Issa's Rags-to-Riches Tale Has Some Ugly Chapters

TIMES STAFF WRITER

To hear Darrell Issa and his supporters tell it, the San Diego County businessman is a modern-day Horatio Alger who built his company "from scratch" and clawed his way to a fortune that has given him instant credibility as a U.S. Senate candidate in next month's primary.

But a closer look at the 44-year-old Issa's financial beginnings reveals a more complex tale, rooted as much in discord as in dogged determination.

His admirers praise his business savvy, his innovation and his aggressive marketing of cutting-edge technology in the car security industry.

However, Issa also has left a trail of spurned associates from New York to California who accuse him of distorting his record and of trampling them on his way to the top.

The car security company that Issa now says he "started" in his hometown of Cleveland 16 years ago actually came under his control after a bruising battle with the former owners, records and interviews show. The clash and its aftermath featured accusations of underhanded tactics and intimidation, a suspected arson, even a glimpse of an Issa arrest in his youth on charges that were later dismissed.

"It's an ugly past chapter," Issa acknowledged in a recent interview. "If I had not succeeded in business and they had, I could be saying this in reverse."

The pristine headquarters of his $70-million-a-year operation north of San Diego seem far removed from his working-class Ohio roots, where he and his competitors were scrambling in the 1980s to gain a foothold in the growing car security business. It was a rough-and-tumble time for Issa--and tensions ran particularly high after a suspected arson fire ripped through his manufacturing plant in 1982.

No one was ever charged in the fire, but authorities were troubled by a dramatic escalation in the facility's fire insurance just weeks earlier. Even before the blaze was put out, investigators began peppering Issa and his partner with "crazy questions" regarding their whereabouts before the fire, Issa recalled.

Authorities later checked their criminal records and their financial histories. The rap sheets turned up an old run-in with the law that now seems ironic for a staunch law-and-order candidate who struck it rich selling car alarms: A decade earlier, Issa had been arrested at the age of 18 on charges that he and his brother had stolen a car.

A grand jury indicted the Issa brothers on charges of felony theft of a red Maserati from a Cleveland dealership in 1972 after a witness reported seeing them pushing the sports car down the street just before midnight, records and interviews show. But the charges were dismissed--months before the older brother, Bill, was convicted of stealing another car amid a string of offenses.

The Issas both say that they were arrested only because they were near the car--and because Bill had a bad reputation with police. "If I hadn't been there, they wouldn't have bothered my brother," Bill Issa said, adding that he recalls that the charges were dismissed because a witness changed part of his story.

"The fact is," Darrell Issa said, "I was exonerated of all wrongdoing. My brother went on to have a long and sordid career. I told the campaign a long time ago, 'You want to just publish my brother's record on the Internet and get it over with?' They said, 'No, don't worry about [your] family.'

". . . I am not my brother, I am not my brother's keeper."

Takeover of Company

Issa smiled and shook his head when the name of one of his former business associates in Cleveland was first raised in a recent interview.

"Ah, Joey Adkins," he said. "I remember him."

Issa has spent about $6 million of his own money to air commercials in which he tells, among other things, of "building a world-class business from scratch" and using his $7,000 life savings to start the company.

But Adkins, 42, who is now repairing video equipment at his rundown shop outside Cleveland, was there at the beginning, too. The company that Issa says he founded had belonged to Adkins until Issa seized control in 1982.

Issa says he simply did what any good businessman would have done under the circumstances.

Adkins counters: "Darrell stole that company out from under me. He screwed us."

Adkins started work in the late 1970s on anti-theft devices for automobiles, developing a product called Steal Stopper that killed the ignition switch unless a digital code was entered. His company, A.C. Custom Electronics, secured a contract with Ford Motor Co. and, by 1981, was reporting nearly $1 million in annual revenues, tax returns show.

Meanwhile, Issa was breaking into business himself.

In 1980, after leaving active military duty, he bought into Quantum Enterprises, which had previously manufactured CB radio parts. When the CB market began dying, the company resorted to developing gadgets, such as a potato peeler, but it suffered what Issa described as "incredible losses."

The company also had begun doing electronics work for Adkins. The relationship went smoothly until Adkins turned to Issa for a $60,000 loan that would eventually cost him his business after Adkins pledged his company's stock as collateral.

A similar loan from Issa was repaid the previous year. But this time, Adkins asked for a few more weeks to repay the loan--and Issa says he agreed.

Within days, however, Issa went to a judge and--under an Ohio law that did not require the debtor to be present--won a judgment for the outstanding $60,000.

Issa promptly called Adkins at home to declare that he now owned his auto security company, Adkins recalled. "I was completely floored," he said.

Why, after promising more time, did Issa go to court to collect?

Issa says he learned only after extending the loan that Adkins' company was saddled with mounting debts and was bordering on insolvency. Rather than risk losing his investment, he said he went to court for protection.

"We had every right to do so," he said. "There wasn't any stealing of any company."

Issa's partner at Quantum, Miles Hunsinger, also blames red ink for Adkins' troubles and the company takeover.

"If Darrell hadn't grabbed them up, someone else would have very shortly. They were done," Hunsinger said. "Darrell was sharp enough to understand that the basic premise of their design and their name held promise, and he took it and ran with it."

But Adkins said A.C. Custom was on solid financial ground and could have paid off the note as agreed.

Moreover, he charged that Issa had been scheming from the start to take over his company--a charge buttressed by Adkins' former bookkeeper.

The bookkeeper, Karen Brasdovich, said Issa had grilled her about Adkins' finances, including his late payment of bills. Only later, she says, did she suspect that Issa may have then used that information to seize the firm.

"He picked my brain. It really bothers me to this day that I fell for that," she said.

Issa said he did not recall the episode. Nor did he recall an alleged incident in the days after he took over A.C. Custom.

One of Issa's first tasks as the new boss was to remove an executive named Jack Frantz.

According to Frantz, Issa came into his office, placed a small box on the desk and opened it. Inside, he said, was a gun.

"He just showed it to me and said 'You know what this is?' " Frantz said.

Issa invited Frantz to hold the gun at one point and told him he had learned about guns and explosives during his military days, Frantz said. Because he was about to be fired, Frantz said he saw it as "pure intimidation."

The bookkeeper, Brasdovich, also recalled Issa having a gun at the company that day. "It was pretty terrifying," she said.

Issa confirmed that he wanted to remove Frantz--who years later was convicted in a telemarketing scheme--because he failed to collect outstanding bills.

But, as for having a gun, Issa said, "Shots were never fired. If I asked Jack to leave, then I think I had every right to ask Jack to leave. . . . I don't recall [having a gun]. I really don't. I don't think I ever pulled a gun on anyone in my life."

Issa said he moved quickly to pay off the company's creditors, partly with $7,000 in life savings. He wound up with the Steal Stopper name and product line, which he would sell for years to come.

Adkins blames the episode for triggering his slide into bankruptcy, family rifts, bouts with alcohol and a recent jail stint for drunk driving.

"It's been a rough 17 years," he said. "He's got $250 million, and I'm lucky if I can pay my taxes."

Adkins is still estranged from his sister, who sided with Issa in the dispute and runs his Cleveland facility even today.

"Darrell always worked his tail off, and I thought he was very fair," said the sister, Ernestine Brown. "But my family more or less disavowed me when I went to work for Darrell."

1982 Plant Fire Raises Suspicions

Perhaps the darkest chapter in the saga came Sept. 7, 1982, seven months after Issa took control of Steal Stopper.

Just before 3 a.m., a police officer spotted smoke billowing from Issa's Quantum manufacturing plant in Maple Heights near Cleveland.

Before the blaze was brought under control three hours later, a firefighter was seriously injured.

Issa said he was "flabbergasted" that investigators immediately began asking him and his partner "where we had been the night before." He told them he thought the fire began accidentally.

Investigators didn't think so. Case files from Maple Heights, the Ohio fire marshal and insurers pointed repeatedly to the likelihood of arson in the blaze, which officials estimated caused $800,000 in damage.

Although an accident could not be ruled out, the uneven and unnatural burn patterns made the blaze "suspicious in nature," the state concluded two months later. Flammable liquid appeared to have been poured on the only area not covered by fire sprinklers, investigators found.

Circumstantial evidence also aroused suspicion of arson.

Weeks before the fire, Issa and Hunsinger boosted their fire insurance from $100,000 to $462,000 on property stored for other companies, including Issa's Steal Stoppers. At the same time, a separate company that contracted with Quantum to outfit bug zappers increased its insurance to $400,000, and, according to an insurance report, one investigator was "concerned about the coincidence."

Fire investigators also noted that a computer was taken off the site eight days before the fire, "allegedly to be reprogrammed" by Issa's lawyer, and that business blueprints were put away in a safe--which was "not previously done before."

An unexplained note was typed at the bottom of a state fire marshal's lab request: "RUSH--Have suspect or conspiracy."

No one was charged. And with the two main investigators now deceased, fire officials say they do not know why.

"There was finger-pointing every which way," recalled Issa, who sued when his insurance company contested his claim. He reached an out-of-court settlement that he said did not begin to cover his losses. But, he added, "that's the breaks of the game."

Shadowed by Controversy

Since then, most of the breaks have gone his way for a man who once told an interviewer he was "a recipient of all that was good of the greed of the 1980s." But controversy has shadowed him.

Issa moved his alarm operation to San Diego County in 1985. Now he and his wife own Directed Electronics Inc., which bears his initials.

He has achieved both rising revenues--sales are expected to reach $100 million by the turn of the century--and rising stature among industry leaders.

"He's a man with a vision, with core beliefs and a strong business savvy," said Jonathan Thompson, vice president of the Consumer Electronics Manufacturers Assn. "I would call him a hands-on industry leader, someone who's willing to roll up his sleeves."

Issa played a key role in developing tougher standards for alarm installers, and supporters say he has often been ahead of the curve in anticipating trends--such as his use of cheaper overseas manufacturing in Taiwan.

He has also proved aggressive in using courts to repel what he sees as threats to his empire, bringing dozens of claims in recent years over alleged patent infringements and illegal distribution of his products.

Issa has almost always prevailed, said one of his lawyers. "You're going to go out and try to enforce your [patents]," said David Doyle. "Darrell has come to take all this very, very seriously."

He recently won a total of $15 million in suits alleging that a Michigan alarm maker had purloined his technology. One of his few setbacks was a 1984 order banning his company from distributing a knockoff of the Club steering wheel lock.

Confrontation seems to have become a trademark for Issa.

Issa acknowledges that he has made enemies and says he has tried to learn from his sometimes poor choices of past associates. "We have gone out of our way to stay away from shady characters," he said.

He challenges accusations against him as the bitter and baseless grumblings of failed entrepreneurs. "It's sour grapes, period. But that's business," he said. "You tell me how I can sell a million products a year and not run into some of these [problems]."

One of his harshest critics is John Pleck, a New York businessman whose firm won more than $40,000 from Issa's company in 1993 after saying that Issa denied him his share of the proceeds from a new car alarm product for BMW.

"As far as I'm concerned, Darrell is a confidence man," Pleck said in an interview. "He always found a way to break his promise."

No more complimentary is Bob Raines, Issa's former partner during a short-lived corporate marriage in San Diego County. In 1985, Raines' home alarm company, called Astro-Guard, acquired Issa's company. Issa ran the merged operation as president, but he and Raines soon clashed over money. Raines maintains that Issa tried to run the company into the ground after Raines refused to sell out.

The two parted ways in a split that Issa described as "amicable."

But Raines says now: "He's a real operator. He's so shrewd. I wouldn't have any personal dealings with him again." Raines said he survived the split only by selling off his boat and his motor home and spending $100,000 in retirement money.

Around the same time, Scotty Herd was forced to suddenly shut down his $4-million-a-year distributing company in Carson--a turn of events he blames on Issa.

The company, Black Bart, distributed security products from Astro-Guard in the mid-1980s. Herd said that Issa, as president of Astro-Guard, was negotiating an agreement to purchase Black Bart when he cut off shipments to the company, forcing it out of business.

"He was looking . . . to bring us to our knees and then just walk in and take over the company," said Herd, a Beverly Hills real estate investor. "Except he didn't take it over, he destroyed it."

Issa, discussing the episode in a 1989 deposition in another dispute, maintained that he stopped shipping products to Black Bart because of its growing debts and bouncing checks, not because of any scheme to ruin the company.

Issa said that once Black Bart's collapse was complete, he was quick to "strip off the majority of their sales people" and lobby their old clients for new business.

Issa saw the maneuver as simply "a way for everyone to benefit from the silver lining of a cloud." Herd called it "picking over the bones."

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The Building of Issa's Business

1980: Just out of the military, Issa buys into a struggling electronics company in Cleveland.

1982: A dispute over his $60,000 loan to an associate allows Issa to take control of auto security company in Cleveland. Months later, suspected arson fire rips through his manufacturing plant; no one is ever charged.

1985: Issa's auto alarm company is bought out by a San Diego County home alarm maker. He moves to California to become president of the newly merged operation.

1986: Partnership ends after disagreements over money, and Issa creates his own California alarm maker, Directed Electronics Inc. The Viper, a fully customized alarm, is introduced.

1991: As its alarm sales climb, the company is named to a list of the 500 fastest-growing businesses in the United States.

1996: The company moves into the lucrative car audio market.

1997: Sales of more than $70 million for the year are reported, as Issa begins bid for the Senate.

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