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Late last month, Johnston was brought before the Bow Street Magistrates’ Court in central London. He wore a natty tweed jacket and gray trousers, but the white-haired man looked frail sitting in the dark, wood-paneled courtroom. He sat silent, leaning against his walking stick, as the prosecutor read out the charges against him: murder-for-hire, possession of a stolen British passport, owning a false Belgian passport and driver’s license.
The London court ordered Johnston to continue to be held without bail until June 25, when he is due back before the magistrate.
Both British prosecutor Jack Renwick and Johnston’s lawyer, Brian Spiro, declined to comment on the case.
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Times bureau assistant Janet Stobart in London contributed to this report.
